Emergence of the East India Company

21 July 2006 at 2:28 pm Peter G. Klein Leave a comment

| Peter Klein |

An example of spontaneous order in the emergence of the large firm: Emily Erikson and Peter Bearman’s “Routes into Networks: The Structure of English Trade in the East Indies, 1601-1833,” forthcoming in the American Journal of Sociology. Working paper here. Abstract:

Drawing on a remarkable data set compiled from ships’ logs, journals, factory correspondence, ledgers, and reports that provide unusually precise information on each of the 4,572 voyages taken by English traders of the East India Company (hereafter EIC), the authors describe the EIC trade network over time, from 1601 to 1833. From structural images of voyages organized by shipping seasons, they map the (over time and space) emergence of dense, fully integrated, global trade networks: of globalization before globalization. The paper shows that the integration of the world trade system under the aegis of the EIC was the unintended by-product of systematic individual malfeasance (private trading) on the part of ship captains seeking profit from internal Eastern trade.

The paper even gets a plug from Scientific American:

The researchers . . . describe how many rogue captains ignored orders to trade in established markets and then return directly to England, choosing instead to explore new locations and trade between local Asian ports for their own personal profit. Although they were breaking the law by appropriating supplies and ship crews for this private trading, in doing so they ultimately benefited the East India Company by building a larger market and gaining a unique knowledge of local market fluctuations.

Via Craig Newmark. Related: my earlier post on market-based management.