On Guilds (etc.)

Part I

On Guilds (etc.) - part 1

(this is half of a long essay I began writing at the end of the summer. Since it’s gotten too long for a single post, I’ve decided to break it in half. Part 2 will be coming as soon as I can track down some of the more obscure references).

1. Is “the Firm” on Firm Ground?

My topic for today is a review of some recent work by the legal scholar Sanjukta Paul on the history of American anti-trust legislation and the concept of “the firm.” Paul’s work is, I think, quite important, because it seeks to open up a second front in the offensive launched by Modern Monetary Theory against mainstream economics. Whereas the MMT writers — with whom Paul is closely associated — sought to demonstrate that economics took the existence of money itself for granted, to its theoretical detriment and the foreclosure of political possibilities, Paul seeks to do the same for the firm: the basic unit in terms of which economics attempts to theorize the organization of productive economic activity. As Paul convincingly argues, the fact that there are “firms” at all cannot be taken for granted but must rather be understood as a historically specific construction of a legal regime of economic governance.

While Paul’s work does not engage directly with questions about money, it has a lot in common with MMT at the level of its political goals and structure of argumentation. The essence of both of these positions is that, contra mainstream economics, there is no such thing as a “free market economy” prior to its constitution by some kind of public regulative authority (be it executive, legislative, or judicial), and that therefore the entire idea of a market economy “free of intervention” by regulation is conceptually incoherent. Once we realize that markets are regulated into existence, in the first place, this seems to expand the scope of possibility for regulating them differently and in the service of a political economic project which is now free to be benevolent or “moral” in a way that was previously understood to be off the table — for reasons that are now revealed to have been grounded in dubious ontological assertions about how the market economy would be if only it weren’t being interfered with.

Like MMT then, Paul is mainly concerned to mount a policy intervention into the present: specifically, in her case, by refuting the dominant interpretation of the power granted to American courts by the Sherman Act of 1890. Also like MMT, however, Paul’s intervention cannot restrict itself to being purely forward-looking, but seeks to ground itself by demonstrating that the orthodox view has gotten something importantly wrong about the past. In a 2021 essay in the Yale Law Journal — “Recovering the Moral Economy Foundations of the Sherman Act” — Paul attacks the orthodox interpretation of the act’s legislative history forwarded by Robert Bork. I will summarize this argument in a moment. Paul’s investigation of the history of US anti-trust legislation, however, leads her to a confrontation with a much more fundamental conceptual issue about the idea of the firm, which she explores in detail in a recently circulated draft essay, “On Firms.”

In this second essay, Paul seeks to more fully explore the theoretical problems raised by the argument of the first: to show that the idea of “the firm” upon which economics constructs an ontology of productive economic organization is neither necessary nor natural, and that in presenting it as such economic orthodoxy constructs a historical myth about the origins of capitalism or the market society that can be demonstrated to be false. In this second essay, therefore, Paul wants to fry an even bigger fish: Adam Smith himself, who bequeathed to mainstream economic thought a tendency “to view guilds and workshops as hubs of anti-competitive price-fixing” which therefore impeded technological progress (13). Thus, the myth that the organizational model of the firm “succeeded because it offered technical efficiency benefits, which ultimately “grew the pie” for everyone,” in contrast to the supposedly hidebound and over-regulated guilds, plays the same role in the theory of the firm that the “myth of barter” played in the orthodox theory of money (12). By attacking this myth, Paul hopes to show not only that judges are wrong about the Sherman Act but that economists are wrong about, or are at least making ungrounded assumptions about, the basic ontological units in terms of which they construct their theory of the economy. Since this economic discourse is, in turn, taken up by judges when they consider cases about the legality of economic policy, even these more fundamental and abstract questions have significant implications for the way things actually work, here and now: “The criteria antitrust law uses to permit or prohibit coordination under its firm exemption… have the effect of constituting the units that will then engage in competition. This seemingly small additional logical step cloaks a multitude of unconsidered possibilities” (5).

Here, however, Paul runs up against a problem that her work also shares in common with MMT: in seeking to attack one of the basic myths of economic orthodoxy by revealing it as unhistorical, she ends up positing historical claims of her own that don’t stand up to scrutiny. If the firm is revealed to be a contingent regulatory construction, then it might not be the case that there are firms. And if there weren’t firms, then what would there be? There would, of course, be guilds. Since the orthodox theory of the firm defines itself negatively against what it is not — what’s good about the firm is that it is not a guild — any attempt to reevaluate the firm cannot really avoid making, even if only in passing, some kind of positive claims about its determinate negation. If we want to show that it’s not the case that firms are good because guilds are bad, then we might be tempted to try to turn the claim on its head by claiming that guilds are actually good. And it is here, as I will show, that Paul finds herself on unfirm ground, and ends up in the same place as MMT by simply replacing one myth with another whose implications she prefers.

First, however, before turning to the assertions that Paul makes about guilds, I want to rehearse the steps of the argument that got her there, since they are interesting and important in their own right. And it’s not my goal to argue that, because Paul is wrong about guilds, she is therefore wrong about everything else. Quite the contrary: I think that what’s interesting about her argument can be even more fully appreciated by rejecting the way that she constructs the medieval guild as a foil for the modern firm and thereby carrying the line of inquiry further than Paul herself is willing to take it. In the past, I have argued that the fantasy of a “fully political” medieval money has served as an obstacle for the exploration of what was actually interesting about MMT. Here, I will argue that the fantasy of the “medieval guild” plays a similar role for Paul. But first we should stop to appreciate what’s so interesting about what she’s actually right about.

2. The Question of Values

Let’s begin by considering Paul’s argument in “Recovering the Moral Economy Foundations of the Sherman Act.” Her primary target here is Robert Bork, who forwarded a reading in 1966 of the Sherman Act that is now dominant (as part of what recent scholarship has identified as the “Chicago School” movement that introduced neoclassical economic models into jurisprudence). Bork’s argument is that the court’s use of the antitrust legislation has been muddled by an ambiguity about the “question of values” that underpins the legislation; a muddlement that he proposes to solve by reducing the question of values-plural to the single value of “what we would today call consumer welfare.” Such an interpretation would function to clarify “a statute as vaguely phrased as the Sherman Act” as specifically prohibiting “combinations” that could be found to impede “consumer welfare,” by which he meant “maximization of wealth or consumer want satisfaction” (Bork, 7).

How, chez Bork, is consumer welfare to be maximized? Here, jurists are lucky in that they can now (in 1966, as opposed to the legislature in 1890) speak “with the precision of a modern economist” (Bork, 10). They can, in other words, draw on the science of economics in order to clarify what lawmakers prior to the development of that science really meant even if they could not say it precisely. And what they really meant was that the purpose of anti-trust legislation was purely and simply the promotion of “consumer welfare,” which meant, first and foremost, lower prices of consumer goods in virtue of the “efficiency” that could be delivered only by a market approaching “full and free competition.” This is simply what we all know as “Econ 101:” maximizing competition will lead to the maximization of efficiency will lead to the maximization of consumer welfare… and so forth.

Bork’s crucial move — which is Paul’s point of attack — is to gloss the common-law notion of “restraint of trade” actually invoked by the bill as identical to the modern economic idea of the “prevention of competition”: “He repeatedly used common law terminology, "restraint of trade," as interchangeable with his bill's reference to prevention of full and free competition and advancement of costs to consumers” (Paul, 46). This move is absolutely crucial because it effectively means that neoclassical economic theory can now be understood as elaborating upon what was already implicit in common law: in order to understand what common law really meant by the prohibition of the restraint of trade, we can turn to what neoclassical theory now describes as the prohibition of the prevention of competition, and in effect make new common law on that basis.

The stakes of this move in large part lie in the question of what the Sherman Act says about the organization of labor: does the restriction of labor organization fall under the purview of the common-law against the restraint of trade, now understood to be identical to a prohibition on the prevention of competition? Since Paul’s intervention rests in large part on an attack on this paragraph in Bork, I’ll quote it at length:

That Congress did not wish courts to apply criteria expressing values other than consumer welfare is also strongly suggested by its preferred method of dealing with situations in which consumer welfare was not to be controlling. The primary examples were farm and labor organizations. Most of the congressmen who spoke to this issue favored the complete exemption of such organizations from the coverage of the statute. Senator Edmunds, who appears to have played the primary role in drafting the bill which became the Sherman Act, wished to include such groups within the law's sweep. The Act as passed was silent on the issue. It may be uncertain, therefore, whether Congress had an intention on this issue and, if it did, what that intention was. But it is clear that those who did not wish farm and labor organizations judged by consumer-welfare criteria adopted the technique of exempting them from the bill altogether. No one suggested that the matter be handled by letting the courts balance the values that these congressmen thought were in play. This raises a fairly strong inference that no values other than consumer welfare were to be considered in those cases which were intended to come within the statute's coverage. (Bork, 12-13)

Bork, in other words, is arguing that labor organizations should also be understood under the Sherman Act as constituting combinations in restraint of trade (because of the fact that they undermine competition in labor markets), and that this is the legislative intent of the act because of the fact that those who wished to exempt labor organizations from it sought to do so explicitly, while the final bill does not do so.

Paul’s line of attack against this argument has two prongs. The first is to dispute Bork’s claim that those who sought to explicitly exempt labor organizations from the bill ultimately failed to have their intention codified in the law. Instead, as she shows, it was precisely those Senators who had been most concerned with the labor exemption who actually drafted the bill in its final form. The second and more crucial prong is to dispute Bork’s equation of the common-law “restraint of trade” with the neoclassical “prevention of competition.” Together, these prongs add up to the argument that the Sherman Act does not specifically exempt labor precisely because those who originally wanted to exempt labor ended up drafting the final version of the bill, and they did not include any specific exemption for labor because they understood labor organization to already fall outside the common-law against the restraint of trade. In other words, the faction of Senators who had been pushing for the labor exemption ended up winning, and the result of their victory was that they drafted a new version of the bill for which they understood the exemption to be unnecessary. And the exemption was unnecessary precisely because the common-law “restraint of trade” says nothing, and does not imply anything, about the organization of labor.

Paul is correct on both of these counts. Her reconstruction of the legislative history of the bill is painstaking and demonstrates quite convincingly that the legislative intent of the bill was precisely to respond to the demands of organized labor against the trusts, and could thus hardly be interpreted as intending to disempower or forbid the organization of labor. As Paul puts it: “In their deliberations, legislators were primarily occupied with the worry that courts would either eviscerate or pervert the statutory purpose. Their choice of the common-law language was immediately motivated by those worries. Simply moving to federalize an existing body of law, as signified by the use of the phrase “restraint of trade,” was projected as a less audacious move, and thus a less extravagant use of the federal Commerce Clause power, than crafting a new edict altogether. And the use of the phrase ‘restraint of trade’ in the final bill also replaced language in the earlier bill about raising consumer prices, likely seen by legislators as the primary threat to coordination among small players, which they sought to preserve” (206).

The real question, then, is what is meant by the “restraint of trade” in common-law, and the extent to which what common-law meant by the “restraint of trade” is relevant to modern anti-trust law. Paul argues — again, convincingly — that the “Law and Economics” or Chicago School (here voiced by Richard Posner) is ambivalent on this point, with the result that their position is circular: “The claim is that the actual common law of restraint of trade, invoked by the statutory language, cannot be relevant to interpreting the Sherman Act, precisely because the actual common law was not about “promoting competition” in Chicago School terms. In other words, Posner’s claim takes the substantive commitments of the Chicago School as a fixed point and on that basis, declares that the actual common law of restraint of trade is irrelevant to interpreting the statute because it is not consistent with that fixed point” (234).

Posner and Bork together, in other words, are basically saying that the common-law prohibition on “restraint of trade” really means “promoting competition,” and also that what the common-law actually says about restraining trade is irrelevant because it isn’t about promoting competition. Against this view, Paul insists that what common-law means by restraint of trade really matters, not only because it doesn’t imply anything against the organization of labor (or, more generally, the “allocation of coordination rights” to “small time players”) but also because it holds out the possibility of a fundamental paradigm shift towards an embrace or revival of “traditional market regulation, or the old moral economy. Antitrust law has its ultimate origins in the doctrines of forestalling, regrating, and engrossing. The beginnings of these doctrines seem to extend more or less as far back as the common law itself.” (185).

Here, then, we have encountered a more fundamental conceptual problem, and one that brings us into touch with the deep history of English laws about markets, with the ideological victory of the classical political economists in the late 18th century, and thus with what is imagined to be the constitutive difference between modernity and its past. One of the basic features of the myth advanced by the classical political economists about their difference from their own past was the idea that economic modernity was in large part constituted by the historical supersession of an economic order based on “guilds” that “restrained competition” by an alternative economic order characterized by “free competition” and “the firm.” This is the view, of course, most famously associated with Adam Smith, whom we will consider in a moment.

As Paul argues, however, the firm in itself is, at the level of its concept, nothing but an exemption to the principle of competition: the idea of competition implies units which are to compete, and if they are to be units, then there must not exist competition inside themselves. The neoclassical idea of “competition” therefore is really making the implicit normative assertion that there should be competition everywhere… except within the firm itself. Since the firm, historically, is an entity that emerged by combining into a single entity what had previously been organized into discrete units — a single factory full of workers rather than a collection of small workshops headed by guilded masters — this allows Paul to completely invert the polarity of classical economy’s foundation myth about the supersession of the guild by the firm. It’s not at all the case, she argues, that guilds suppressed competition, and firms freed it. Rather, the opposite is true. In reality, she suggests, guilds were institutions through which the medieval “moral economy” ensured and regulated the existence of “fair competition” between large numbers of basically independent guild masters. If true, the result would clearly be that when these guild masters were replaced by a single firm managing a large factory, this would represent the suppression rather than the promotion of “competition”, since the point or even the definition of a firm is that it does not compete within itself. The historiography on guilds, as we will glimpse in Part 2 of this essay, is quite complex, and generalizing about these institutions is somewhat treacherous. But one thing is for certain: a firm-owned factory is a much bigger thing than a guilded workshop, employing a lot more people and producing a lot more goods. And if the firm just is an entity within which there is no competition, then this means that the rise of firms reduced competition rather than enhancing it.

The exploration of this problem is the topic of the follow-up essay to “Foundations of the Sherman Act”: “On Firms.” In this essay, Paul works through some of the problems raised by the earlier piece, which led her to propose an alternative framework for thinking about “the point” of anti-trust law. Rather than understand it as “promoting competition,” which relies upon an idea from (neo)classical economics that may well be incoherent, she argues that we should frame anti-trust in the more positive light of “allocating coordination rights.” The current regime does just that: it allocates coordination rights to firms, and to no-one else. But once we recognize that this entire doctrine is based upon a spurious interpretation of the common-law restraint of trade and of the Sherman Act itself, new possibilities are opened up for aiming anti-trust in a different direction, towards the dispersal of coordination rights among more “small players”, the promotion of “democratic” processes of price-coordination, and “the active construction of market rules, similar to the old town council — which actively balanced and mediated the claims of bakers, millers, journeymen and apprentices, and consumers in governing the market for bread” (“Foundations,” 249-50).

In moving, between the first and second essay, from an attack on the jurisprudential reception of the Sherman Act to an attack on classical economy’s myth about the rise of the firm, Paul is led to engage somewhat more closely with, and make somewhat stronger claims about, the medieval institution of the guild itself. It is these claims that I really want to discuss, and we’ll get to them in part 2. First, however, we need to consider the idea of the common-law “restraint of trade” and the activities of forestalling, regrating, and engrossing a little more carefully, as well as the basic source of the “myth of guilds” in the famous passage from Adam Smith about a “conspiracy against the public.”

3. Restraint of Trade

What are forestalling, regrating, and engrossing? Paul defines them like this: “Narrowly, forestalling can be defined as an attempt to sell above the customary price, or otherwise to conduct transactions outside marketing hours and rules; regrating can refer simply to specific methods of selling at a profit; and engrossing to buying up crops in the field or prior to coming to market” (“Foundations”, 185). She draws these specific definitions from Letwin (1954), but they are a bit mixed up and are somewhat contradicted by another, slightly older source offered on the subject: the more reliable Herbruck (1929). It is worth getting a little pedantic about what these words mean, because understanding their precise sense will shed significant light on how medieval English people — and thus the common-law tradition — thought about the idea of “trade” and what it meant to interfere with or “restrain” it. In their basic outlines, Paul’s claims are correct: the medieval idea of the “restraint of trade” had no bearing whatsoever on the organization of labor (or, as we will see, on the activities of guilds), and cannot really be construed as doing so. There are, however, some important aspects of this idea that drop out of Paul’s discussion, since she is mostly content to make the point that medieval economy is “moral” or “ethically embedded” and leave it at that.

What is perhaps confusing about the unholy trio of “forestalling, regrating, and engrossing” is that they seem to have been used somewhat interchangeably by medieval people themselves. The reason for this is probably that anybody who was engaged in one of the activities was quite likely to be engaged in one or both of the others, and so there was not really a point to distinguishing them sharply. But they do have distinct meanings, and the words themselves tell us what they are. “Forestalling” is a Saxon word whose basic meaning is to “defy or prevent,” but whose specific economic meaning is directly translated by the Latinate “preemption.” To forestall goods means to “stall” someone who is coming to market intending to sell their goods (pre + emptio) and buy them “before” they get there. “Regrate” is a Latinate word meaning “to step back.” The regrator, in other words, is engaged in the activity of what we would now call “flipping”: the regrator buys a commodity in the market only to “step back” into that same market and sell it again later. Finally, “engrossment” most literally means “to accumulate in large quantities.” Engrossment refers to the act of holding goods off the market by warehousing them and refusing to sell, usually after having purchased them directly from farmers in the field. Thus, “buying up goods before they come to market” is forestalling, while “buying up goods in the field” is engrossing, and these are, at least in some sense, understood as distinct offenses.

It is important to note that none of these activities have meanings that involve or require any idea of “selling above the customary price.” Forestalling means buying up goods before they reach the market, regrating means flipping goods within a market, and engrossing means holding goods off the market. All of these things were understood as, in some way, “restraining” trade and thus producing an “unjust” price, and there would be no incentive to engage in these activities unless they did in fact generate an — inherently suspicious — profit for the one engaging in them. But the idea of a “customary price” is not necessary to define what they are, and indeed in the most important of the relevant markets — the grain market — it is not quite clear what this “customary price” would be. If we are to begin trying to understand medieval common-law doctrines on the restraint of trade on their own terms, we must begin with the basic fact that the most important price in the medieval economy was the price of grain, and this price exhibited strong seasonal fluctuations. Inevitably, grain would be cheapest in the season immediately following the harvest, and most expensive right before it. Medieval people did not expect grain to be sold at a constant price throughout the year, and they expected the severity of the price appreciation over the course of the year to vary with the quality of the harvest, so it is not really clear how the benchmark of a “customary price” could be adequately employed to judge whether something was or was not “forestalling.” Things were much simpler than that. Forestalling was simply the act of buying up goods before they reached the market. This was understood as leading to an injustice of prices, but as an expected consequence rather than a matter of definition (in the same way that, in the neoclassical discourse examined above, “consumer welfare” was an expected consequence of “competition,” but not inherent in its definition).

Though these terms have somewhat distinct meanings, it seems likely that medieval people often considered them as a big lump of generally similar activities: “forestalling, regrating, and engrossing” as a single catch-all category of offense. When we consider what they all have in common, then, we can better appreciate what medieval people understood by the idea of the “restraint of trade.” Medieval people, crucially, did not conceive of a “market” in the same way as the classical political economists, as something that was naturally formed by the spontaneous brownian motion of exchange. Rather, a “market” was really an event, happening at a specific time and place, and which had to be held until the auspices of some sort of right or privilege to do so. Not just anyone, in other words, could “make a market.” They had to be specifically endowed with that power. This fact is at least partially consonant with the idea of the market as something “regulated into existence.” But to declare that a market exists, at a certain time and place, in which trade is to occur, is at one and the same time to open up the possibility that transactions might occur illicitly outside it.

Thus, what each of the unholy trio has in common is that they are precisely the sorts of illicit transactions that seem to threaten the identity of the market with itself at a single point in time and space (thereby disrespecting the right or privilege under which the market was held). Intercepting goods before they reach the market, holding goods off the market, taking goods out of the market and then back into it again — all of these actions are those that threatened the normative conception of what a proper market should be, which was an event at which everybody brought all the goods that were to be transacted and made these transactions all at once. Thus, medieval people did have a concept of an ideal, counterfactual market in terms of which they judged certain activities to be improper. It’s just that this ideal market had little to do with “competition,” but rather with the self-identity of the market as occurring at a single point in time and space (this concept of an ideal market survives, perhaps, in the figure of the Walrasian “auctioneer”).

We’ll return to this idea of a “just price”, and the uses to which Paul puts its, in part 2 of this essay. Before we move on, however, I want to conclude this section by noting one potentially explosive consequence of Paul’s interpretation of the Sherman Act, given our more precise understanding of what is meant by the common-law “restraint of trade”. Recall that her argument runs as follows: There was, originally, a draft of the Sherman Act that focused on the language of “competition.” This raised concerns among some senators that this language might be construed by courts as limiting the organization of labor, which they did not wish to do. Therefore, they proposed a series of amendments making exceptions for, among other things, organizations of laborers and farmers. The large number of amendments, however, raised concerns about the bill’s viability, after which it was moved to another committee and redrafted, this time with language around the “restraint of trade” rather than “competition.” Because the same senators who had proposed amendments exempting labor organization supported this second version of the bill even though it lacked explicit exemptions, Paul argues, it should be understood that they believed the language of “restraint of trade” to already place labor organization beyond its scope.

If we accept this argument as correct — and I suggested above that we should — then the Sherman Act, properly understood, also outlaws futures contracts (and probably a great many other modern financial instruments and activities). The purchase of a futures contract is, plainly, an act of forestalling in the sense of “the making of a contract for the purchase or control of anything coming towards a market to be sold therein before that thing shall be in the market ready” (Herbruck, 377). Moreover, the language of “restraint of trade” seems to have been understood by at least one senator as having precisely this implication: “When the Sherman bill was under debate in the Senate, Sen. Ingalls of Kansas proposed an amendment which would have taxed out of existence the business of dealing in futures contracts. Grain futures were specifically enumerated in the amendment… The Sherman bill was subsequently redrafted by the Senate Judiciary Committee, which used substantially the same broad and sweeping language which Sections I and 2 of that Act contain today. Sen. Ingalls and proponents of the Ingalls amendment supported the bill” (Law Review Editors, 1948). Since this is precisely the same grounds on which Paul argues that the Sherman Act should not be understood as prohibiting labor organizations, it does not seem possible for her to advance one claim without advancing the other. The Sherman Act prohibits “contracts… in restraint of trade,” and if by “restraint of trade” we are to understand what the common law meant by that, and what the senators of 1890 understood by that, then it is clear that the Sherman Act prohibits futures contracts. Perhaps this is a consequence to be embraced!

4. Conspiracies, Guilds, and the Public

The more fundamental point raised by Paul’s excavation of the legislative history of the Sherman Act is that the United States in 1890 did not yet fully believe in “economics.” There were, instead, two rival discourses circulating, both of which could be mobilized by policy makers against the large industrial combinations, but which were constructed around different fundamental ideas and thus had significantly different implications. One was the new language of economics centered around the idea of the virtues of competition. The other was an older common-law discourse about the restraint of trade. As we have already seen, the assertion of a simple identity between “prohibiting the restraint of trade” and “promoting competition” is key to the interpretation of the Sherman Act forwarded by Bork and the Chicago School. But despite the fact that both of these discourses could agree about the desirability of breaking up combinations, they disagreed about much else — and, as Paul has shown, the fact that legislators in 1890 understood them as disagreeing about much else is indispensable for understanding the legislative history of the bill.

For one thing, the discourse of economics — which was, famously, born around the same time as the entity called “the United States” — was centrally concerned to abolish common-law prohibitions on the restraint of trade, or what Adam Smith called “the absurd laws against engrossers, regrators, and forestallers, and the privileges of fairs and markets” driven by a “popular fear of engrossing and forestalling [which] may be compared to the popular terrors and suspicions of witchcraft” (522; 702). Somewhat counter-intuitively, Smith was actually arguing in favor of the “restraint of trade”: his view was essentially that by prohibiting speculation on the future market price of grain through engrossing, regrating, and forestalling, common-law market regulation had the effect of making grain markets more volatile. If merchants, he argued, were allowed to buy up grain when it was cheap in order to sell it into the market when it was dear (i.e. regrating), their profit from the operation would be simply a fee for their service of thereby stabilizing prices across the annual cycle. Any defense of the socially desirable effects of financial contracts such as futures, therefore, would be a continuation of this intellectual lineage which sought to argue that the “restraint of trade” was actually a good thing.

At the 1890 congress, both of these discourses were potentially available to mobilize for attacking industrial combination. It is clear that the discourse of economics, even if not yet hegemonic, was enjoying considerable circulation, since originally the senators involved in drafting the anti-trust act tried to frame the legislation in terms of the principle of competition. This, however, raised a puzzling ontological problem: if there is to be competition, there must be competition between some entities. What are the entities? And how are the entities which are to compete to be constituted legally except by means of an exception or “carveout” that sanctions the internal non-competition constituting the unity of the unit? (SOCRATES: “Do you think that a city, an army, a band of robbers or thieves, or any other group with a common unjust purpose would be able to achieve it if its members were unjust to each other?”; Rep. I.351c). It was this ontological confusion — and worries over its implications for the power of farmers and laborers — that led the senators to eventually retreat onto the firmer and more familiar ground of the “restraint of trade.” This older discourse did not raise the same ontological problems as did the idea of “competition,” because it could afford to be ontologically agnostic about the entities concerned: the restraint of trade needed only to consider relations between things and their owners, rather than a relation obtaining between (real or fictive) persons.

Thus, it is at this point that the theoretical stakes of Paul’s intervention are raised from a challenge to the dominant interpretation of the Sherman Act to an attack on one of the fundamental concepts of economics itself: the firm, which serves as the constitutive exception to political economy’s doctrine of competition. As was the case with MMT, the project of attacking a fundamental economic concept makes it necessary to engage with the historical myth that grounded that concept: just as the MMT writers had to claim to be overturning the “myth of barter” with the “real history” of money, in order to ground the claim that they really cared about, Paul must also claim to intervene into the origin myth of the firm (that it arose by superseding the “anti-competitive” guilds) in order to ground the claim that she really cares about: that the foundational concept of anti-trust should be re-framed away from “promoting competition” and towards the more rigorous notion of “allocating coordination rights” (which is superior precisely because it transcends the distinction between the rule and its exception that led to the ontological puzzle about how the units which are to compete get constituted in the first place). And again, in a striking parallel to the chartalist writers who grounded their assertions about the political potential of money by constructing a myth of a “fully political” medieval money, Paul grounds her assertions about the desirability of “coordination rights” by constructing a myth about a medieval economy — organized in terms of guilds — which was already “fully coordinated” in the service of what she calls a “traditional moral economy.”

Before we examine this claim further, it will be useful to remind ourselves briefly about the conventional or mainstream view that she wants to reject. The received wisdom about guilds “since Adam Smith has tended to view guilds and workshops as hubs of anti-competitive price-fixing” (“On Firms,” 9). We tend to imagine, in other words, that guilds were equivalent to what we now call “cartels”: organizations that monopolize the market in some commodity in order to fix the price above what would otherwise obtain in a “competitive equilibrium.” We imagine, furthermore, that this activity was the primary concern and activity of guilds — their basic reason for being — and that they were supported in this activity by the legal administration.

Interestingly, however, this is not really quite what Adam Smith himself says. He does not describe “price fixing” as the defining and above-board activity of guilds, but rather as an inevitable consequence of the mere fact that one tradesperson is aware of the specific existence of another: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meeting… But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary” (183). Adam’s Smith’s objection, in other words, applies just as much to any sort of industry association — or even to the Yellow Pages — as it does to guilds per se. Nor does Smith think that it would be possible to prevent such “conspiracies.” He merely argues that public regulation should avoid enabling or requiring them (by, for example, permitting trade associations to operate “widows and orphans” funds!).

Smith’s real complaint about guilds in this passage is not that they “fix prices,” but rather that they restrain supply in labor markets through the apprentice system (thereby “raising prices,” but only as a putative indirect consequence). His commentary here must be understood in the context of contemporary political struggles over the Elizabethan Statute of Artificers, dating from the parliament of 1562. This late 18th-century debate was essentially a dispute between labor and capital, in which the labor faction desired to reactivate and enforce the provisions of the old statute — especially that requiring a seven year’s apprenticeship by anyone practicing certain trades — while their opponents in the faction of capital sought to ward this off by officially repealing it (see Derry, op. cit.). It is probably this conflict from which our received notion of “the guild system” derives: in the late 18th and early 19th century, organized labor in England was attempting to mobilize spottily-enforced mid-16th century statutes on labor market regulation, couched in terms of “guilds” and “apprentices,” against the interests of capital, which sought to establish what we would now call a “flexible” labor market (i.e. a labor market in which workers are atomized and powerless). In this context, the attempt by the labor faction to enforce the Statute of Artificer’s clauses on apprenticeships was essentially an attempt to protect their collective bargaining power and prevent the hiring of scabs. It is not hard to see why the mercantile ideology voiced by Smith should resent this.

The original political context of the 1562 statute, however, seems to be somewhat different: not so much a dispute between labor and capital as between the interests of the central government and rural elites and those of the urban industrial economy. The central government seems to have been primarily concerned to limit the ability of the rural poor to migrate towards the labor markets of the towns, thereby putting pressure on labor markets in the agricultural sector. To this end, the government sought to restrict their ability to gain residency in the towns through the apprenticeship system, not only by lengthening the required term to seven years, but also by imposing property requirements on the parents of prospective apprentices, who had to hold land in freehold above a certain monetary valuation in order for their children to be eligible. The industrial interests in the towns, by contrast, were opposed to these measures — since the urban economy benefited from the influx of rural labor — and were able to win some concessions along these lines in the final version of the statute (Woodward, op. cit.). Thus, here, it was not the “guilds” who were pushing to restrict entry to industrial labor markets. Rather, the municipal governments dominated by the guilds were opposing these measures, which were being forwarded by a central government more aligned with agrarian elites and concerned about the disruptive “pull” of urban labor markets.

The moral of this story is that it would be a mistake to assume that “guilds” — and the stakes of being for or against “the guild system” — were the same in every historical conjuncture, or that all participants in the guild system necessarily had the same interests. As we can see in the example of the Statute of Artificers, a piece of legal regulation might be created in one context by one set of actors for one purpose, and then mobilized later in another context by a different set of actors for another purpose (much like the Sherman Act!). Restrictions on access to the apprenticeship system might either be demanded by “the guilds” or resisted by them, depending on the context. More to the point, both those who created the restrictions on apprenticeship in the 16th century and those who sought to abolish them in the 19th century had the same goal: disciplining labor. The main difference between them was the sector in which labor was perceived as being most in need of discipline: the Statute of Artificers was created in order to discipline the rural workers, and eventually repealed in order to discipline the urban. The statute meant rather different things in the 16th and 19th centuries, and thus its repeal cannot be understood simply as a negation of its passing. The situation had shifted.

In Part 2 of this essay, then, we will need to review some of the recent historical literature on guilds in order to see if we can move past caricatures both hostile and sympathetic towards a more adequate understanding of these organizations. We will begin by taking a closer look at what Paul has to say about them, now that we have a firm grasp on the stakes of the debate that brought her — ineluctably — to the point of planting a flag on the treacherous ground of medieval history. What I hope to have established is that criticism of Paul’s claims about guilds on historical grounds is more than an exercise in nitpicking. These claims are, in fact, at the heart of the issue, because of the fact that Paul is attacking a fundamental concept — the concept of the firm — and this concept is inextricable from the historical myth that grounds it. The concept cannot be attacked without attacking the myth, and the myth cannot be attacked without saying something about the “real history” that the myth gets wrong. Thus, I argue, Paul should be held accountable for her positive claims about guilds for precisely the same reasons that the neochartalists proper should be held accountable for their positive claims about the history of money. These claims are not just decoration. They really matter.

BIBLIOGRAPHY:

Bork, Robert H. “Legislative Intent and the Policy of the Sherman Act.” The Journal of Law and Economics 9 (1966): 7–48.

Derry, T.K. “The Repeal of the Apprenticeship Clauses of the Statute of Apprentices.” The Economic History Review 3, no. 1 (1931): 67–87.

Herbruck, Wendell. “Forestalling, Regrating and Engrossing.” Michigan Law Review 27, no. 4 (1929): 365.

Law Review Editors. “Validity of Commodity Exchange Regulations under the Sherman Act.” The University of Chicago Law Review 16, no. 1 (1948): 144. https://doi.org/10.2307/1597829.

Masschaele, James. “Market Rights in Thirteenth-Century England.” The English Historical Review CVII, no. CCCCXXII (1992): 78–89. https://doi.org/10.1093/ehr/CVII.CCCCXXII.78.

Paul, Sanjukta. “Recovering the Moral Economy Foundations of the Sherman Act.” The Yale Law Journal, 2021, 175–255.

Paul, Sanjukta. “On Firms.” University of Chicago Law Review, 2023 (Forthcoming).

Woodward, Donald. “The Background to the Statute of Artificers: The Genesis of Labour Policy, 1558-63.” The Economic History Review, 1980, 32–44.