Medieval Capital Markets

Abstract

The book is structured as follows. Chapter 1 introduces medieval Holland as a significant entity for institutional-economic development by discussing how the state created a county wide societal structure. As a proto-territorial state Holland had a uniform judiciary, a government apparatus that gave shape to the public sector and regulations aimed at the capital market. At the same time the counts of Holland profited from the capital market: they used funded debt to finance state formation. Lacking creditworthiness, they relied on the solvency of the public sector: individual cities and villages, collectives of cities and ultimately the Staten van Holland intermediated on the capital market. The emergence of public debt caused the public sector to gain influence on national politics and the financial expertise to shift from the center to the periphery; this development reinforced the position of the public sector vis-a-vis the center (chapter 2). To be able to create public debt cities and villages had to gain access to capital markets. They tried to create structures aimed at the market for public debt improving their own position; however, such tendencies to create monopolies were checked and usually public bodies let the forces of supply and demand sort things out (chapter 3). What the capacity of markets for public debt was is the subject of chapter 4. The public sector created market structures supporting both the markets for public and private debt. Issues like secure property rights, contracting institutions and limiting of information costs were all centered on the local court. Why and how public bodies created the institutional framework of the market for private debt is the subject of chapter 5. The final test is to look at the performance of the private capital market. The central issue at stake is whether it allowed all owners of real estate to contract mortgages. In chapter 6 I will use a number of qualitative and quantitative sources to test the capacity of the medieval capital market.