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Published by EH.NET (February 2003) 
 
S. R. Epstein, _Freedom and Growth: The Rise of States and Markets in 
Europe, 1300-1750_. London: Routledge, 2000. 223 pp. $100 (hardcover), 
ISBN: 0-415-15208-9. 
 
Reviewed for EH.NET by Karl Gunnar Persson, Institute of Economics, 
University of Copenhagen. <[log in to unmask]> 
 
 
_Freedom and Growth_ is a carefully and densely argued book which delivers 
new and important insights on the political conditions for pre-industrial 
economic growth and the nature and historical evolution of an efficient and 
modern state. The author, S.R. (Larry) Epstein is professor of economic 
history at the London School of Economics. As a medievalist and early 
modern scholar he works within a comparative approach and is free from the 
constraints of 'foreign language illiteracy' sometimes found at British and 
US universities. The book relies both on original research based on primary 
sources and on an impressive list of secondary sources. The forty-page 
bibliography lists everything worth looking at in the English, French and 
Italian literature and a fair share of the German discussion. 
 
Epstein's new book is a contribution to a relatively new approach in 
pre-industrial studies taking an explicit anti-Ricardian view. Recognizing 
that the large regional income differentials in late medieval Europe and 
onwards cannot be ascribed to differences in resource endowments and land 
constraints, this new literature singles out rent-seeking, market 
imperfections and coordination failures as an explanation for backwardness. 
It is suggested that many economies operated below their capacity for long 
stretches of time. 
 
_Freedom and Growth_ offers a more sophisticated view of the impact of 
political constitutions on solving coordination problems and permitting 
'Smithian' growth, that is growth dependent on efficiency gains from 
spatial specialization and division of labor. The outline of the book is 
presented in Chapter 1. 
 
In Chapter 2 Epstein takes issue with the prevailing 'Whig' interpretation 
of political constitutions, which suggests that economic freedom and 
limited government are the keys to economic growth. Not so, says Epstein: 
Good government is not necessarily small government. The essential element 
for growth is undisputed jurisdictional sovereignty over the realm both of 
economic and political spheres. Smithian growth requires extension of and 
free entry to markets but many pre-modern states, with parliamentary checks 
and balances or not, were instead characterized by jurisdictional 
fragmentation. Regions and cities, feudal lords and corporations asked for 
and obtained privileges. That made tax collection difficult and costly and 
made barriers to trade pervasive. 
 
Chapter 3 develops the critique of the Ricardian and Malthusian 
interpretation of the medieval crisis suggesting instead that it was an 
'integration crisis.' The main problems were the high costs of trade due to 
institutional regulation and tariffs and the absence of social order due to 
endemic conflicts and warfare. Political centralization was the response 
and the late medieval period witnessed attempts to standardize coinage and 
measures facilitating trade. One aspect of the regeneration of trade is 
explored in Chapter 4, which deals with regional fairs. Epstein believes 
that this innovation was an efficient response undermining established and 
privileged trading networks. The argument fits into his general idea that 
the main problem of pre-industrial constitutions was the debilitating 
impact of particular interests, but it is framed in a simplistic functional 
form. The author suggests that the stability of the institutional 
innovation is a proof of its efficiency but that argument cannot be 
generalized to all stable institutions in the pre-modern period. 
 
In Chapters 5 through 7 the focus narrows to different aspects of Italian 
city-state relationships. Here Epstein relies on his own research. The 
diversity of the Italian political landscape after the Black Death makes a 
comparative analysis useful and the development of Lombardy, Sicily and the 
Florentine republic are closely monitored. The Italian city-republics often 
had accountable governments, which contributed to low interest rates of 
public debt and, in general, a sophisticated financial system kept interest 
rates low for the general public as well. By and large there was a 
declining trend in price volatility of grain in Europe from 1300 to 1600, 
which in Epstein's view stems from political centralization that stimulated 
market integration. However, the thesis that political integration precedes 
market integration must be qualified, says Epstein. The relationship 
between a dominant city, say Florence, and the other cities in the republic 
mattered. The city of Florence acquired a privileged position in the food 
supply network of Tuscany which delayed market integration compared to 
other regions, such as Lombardy. I am not fully convinced that Epstein's 
empirical evidence suggests a significant difference between these two 
Italian provinces, however. 
 
Chapter 8 concludes: "Prisoner's dilemmas caused by decentralised 
rent-seeking and co-ordination failures caused by jurisdictional 
fragmentation, posed the most significant constraint on pre-modern growth." 
Furthermore Epstein argues that modern individualism developed with the 
modern state -- that is a state with a clear separation between the 
legislative, executive and judicial functions and with full sovereignty. 
 
_Freedom and Growth_ will, I believe, have a lasting impact on the analysis 
of early modern economic growth because it convincingly shows that the 
economics of growth must incorporate the political economy of growth. 
 
 
Karl Gunnar Persson most recent paper is "Mind the Gap! Transport Costs and 
Price Convergence in the Nineteenth-Century Atlantic Economy," (Discussion 
Paper from the Institute of Economics, University of Copenhagen, 02-2002). 
His most recent book is _Grain Markets in Europe, 1500-1900_, Cambridge 
University Press, 1999. 
 
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Published by EH.Net (February 2003). All EH.Net reviews are archived at 
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