The Invisible Hand?

How Market Economies have Emerged and Declined Since AD 500

Bas van Bavel

Provides insight into more than a thousand years of economic and social developments
Offers a better understanding of what markets and market economies really are
Assesses the advantages and drawbacks of having markets as the dominant system of exchange and allocation
Confronts theoretical models and ideological viewpoints with empirical historical data
Enables the reader to take a fresh look at the present debates about the future of capitalism, the effects of inequality, and the relation between wealth and political leverage

The Invisible Hand?

How Market Economies have Emerged and Declined Since AD 500

Bas van Bavel

Description

The Invisible Hand offers a radical departure from the conventional wisdom of economists and economic historians, by showing that 'factor markets' and the economies dominated by them - the market economies - are not modern, but have existed at various times in the past. They rise, stagnate, and decline; and consist of very different combinations of institutions embedded in very different societies. These market economies create flexibility and high mobility in the exchange of land, labour, and capital, and initially they generate economic growth, although they also build on existing social structures, as well as existing exchange and allocation systems. The dynamism that results from the rise of factor markets leads to the rise of new market elites who accumulate land and capital, and use wage labour extensively to make their wealth profitable. In the long term, this creates social polarization and a decline of average welfare. As these new elites gradually translate their economic wealth into political leverage, it also creates institutional sclerosis, and finally makes these markets stagnate or decline again.

This process is analysed across the three major, pre-industrial examples of successful market economies in western Eurasia: Iraq in the early Middle Ages, Italy in the high Middle Ages, and the Low Countries in the late Middle Ages and the early modern period, and then parallels drawn to England and the United States in the modern period. These areas successively saw a rapid rise of factor markets and the associated dynamism, followed by stagnation, which enables an in-depth investigation of the causes and results of this process.

The Invisible Hand?

How Market Economies have Emerged and Declined Since AD 500

Bas van Bavel

1. Introduction: Markets in economics and history
2. Markets in an early medieval empire: Iraq, 500-1100
3. Markets in medieval city-states: the centre-north of Italy, 1000-1500
4. Markets in late medieval / early modern principalities: the Low Countries, 1100-1800
5. Epilogue: Markets in modern states: England, the United States and Western Europe, 1500-2000
6. Conclusion: The fundamental incompatibility of market economies with long-run prosperity
Bibliography

The Invisible Hand?

How Market Economies have Emerged and Declined Since AD 500

Bas van Bavel

Author Information

Bas van Bavel is Distinguished Professor of Transitions of Economy and Society at Utrecht University. He acts as the academic director of the Utrecht University interdisciplinary priority area--"Institutions for Open Societies"--and he is a member of the Royal Dutch Academy of Sciences.

His research activities focus on reconstructing, analyzing, and explaining economic development and social change, emphasizing long-term transitions and regional diversity, and using comparative analysis--both over time and across regions--as the main tool. More specifically, he aims to find out why some societal arrangements are successful in generating wealth, equity and resilience, and others not, and what drives the formation of these arrangements.

The Invisible Hand?

How Market Economies have Emerged and Declined Since AD 500

Bas van Bavel

Reviews and Awards

"This a beautifully written book, easy to read, which makes it adequate for a wide audience. Above all, it is an original and intellectually challenging piece of scholarly work that breaks new historical grounds. Van Bavel is one of the few scholars alive who is equally an expert on history, economics, politics. This characteristic enables him a truly subtle analysis of texts and ideas. I want to make clear at the outset that economists and economic historians neglect this book at their peril, since it represents a methodological challenge to research as usual....[T]his book is going to be a vital contribution to the advancement of economic discourse as well as a crucial intervention in current political debate."--Stefano Zamagni, Journal of Economics

"Van Bavel's deep expertise in the subject matter weaves an intricate web of connections of cultural, economic, and social aspects across time and space, and seamlessly draws the reader into a wonderful account..."--Mauricio Drelichman, Journal of Economic Literature