This chapter considers the widely hypothesized antithesis between economics and history, and argues that the two disciplines are not substitutes but complements. It develops its argument through demonstration, by exploring how economics and history together provide complementary approaches to analyzing a specific historical institution: serfdom. To draw out general implications of such disciplinary complementarities, it scrutinizes three scholarly controversies about serfdom – how it shaped peasant choices, how it constrained these choices, and how it affected entire societies. To resolve these controversies, it shows, economics and history each brings special expertise, which have proven most productive when used jointly. The essay uses these debates about serfdom in particular to draw implications concerning the mutually reinforcing capacities of economics and history in general. It concludes that by working together, economics and history have improved our understanding of pre-modern society to a much greater extent than either discipline could have achieved in isolation.

This chapter addresses a central tension between two sides of rural history – one stressing peasant choices, the other the constraints on those choices. For the one side, key concepts are ‘individualism’, ‘autonomy’, ‘rationality’, ‘voluntarism’, and ‘agency’. For the other, they are ‘class struggle’, ‘exploitation’, ‘extra-economic coercion’, ‘social structure’, and ‘institutions’. This chapter argues that both strands of analysis can deepen our understanding of the pre-industrial countryside – not just in England but in many other societies. But pursuing the one and ignoring the other can lead us astray. Only by attentiveness both to people’s choices and to the constraints on those choices can we arrive at a just understanding of the particular rural society we are studying and of rural development more widely.

Choices

Let us begin by considering whether rural people in pre-industrial societies really did have choices, in the sense of deciding, as individuals, between two or more possibilities. It is surprising how often one still encounters views to the contrary, sometimes explicit, sometimes implicit and hardly recognised by the scholars who enunciate them. These views take four main forms.

First is the view put forward by Alexander Chayanov and his modern followers, that peasants were governed by a mentality that did not view certain aspects of life as choice variables. So in the Chayanovian view, peasants do not make individual choices about labour, capital, farm size, technology, market participation, or consumption style. Instead, their cultural norms cause them to engage in self-exploitation (i.e., to go on putting labour into the farm past the point at which an individual agent making rational choices would stop), avoid debt and credit (i.e., to accept the ups and downs of consumption and production and not try to smooth them by borrowing or lending), retain the family farm at all costs (i.e., not buy or sell land to adjust to changes in prices or technology), avoid markets (i.e., not choose between self-consumption or market sales), and consume only traditional goods (i.e., not choose new consumer objects even when they are available).

According to this view, a deeply rooted peasant mentality so strongly guided rural people’s behaviour that they could not – or at least did not – make individual choices about labour, capital, land, technology, markets or consumption. These assumptions are still often applied to rural societies, both historical and modern.

Married women in early modern Germany were affected by the law in a wide variety of ways - so many, in fact, that a single essay cannot hope to cover them all. The special character of women's legal position in each German polity forces us, in fact, to pause and ask ourselves what we mean by concepts we have largely taken for granted - ‘the law’ itself and how it assigned different rights to people according to sex and marital status. In pre-Napoleonic Germany, this question is of immediately striking relevance. For one thing, the Holy Roman Empire of the German Nation contained a large number of sovereign territorial units - almost 2,500 when one includes the sovereign estate of Imperial Knights, and 384 even when these are excluded. Moreover, these territories were widely heterogeneous on almost every conceivable axis of comparison including their legal systems. Furthermore, in German-speaking central Europe both the law itself and its concrete implementation in daily life were affected by the co-existence of various levels of authority in each society - empire, prince, community, guild, church - so the nature of the ‘composite state’ of the Empire raises questions about the legal system, which are not easy to fit into the framework which historians have devised for other early modern European societies with a closer resemblance to modern nation-states. Germany is thus a good context for reflection on what we might mean by the effect of the law on the lives of married women, because it undermines so many of the ideas we have come to take for granted about what the law is, where it comes from, and how it functions.

Any merchant trading beyond the scale that can be handled by a single individual has to use other people – agents – to do business on his behalf. This is particularly important in long-distance trade, which can be more efficiently conducted if one trader stays home to manage the local end of the business, while his partners or agents trade abroad, enabling the business to trade simultaneously in multiple locations and diversify its activities.

But once a merchant gets someone else to trade on his behalf, he confronts the principal-agent problem. An agent entrusted with a merchant's capital or wares has an incentive to pursue his own interests at the expense of his principal. If the probability of misconduct by agents is too high, principals will not employ them.

Trade requires information. Buyers and sellers need to know the attributes of goods. Merchants with contracts need to know whether other parties are complying. Principals need to know what agents are doing. Traders in general want to transform uncertainty about the future into risk – to move from being unable to ascertain the probability of a particular event to being able to predict and thus prepare for it. To plan business dealings, merchants need to know about price movements, supply chains, demand conditions, political developments, military events, geographical obstacles, weather patterns, commercial techniques, foreign languages and alien customs.

The medieval and early modern trading world brought new information requirements. Trade routes – particularly as international trade expanded – were uncertain. Maps were imperfect. Transportation techniques were stretched to the limit. Communication lines were longer. Existing merchandise varied in quality. Novel goods were being discovered. Prices fluctuated wildly. Currencies differed across space and time. New methods of transferring and exchanging money were being invented.

When we trade, we transfer property rights to another person. To do this, we make a contract. Unless it is a spot trade – i.e. good and payment are exchanged simultaneously – reneging is possible. The seller may take the payment and not give the good, or the buyer take the good and not pay. So contracts need to be enforced. If they are not, people will not trade, even though exchange could profit both them and the wider economy.

Contract-enforcement problems exist everywhere, but are particularly acute in trade across long distances or political frontiers. To solve them, merchants use institutions – formal and informal – to reduce the probability that their trading partners will renege on agreements.

What was a merchant guild? A guild – in its most general form – is an association of people who share some common characteristic and pursue some common purpose. The shared characteristic can be anything: religion, nationality, neighbourhood, cultural interests, military service, good works, political convictions. But by far the commonest is occupation.

Medieval and early modern Europe had a few religious guilds (more often called fraternities), but most guilds were formed around shared economic activities. Guilds were least prevalent in the primary sector, although guilds of farmers, gardeners, winegrowers, shepherds and fishermen formed in some medieval and early modern European societies. Guilds were most prevalent in industrial occupations, with a majority of urban craftsmen and even many rural proto-industrial workers forming guilds. But guilds were also widespread in tertiary production, with service professionals such as barber-surgeons, musicians, artists and chimney sweeps organizing guilds in some European economies.

By far the commonest tertiary-sector guilds were formed by merchants. Narrowly defined, merchants were wholesale traders. They specialized in trading for profit, dealing in goods that they did not produce themselves and selling them to other wholesalers, to retailers or to industrial, commercial, institutional or other business users, but not directly to consumers.

A basic problem for trade is uncertainty. If economic prospects are too uncertain, people will refrain from doing business. This is bad not just for them but for the entire economy, since it limits exchange and the gains from trade. Price volatility is one major source of uncertainty. Unexpected fluctuations in prices can wipe out a merchant's profits or even his entire business.

One strategy for reducing such uncertainty is to gather information about prices and the factors that might affect them. To obtain information, as we saw in Chapter 9, medieval and early modern merchants used a whole array of institutional mechanisms.

Merchant guilds are one of the most widespread and long-lasting economic institutions in European history. Their roots reach back to Greek and Roman antiquity, there are persistent indications of their survival through the centuries after the collapse of the western Roman empire, and as soon as documentary sources become richer after c. 1000, they can be found in every European economy during the Middle Ages. Local merchant guilds were formed in most medieval European towns, and alien merchant guilds and hanses were formed by many traders operating abroad in foreign lands. Although traditional medieval-style merchant guilds weakened in the Low Countries and England after about 1500, they survived elsewhere into the early modern era, enduring in some societies – particularly in Italy, Iberia and Germany – well into the eighteenth century. In many parts of Europe between c. 1500 and c. 1800, guild-like merchant associations also formed in new sectors such as the proto-industrial trades. Spain exported its institutions to its overseas empire, and merchant consulados survived in many Spanish American economies until the nineteenth century. And between c. 1500 and c. 1800 every European state, including England and the Netherlands, formed privileged merchant companies which, for better or worse, became the standard-bearers of European globalization.

Insecurity is a basic problem for all commerce. Pirates may attack ships, bandits hold up caravans, thieves break into storehouses. Enemy navies may board vessels, soldiers loot wagons, customs officers impound merchandise, rulers arrest traders or declare their goods forfeit. The merchant risks not only losing property but suffering bodily harm – imprisonment, injury, death. Such attacks increase costs, and if their probability is too high, merchants will refrain from trade, harming the wider economy.

Risk of attack creates a demand for institutional arrangements to improve commercial security. But security is a public good, which can make it difficult for private providers to supply in markets. For one thing, security is often ‘non-excludable’: once a police force, naval patrol or fortification is created to protect one merchant, it is hard to prevent others from enjoying it without charge. Second, it is frequently ‘non-rival’: providers often incur no higher costs by providing security to additional merchants. Consequently, the private benefits of providing security are often less than its social benefits, so it may be under-provided by private individuals transacting in markets.