Title: Guilds, Innovation and the European Economy, 1400-1800
Author: S. R. Epstein and Maarten Prak
Scope: 3 stars
Readability: 3 stars
My personal rating: 4 stars
See more on my book rating system.

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Topic of Book

The authors investigate whether pre-Industrial guilds promoted or hindered innovation.

If you would like to learn more about the importance of this time period in creating progress, read my book From Poverty to Progress: How Humans Invented Progress, and How We Can Keep It Going.

My Comments

Unless you are very interested in guilds, I would not recommend reading this book. It is important, however, to be aware of their importance and how the opinions of historians have changed over time.

Traditionally, economic historians regarded guilds as local monopolies that stifled innovation. They saw the elimination of guilds as an important step towards free trade and competition.

Partly as a result of this book, opinions have shifted towards viewing guilds as important institutions for sharing innovation and training skilled labor through apprenticeship.

Key Take-aways

• Guilds evolved in Medieval Europe and persisted well into the 19^th Century.
• Guilds typically focused on one urban trade.
• Guilds played a very important role in passing on skills to the next generation via apprenticeship. Guilds were particularly important given the almost total lack of schooling for the masses.
• The main purpose of guilds was to share the costs and benefits of training among its members.
• Guilds also played an important role in spreading innovations throughout the trade as they were considered common goods.
• Guilds also promoted mobility of skilled labor throughout Western and Central Europe. In particular, journeyman typically moved to new cities before they established their own workshop.

Important Quotes from Book

Craft guilds, Adam Smith famously suggested in 1776, are ‘a conspiracy against the public’, and the government should ‘do nothing to facilitate such assemblies, much less to render them necessary’. As in so much other economic thinking, Smith was a trendsetter in this too.

Guilds, in other words, were seen as part of an economic system that had prevented the European economy from realising its full economic potential. It was, if anything, a demonstration of the validity of this argument, that England was the first European country to lose its guilds – English guilds.

The negative view of guilds survived for the best part of two centuries in history textbooks and specialised works.

This generally negative evaluation of the guilds slowly started to change, however, in the 1980s.

It is now generally accepted that, rather than a complete break with the previous period, the changes of the Industrial Revolution were the outcome of a long process of innovations during the preceding centuries. These innovations were characterised by micro, rather than macro, inventions and hencewere incremental, though significant.

The institutional framework for the training and clustering of the skilled workforce in 1800 was not fundamentally different from what it had been in, say, 1400: throughout this period guilds were the predominant institution governing early modern Europe’s urban industries.

So how exactly did craft guilds help promote innovation? The literature, and indeed the essays in this book, suggests that this could happen in a variety of ways. Probably their single most important contribution to innovation and the pre-industrial economy generally was the guilds’ involvement in the training of human capital.

Clustering created a range of externalities beneficial to the membership and to the industry as a whole, like for instance the reduction of information asymmetries between producers and customers. Pre-modern markets were seriously hampered by a lack of information about both producers and their products, and this problem could ultimately lead to a complete standstill of the trade in products, when customers became too suspicious about their quality. In a variety of ways, guilds contributed to the reduction of this problem. First and foremost, they would ensure the quality of the workforce, or more specifically the master craftsman who was responsible for output quality.

Given the importance of tacit knowledge in most crafts, the experiential nature of most technological knowledge and the fact that technological progress was small-scale and incremental, rather than wholesale and revolutionary, intellectual property rights were difficult, often impossible, to establish. Knowledge sharing – voluntary, or as an unintended outcome of labour mobility – thus seems to have been the norm.

Clock makers’ and instrument makers’ guilds were not opposed to innovation per se, but tended to resist attempts to monopolise such innovations for individual profit. Their argument was, precisely, that inventions were a common good, because they built upon cumulative knowledge that could not be ascribed to this or that individual, but was the shared property of the trade as a whole.

Many innovations either occurred as a result of the combination of knowhow developed in different production locations, or more straightforwardly through the mobility of the labour force.59 It has by now been firmly established that the world of the crafts, as much as the rest of early modern urban society, was one of significant mobility.

Not only did guilds tolerate migration but, especially in Central Europe, they actively encouraged it, as Reinhold Reith points out in his chapter in this book. The mobility of skilled labour had significant implications for the diffusion of skills and innovations, and must have been a source of innovation in its own right.64 Technologically advanced areas, such as Northern Italy and the Low Countries, were major attraction poles for migrant workers, including artisans.65 The role of these skilled immigrants in the shifting location of technological leadership in pre-industrial Europe was very significant.

This book claims that the impact of guilds on the early modern economy was more positive than has so far been acknowledged by historians of the traditional, and even of the revisionist, school. It investigates how and why this was so. Guilds promoted the reproduction of the skilled workforce. They supported the mobility and hence the geographical integration of that workforce. Guilds provided a framework for the vertical and horizontal integration of complicated production processes. They helped set quality standards, and thus generated greater market transparency. In other words, through institutionalised clustering, guilds created an environment that was conducive to the type of tacit, embodied, and incremental innovation typical of most industrial development before the Industrial Revolution, and much of it even after that momentous event.

The main purpose of the craft guild was to share out the unattributed costs and benefits of training among its members. Guilds were cost-sharing rather than price-fixing cartels.

Before the introduction of mass schooling, a degree of formal training was needed to iron out initial differences in skills among children and to socialise adolescents into adulthood; artisans required skilled labour to produce goods to a standard quality and to raise output.26 Masters could reclaim their investment costs (which included time spent on training, wasted materials, and maintenance) by requiring that the apprentice work for below-market wages after gaining a set level of skills. Conversely, in the absence of credible bans against apprentice opportunism in the shape of early departure and of poaching by rival masters (who could offer higher wages because they had no training costs to recover), training would have been less than optimal and would have constrained output. A lack of rules would also have reduced the masters’ incentives to develop their own talents.

In order to restrain apprentices’ opportunism, masters also demanded rights over the apprentice’s labour through long-term training agreements upheld by formal or informal sanction. Equally, apprentices needed to be protected against the opportunism of their masters. They were liable to be exploited as cheap labour, and could be discharged before they gained the agreed skills. Because apprentices learned craft-specific skills within oligopsonistic labour markets, they suffered serious loss if they were discharged early or were poorly trained. Guilds therefore passed rules to enforce adequate training.

Craft guilds increased the supply of technology systematically in three ways: by establishing a favourable environment for technical change; by promoting technical specialisation through training and technical recombination through artisan mobility; and by providing inventors with monopoly rents.

Technological transfer took place through the permanent emigration of master artisans and the temporary migration of journeymen. The former was analogous to the breakaway under industrial capitalism of small firms from larger ones; both were a functional consequence of the guild system, which imparted skills that increased the masters’ and journeymen’s mobility. Masters offered their services to competitors either voluntarily or to escape religious persecution, economic hardship, or warfare.

European rulers made it a point to attract displaced craftsmen from enemy lands. The Huguenot migrations to Geneva and England and the wholesale transfer of artisan skills from Brabant to the Netherlands after the sacking of Antwerp in 1585 are just three threads in an intricate web of politically driven technical diffusion.

Technological transfer through travelling journeymen was an equally inescapable consequence of the craft guild system. Although innovation of this kind has attracted less attention, the greater scale and regularity of journeyman tramping compared with permanent artisan migration suggests that its effects may have been proportionally stronger.

The most significant pre-modern incentive for invention was thus the capacity to capture the rents provided by a technical secret; and the most effective source of these rents was the craft guild.

Comparison with its organisational competitors therefore suggests that it was the technological edge provided by institutionalised apprenticeship, by its associated specialised labour markets, and by the quasi-monopoly rents over innovation that underpinned the craft guild’s long-term survival. For centuries, alternative arrangements were out-competed, restricted to low-skill manufactures like proto-industry, or forced to inhabit institutional niches like centralised manufactories.

Servants, journeymen, and apprentices were young, unmarried, lived for the most part in their employer’s household, and were close to being a distinctive age group. Aged for the most part between 15 and 29, ‘service in an alien home’ (Dienst im fremden Haus) was, for most of them, a transitional phase of life.

Late medieval and early modern skilled workers were highly mobile.

First, craft guilds were omnipresent.

Apart from providing training and the certification of skill, they created and maintained the institutional framework that was essential for artisan mobility. Regulations varied from town to town and from region to region and it is far from clear which were the most efficient. But the unassailable point is that the roving artisan could expect to find some sort of institutional setting almost everywhere, which would give him access to his trade in a foreign and unknown setting or help him to move on to another town. In the great majority of places, guilds provided this setting.

A second conclusion from our discussion must be that it was very difficult to prevent skilled labour from moving around… . Political and guild authorities came to realise that stopping craft mobility was at best a waste of energy, at worst counterproductive. By the eighteenth century, and probably much earlier, they actively promoted mobility rather than preventing it.

Finally, there can be no doubt that the impossibility of stopping skilled workers from moving had important consequences for the diffusion of technology. Once again, the precise mechanisms are not entirely clear. However, the wide-ranging and expanding networks of artisan migration were quite obviously vehicles for the transfer of skills and knowledge across vast areas of central Europe.

If you would like to learn more about the importance of this time period in creating progress, read my book From Poverty to Progress: How Humans Invented Progress, and How We Can Keep It Going.