Freedom and Growth: The Rise of States and Markets in Europe, 1300-1750 (review)

Freedom and Growth: The Rise of States and Markets in Europe, 1300-1750 . By S.R. Epstein (New York, Routledge, 2000) 223pp. $55.00

This book asserts that European economic growth following the fourteenth century reflects the extension and integration of markets. It concludes that "state formation was ... possibly the major driving force ... of market integration and Smithian growth before the nineteenth century" (52). To substantiate this bold claim, the book disputes alternative theses for premodern economic growth advanced by such scholars as North, Mendles, Brenner, and Wallerstein. ¹ In addition it aspires to support its thesis by applying a "a standard of measurement--market integration--by which we may judge the relative economic efficiency of political institutions" (7).

Chapters 2 and 3 challenge alternative accounts of premodern European growth. The author disputes the argument that rulers' inability to commit to property-rights security hindered growth, basing his position on the low correlation between the internal structure of states and the interest rates that they paid. The author also disputes the position that independent city-states enabled Europe to break from its feudalistic past, because of a lack of separation between legislative, executive, and judicial powers, enabling the elite of these cities to advance their narrow economic interests by limiting market growth.

In rejecting other accounts for European growth and decline, Epstein finds support for his alternative thesis: The late medieval crisis reflects an institutional bottleneck that arose from "the coordination failures caused by the absence of undivided sovereignty over the political and economic spheres" (36). By the fourteenth century, however, states were already being formed and the Black Death "impelled state formation in western Europe" (69). It unleashed "a process of 'creative destruction' which raised the economies of western Europe to a higher growth path" (69). This was "the most decisive step in the continent's long trajectory to capitalism and world hegemony" (69).

To support this bold claim, chapters 4 to 7 present comparative historical studies of various economic and political processes, mainly in the three Italian regions of Lombardy, Tuscany, and Sicily. Methodologically, the study builds on a wide range of secondary and primary sources to gather qualitative and quantitative evidence reflecting the postulated positive correlation between state formation and market integration. Stronger states enabled the rise of market-enhancing regional fairs despite the objections of existing market towns (Chapter 4); enabled market integration, as reflected in the emergence of a balanced urban network (Chapter 5); enabled rural proto-industry to benefit from the existing industrial and commercial urban centers without being suppressed by urban political dominance; and provided the regulatory environment required for grain-market integration, as reflected in price convergences and reduction in price volatility. The analysis does not attempt to substantiate the claims regarding the nature and implication of the Black Death or the sources and implications of the creative destruction process.

There is much to admire in this book: the scope of the argument, the integration of qualitative and quantitative evidence, the attention to the interrelationship between economics and politics, and the reliance on recent economic theory regarding integration and the importance of institutions. Nonetheless, it is more an exploration of an idea than a coherent statement or substantiation of one. How, methodologically, can one possibly substantiate a statement regarding the single most important source of economic growth in European economies from the fourteenth to the nineteenth centuries, and the role of the state in this growth, based on an analysis of a few economic and political features of three Italian regions, mostly during the two centuries from 1350 to 1550?

The economic logic that underpins the historical analysis is not well articulated. We learn, for example, that although the location of regional fairs was determined by the state, the longevity of these fairs indicates that this location must have been efficient. Yet, economic analysis shows that...