Maghribi Traders Research Articles

Contract Governance in Small World Networks: The Case of the Maghribi Traders

This Article employs a social network perspective to revisit the best known example of successful private ordering in the economics literature — the case of the Maghribi Jewish merchants who engaged in both local and long distance trade across the Islamic Mediterranean in the eleventh century. Drawing on a case study of the over 200 Maghribi merchant letters available in English, it reveals the ways that a bridge-and-cluster configuration of ties among traders known as a “small-world network” can be effective in supporting trade over long distances, even in an environment of noisy information. Recognizing the contract governance properties of small-world networks is important for three core reasons. First, because the underlying economic forces that give rise to small-world networks are quite common, and they are often associated with innovation related benefits, exploring their governance properties should make it possible to better understand the ways trade is, and can be, supported in a variety of modern markets. Second, understanding the ways small-world networks function can contribute to the design of formal and informal institutions to support exchange. Finally, understanding the governance power of small-world networks reveals that the small, geographically concentrated, close-knit groups (cliques) that the legal literature has long associated with successful private ordering are not in fact a precondition for well-functioning private order, as small-world networks can effectively support trade among large numbers of traders operating at considerable distances from one another.

Valuing Reputation in Extralegal Contracting

Contracting outside the formal legal system is commonplace, be it among diamond dealers, whalers, or Maghribi traders. Parties' ex-ante willingness to enter into contracts depends crucially on whether the available extralegal consequences for breach are sufficiently severe. While economic and behavioral theories flag several channels through which compliance is enforced, identifying whether these channels are actually active in facilitating transactions is difficult: The canonical examples of extralegal contracting are among small, well-connected, and homogeneous communities, which complicates the separation of purely economic motives from shared moralistic and social motives. This complication limits the inferences that can be drawn about whether extralegal contracting would work in broader or more heterogeneous communities. Drawing on a unique dataset of anonymous and unsecured online peer-to-peer lending, this paper shows that forward-looking, wealth-maximizing rational economic behavior, as opposed to intrinsic or social pressure alone, is clearly at work in facilitating contracting with no formal enforcement mechanism. The broader implication for extralegal contracting is that a small community with homogeneous moral beliefs or strong social connections is not a precondition for these markets to function. Rather, the key requirement is a reliable information transmission mechanism to document past behavior.

How did trade norms evolve in Scandinavia? Long-distance trade and social trust in the Viking age

As the saying goes, “it takes years to build up trust and only seconds to destroy it.” In this paper, we argue that this is indeed the case when explaining trust formation in Scandinavia. Hence, in an attempt to explain why the Scandinavian welfare states hold the highest social trust scores in the world today, we argue that one possible historical root of social trust may be the long-distance trade practices of the Viking age. To manage the risk of being cheated, trade between strangers in an oral world required a strong informal institution of trust-based trade norms out of necessity to deal with the risk of being cheated. In contrast to similar cases like the famous medieval Maghribi traders, who counted on writing (Greif, 1989), the punishment of cheaters could not be supported by written documents such as legal documents and letters, as the large majority of Vikings were non-literate. If a trader did not keep his word, social sanctioning by word of mouth was most likely the only method to discipline the cheater and prevent future free-rider behavior. The early rise of trust-based trade norms in Scandinavia is an overlooked factor in the region’s long-term socio-economic development and social trust accumulation. This result points to the importance of free trade today, especially in poor countries with low levels of economic development and high rates of non-literacy.

Agent-Based Modeling of Information Transmission in Early Historic Trading

This work introduces a multiagent model for informal communication about cheating merchants among investing Genoese traders in the 12th century. The model builds on previous, game theory focused work of Avner Greif and extends it by enabling communication between Genoese traders. A trust-based cooperation model is tested across different network topologies as well as two different communication modes: (a) a reactive one representing Genoese trader interrelations and (b) a more proactive one that is based on accounts on the relationships among a North African traders collective, known as the medieval Maghribi Traders. The simulation shows that even for high levels of initial trust among Genoese, their mode of communication would not have sufficed to collectively identify cheating merchants and prevent them from future transactions. The results obtained from the tested network topologies are further discussed in the light of literature accounts of both historical societies.

Choosing and Enforcing Business Relationships in the Eleventh-Century Mediterranean: Reassessing the 'Maghribi Traders'

Choosing and Enforcing Business Relationships in the Eleventh-Century Mediterranean: Reassessing the 'Maghribi Traders'

The Maghribi traders: a reappraisal?1

Previous studies concluded that a private‐order institution based on a multilateral reputation mechanism was particularly important in governing agency relations among the Maghribi traders who operated in the Muslim Mediterranean. The legal system and a bilateral reputation mechanism were particularly important among the Genoese traders. Initial cultural, social, and political factors led to this institutional distinction, while the incorporation of culture in the resulting institutions influenced subsequent institutional developments. In particular, the particularities of the late medieval European institutions contributed to the rise of the modern—impersonal—markets in Europe. The analysis also substantiates the contention that private‐order institutions can support sophisticated exchange and market‐promoting policies should take this into account, particularly in countries lacking an effective court system. An article by Edwards and Ogilvie challenges this analysis. It alleges that the Maghribis, like European traders, relied on court enforcement and a bilateral reputation mechanism in which a narrow social circle responded to opportunism. This article shows that Edwards and Ogilvie's analysis and conclusions are wrong. It refutes each of their empirical claims and presents additional pieces of evidence supporting the institutional distinction conjecture. The discussion is structured around the methodological challenge associated with comparative and historical institutional analysis.

The Maghribi Traders: A Reappraisal?

The Maghribi Traders: A Reappraisal?

Contract enforcement, institutions, and social capital: the Maghribi traders reappraised1

Social scientists draw important lessons for modern development from the medieval Maghribi traders who, it has been argued, lacked effective legal mechanisms for contract enforcement and instead relied on informal sanctions based on collective ostracism within an exclusive coalition. We show that this claim is untenable. Not a single empirical example adduced as evidence of the putative coalition shows that a coalition actually existed. The Maghribi traders made use of the formal legal system in order to enforce agency agreements in long‐distance trade. A subset of the traders did form a web of trusted business associates that contributed to informal contract enforcement, but this was very different from the hypothesized coalition, in neither being exclusive nor having a clearly defined membership. The Maghribi traders combined reputation‐based sanctions with legal mechanisms, in ways that resemble the practices of medieval European merchants. We find no evidence that the Maghribi traders had more ‘collectivist’ cultural beliefs than their European counterparts.

The Effect of State-endorsed Arbitration Institutions on International Trade

During the past two decades, the study of new institutional economics (NIE), with a focus on international and domestic legal-economic institutions, has made a considerable contribution to the unde...

Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie

Edwards and Ogilvie (2008) dispute the empirical basis for the view (Greif, e.g., 1989, 1994,2006) that multilateral reputation mechanism mitigated agency problems among the eleventh-century Maghribi traders. They assert that the relations among merchants and agents were law-based. This paper refutes this assertion using quantitative and documentary evidence thereby vindicating the position that the legal system had a marginal role in mitigating agency problems in long-distance trade in this historical era. Edwards and Ogilvie constantly present legal actions in non-trade related legal cases as evidence for a reliance on the legal system for matters pertaining to long-distance trade. Their criticism of Greif’s documentary analysis also fails scrutiny. The claim that merchants' relations with their overseas agents were law-based is wrong. This paper is based on quantitative analyses of the corpuses containing the hundreds of documents on which the literature relies and a careful review of the documents and the literature Edwards and Ogilvie cite. Their assertion is shown to be based on unrepresentative and irrelevant examples, an inaccurate description of the literature, and a consistent misreading of the few sources they consulted. In particular, their examples for the use of the court are mainly taken from mandatory legal procedures associated with sorting out the assets and liabilities of deceased traders’ estates. Such examples do not support the claim that agency relations were law-based. The quantitative analysis reveals that empirical basis for the multilateral reputation view is stronger than originally perceived. This paper also sheds light on the roles of the legal system and reputation mechanism during this period.

Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie

Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie

Contract Enforcement, Institutions and Social Capital: The Maghribi Traders Reappraised

Contract Enforcement, Institutions and Social Capital: The Maghribi Traders Reappraised

Enforcing Cooperation Among Medieval Merchants: The Maghribi Traders Revisited

We revisit Greif's (1993) analysis of trade between the 11th-century Maghribi traders and present two different models which bring into play, in an essential way, historical features of the Maghribi's organization which had no role in Greif's own analysis. Our reformulation of the Maghribi's punishment strategies incorporates principal components of their actual historical practice and explains why they may have been necessary to sustain cooperation, especially in the presence of uncertainty or imperfect information. We also model formal friendships, or trade through bilateral and multilateral partnerships, and predict the Maghribi's practice of providing agency services without pecuniary compensation. We are thus able to provide a richer and more accurate picture of how that organization facilitated trade between widely-dispersed traders in the absence of a reliable legal system to enforce merchant contracts.

Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders

This article examines the economic institution utilized during the eleventh century to facilitate complex trade characterized by asymmetric information and limited legal contract enforceability. The geniza documents are employed to present the “coalition”, an economic institution based upon a reputation mechanism utilized by Mediterranean traders to confront the organizational problem associated with the exchange relations between merchants and their overseas agents. The the oretical framework explains many trade-related phenomena, especially why traders utilized specific forms of business association, and indicates the interrelations between social and economic institutions.