Club goods and inefficient institutions: why Danzig and Lübeck failed in the early modern period

This article uses club theory to explain why two major medieval commercial centres declined in the early modern period. Lübeck and Danzig illuminate the difficulties experienced by old‐style European towns where early modern guilds (and other privileged ‘corporations’) had a lot of political influence in making the transition to the new style of north‐west European cities such as Amsterdam and Hamburg. The article refutes theories proposing that the special privileges awarded to a merchant elite enhanced economic growth; instead, it is argued that those privileges gave rise to ‘club goods’ that were beneficial only to a small number of merchants and were provided at the expense of society at large, resulting in economic decline.