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Specialization as a Specific Investment Into the Market: A Transaction Cost Approach to the Rise of Markets and Towns in Medieval Germany

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  • Ulrich Bindseil
  • Christian Pfeil

Abstract

In the period from the 9th to the 12th century, Germany witnessed essential steps from a backward agrarian society towards a considerable degree of specialization and trade. The two main institutional innovations of this development were the rise of market places (until the 11th century) and then the rise of free towns (12th century). This paper revisits the famous 19th century debate on the origin of marketplaces and towns with the tools of transaction cost economics. The evolution of the governance of market places and the founding of the free medieval towns is explained by the growing needs of townsmen to invest specifically into the market place in an environment of growing trade flows and of an increasing relative efficiency of specialized production technologies.

Suggested Citation

  • Ulrich Bindseil & Christian Pfeil, 1999. "Specialization as a Specific Investment Into the Market: A Transaction Cost Approach to the Rise of Markets and Towns in Medieval Germany," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 738-738, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199912)155:4_738:saasii_2.0.tx_2-h
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    Cited by:

    1. Davide Cantoni & Noam Yuchtman, 2014. "Medieval Universities, Legal Institutions, and the Commercial Revolution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 823-887.
    2. Felix Butschek, 2001. "Europe and the Industrial Revolution," WIFO Working Papers 149, WIFO.
    3. Hurrelmann, Annette, 2008. "Analysing agricultural land markets as organisations: An empirical study in Poland," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 338-349, July.
    4. Scott E. Masten & Jens Prüfer, 2014. "On the Evolution of Collective Enforcement Institutions: Communities and Courts," The Journal of Legal Studies, University of Chicago Press, vol. 43(2), pages 359-400.
    5. Felix Butschek, 2014. "The Performance of the European Economy in Historical Perspective," WIFO Working Papers 484, WIFO.
    6. Felix Butschek, 2000. "Europa und die Industrielle Revolution," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 26(2), pages 261-280.
    7. Scott E. Masten, 2013. "The enterprise as community: firms, towns and universities," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 6, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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