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:


Reviewed for EH.NET by Karl Gunnar Persson, Institute of Economics, University

of Copenhagen.

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’s 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.