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A social-leverage mechanism on the Silk Road: the private emergence of institutions in central Asia, from the 7th to the 9th century

Published online by Cambridge University Press:  05 October 2016

YANLONG ZHANG  and
WOLFRAM ELSNER
YANLONG ZHANG*
Affiliation:
Institute of Economics, Tsinghua University, Peking, China
WOLFRAM ELSNER*
Affiliation:
iino–Institute of Institutional and Innovation Economics, University of Bremen, Bremen, Germany
*
*Email: zhang.yanlong@hotmail.com
**Email: welsner@uni-bremen.de
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Abstract

We explain archaeological evidence of Sogdian merchants in central Asia in early medieval, remote long-distance trade on the emerging Silk Road. In fact, it began as barter, but was based on the social organization that Sogdians developed in their communities when migrating east. Their particular way of generating trust and institutionalized cooperation was by social leverage, involving third parties as contract witnesses and/or guarantors. These usually had own commercial relations with the contractors, facilitating crediting and exchange – and credible threat to defectors. While Greif (1989) had been criticized for overlooking courts in the Maghribi case, we discuss a differentiated (latent) role for courts. We also discuss property rights versus possession, transactions costs and price implications. We analyze the mechanism in historical cases and game-theoretical reconstructions, and explain trade flourishing under strong uncertainty.

Type
Research Article
Information
Journal of Institutional Economics , Volume 13 , Issue 2 , June 2017 , pp. 379 - 400
Copyright
Copyright © Millennium Economics Ltd 2016 

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