Summary: The Economics Of Guilds

In Venice, the main artist guild or scuola was called the Arte dei Depentori, which was created in 1271 (Brown 42). Sheilagh Ogilvie argues in her article, "The Economics of Guilds," that "guilds in medieval and early modern Europe offered an effective institutional mechanism whereby two powerful groups, guild members and political elites, could collaborate in capturing a larger slice of the economic pie and redistributing it to themselves at the expense of the rest of the economy" (Ogilvie 170). She feels that guilds benefitted individuals with more power in society. Moreover, guilds were used in the Middle Ages as a means of creating specialization in certain fields like crafts. In order to join a guild, one would have to become an apprentice
Ogilvie states that "by monopolizing the labor market in a particular occupation, guilds might help to ensure transmission of techniques across generations (via compulsory years of apprenticeship) and across space" (Ogilvie 184). This would have been important in feudal societies, where there was no formal education system. Guilds could thus act as a means to better oneself in society and acquire scarce skills. However, they also acted as a way to regulate the market. Once an individual joined a guild, anything that a person would produce would be highly examined before it was sold. This was a method to enforce quality control and guarantee that if multiple individuals in the community bought the same product everything would be made to the same caliber of work (Ogilvie 180). Adam Smith saw this as a limiting aspect in society, since individuals are tied to their guild for their education. In contrast he points out that education outside of a guild would be superior, "In country labour, on the contrary, the labourer, while he is employed about the easier, learns the more difficult parts of his business, and his own labor maintains him through all the different stages of his employment" (Smith Book I Chapter X Part I). Smith recognized how specialization limits an individual, since they only learn one trade skill, while those in the country have a wider
Smith recognized how money could buy the rights of these guilds from the government, as they were "obliged to fine annually to the king, for permission to exercise their usurped privileges" (Smith Book I Chapter X Part II.17). Smith felt that when guilds formed in a society the expertise they held became removed from the common knowledge of individuals and as a result the market would have been inhibited. He saw them as "a conspiracy against the public, or in some contrivance to raise prices" and he thought that they should not be allowed to assemble together (Smith Book I Chapter X Part II.27). Adam Smith saw guilds in a unfavorable light, as they would have both horizontal and vertical integration. Each guild would have privileges over specific services and a monopsony over the prices of products (Ogilvie 174). This would have removed any competition from other sellers not in the guild who created similar items. Guilds were established to "defend their monopolies and monopsonies, guilds excluded entrants, restricted trade volumes, set output prices above the competitive level, fixed input costs below the competitive level, and imposed costs on competitors" (Ogilvie 174). This would have limited other groups trying to sell similar products. One could also not make the same product as another guild in the