The Economics of Guilds

The tailors of London and their guild, c.1300-1500.

The Economics of Guilds

By Sheilagh Ogilvie

Journal of Economic Perspectives,Volume 28, Number 4, 169–192 (2014)

Occupational guilds have been observed for thousands of years in many economies: ancient Egypt, Greece, and Rome; medieval and early modern India, Japan, Persia, Byzantium, and Europe; and nineteenth-century China, Latin America, and the Ottoman Empire. Guilds were most prevalent in manufacturing. Almost all urban craftsmen were guilded and, in parts of central and southern Europe, many rural artisans as well. But the service sector also had many guilds. Nearly all premodern economies had guilds of merchants and retailers, and some also had guilds of painters, musicians, physicians, prostitutes, or chimneysweeps. Guilds were rarest in primary production, but some places had guilds of farmers, gardeners, wine-growers, shepherds, miners, or fishermen.

Although guilds have existed for millennia in economies across the world, the analysis of guilds as economic institutions is largely based on Europe between about 1000 and about 1800. This is partly because empirical findings on guilds are richest there, and partly because guilds showed interesting variation across Europe, gradually weakening after 1500 in some societies but surviving long past 1800 in others. Most significantly, Europe is where sustained economic growth first arose, raising obvious questions about the relationship between guilds and growth. For these reasons, this paper also focuses on guilds in Europe since the later Middle Ages. 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.

Guilds provided an organizational mechanism for groups of businessmen to negotiate with political elites for exclusive legal privileges that allowed them to reap monopoly rents. Guild members then used their guilds to redirect a share of these rents to political elites in return for support and enforcement. In short, guilds enabled their members and political elites to negotiate a way of extracting rents in the manufacturing and commercial sectors, rents that neither party could have extracted on its own.

My assessment of occupational guilds begins with an overview of where and when European guilds arose, what occupations they encompassed, how large they were, and how they varied across time and space. Against this background, I then examine how guild activities affected market competition, commercial security, contract enforcement, product quality, human capital, and technological innovation. In some of these spheres, some of the time, guilds took actions that may have helped to boost economic growth. However, I will argue that in each of these arenas the behavior of guilds can best be understood as being aimed at securing rents for guild members; guilds then transferred a share of these rents to political elites in return for granting and enforcing the legal privileges that enabled guilds to engage in rent extraction.

Click here to read this article in the Journal of Economic Perspectives.

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