Institutions and Avner Greif

29 December 2006 at 12:45 am Peter G. Klein Leave a comment

| Peter Klein |

Avner Greif is one of the leading contributors to the “institutional environment” branch of the New Institutional Economics. His work on the emergence of long-distance trade in the medieval Mediterranean world changed the way many social scientists think about reputation, trust, and the role of decentralized, non-state institutions in supporting commercial activity.

The January 2007 issue of Reason features a review essay of Greif’s recent book, Institutions and the Path to the Modern Economy (Cambridge, 2006). The review provides a solid, non-technical overview of Greif’s work.

Reviewer Christopher Faille wonders if Greif goes far enough in drawing out general implications from his historical research:

A fascination with the [Maghribi traders] has been a constant in Greif’s career — they were the subject of his doctoral dissertation — but over time he has seemed increasingly interested in putting some distance between himself and the near-anarchist implications of their relationship to the state. . . . So while the theme of Greif’s early discussions of the Maghribi traders might well have been that they succeeded without the state, even in its role as interpreter and enforcer of contracts, the theme of his more recent writings has been that they were a historical dead end because they weren’t intertwined with the state — whereas the merchants of Genoa and Venice, a little later, demonstrated the way forward. In the 12th century, Greif tells us, the Genoese “ceased to use the ancient custom of entering contracts by a handshake and developed an extensive legal system for registering and enforcing contracts.” This extensive legal system also included bills of lading and, in time, double-entry bookkeeping. Greif argues that these Genoese legal innovations made the rising city-state integral to commerce. . . .

To an extent, Greif is contending that the Italian model proved superior because, from the perspective of history, it was the one that worked. The Italian cities set off the great expansion of the West, which in time underwrote colonial empires that carved up the rest of the world. But history is filled with contingencies. Greif himself notes that the Maghribi model disappeared not because of an internal failure but because of changing external circumstances. The Italians didn’t outcompete the Maghribis; they merely had the good fortune to be situated in a more hospitable political environment.

Here is a more technical review of Greif’s book. And here is some discussion of Greif and Hayek.