Economic Credit in Renaissance Florence*
It has been rarely remarked how seldom a competitive spirit comes into play in the relations among these [Renaissance Florentine] merchants. The vast correspondence of Datini and of the Medici themselves (the largest collections of business letters to survive before the sixteenth century) yields hardly a hint of competition. … However individualistic the Florentine world appears in contrast with the tight corporate structures elsewhere—the Venetian senate, the Hanseatic league, the south-German cartels, the London regulated companies—it was still permeated with something of the spirit of medieval corporatism. This is what the fiducia Florentine business historians make so much of really comes down to—that sense of trust in one another that in a way also kept everyone in line.1
Introduction
What were the social and institutional factors that led to, and reinforced, the precocious emergence of Florentine commercial capitalism, especially in the domain of international merchant banking?2 The dominant stream of answers emphasized by economic historians focuses on the invention in late medieval and Renaissance Italy of a variety of innovative business techniques—bills of exchange, double-entry bookkeeping, partnership contracts, commercial courts. If these impressive organizational inventions are interpreted as facets of a broader rise of efficient impersonal markets, then a tension emerges in Florentine, and indeed in European, historiography between economic historians and the research of social and political historians who emphasize the deeply personalistic—mainly familial and clientelistic—character of social relationships of the period. Were impressive early capitalist business techniques really signs of a teleological breakthrough of the market from its traditional social shackles, as the master narrative of modernization would have it? Or instead were economic relations in the market embedded in, and hence reflective of, the surrounding social and political networks of the time, as anthropologically oriented historians have argued?3 If evidence can be found in support of both propositions, then how are we to reconcile these seemingly contradictory interpretations?
In this article, we address these historical questions through both a statistical analysis of Florentine commercial credit in the early Quattrocento and a documentary study of business correspondence from the same time. Our conclusion will be that commercial credits among Florentine companies were indeed highly correlated with a wide range of noneconomic, social relationships among the partners of these companies. Correlations between economic and social relations were highest in the merchant-banking pinnacle of the Florentine economy—precisely in the industries where reliance on advanced capitalist business techniques was greatest. New business transactions did not displace the oligarchic social networks of the time, we argue; rather, they built on and formalized these relationships into markets. In particular, family and neighborhood provided strong traditional foundations to Renaissance Florentine credit markets. In addition, Florentine republicanism—especially through its elected city council—provided political scaffolding that allowed personalistic social networks, and the economic credit networks built on them, to “open out” topologically toward expansive liquidity and growth instead of closing inward into cliques and corruption. We identify two mechanisms through which republicanism influenced the emergence of economic credit markets: public certification of reputation (onore), through co-optative elections, and the incorporation of carefully filtered newcomers into expansive economic-cum-political networks of exchange.
Causality, however, did not run from social and political networks to economic credit markets only. The logic of accounting and credit infused social and political relations of the time, transforming categorical social distinctions into negotiable gradients of status. The Ciompi revolt in 1378 fused economic, social, and political networks into a new socially open oligarchic-republican elite that remade not only commercial markets but also political factions and kinship.4 Because of these correlations between social and economic ties, Florentine economic credit was built on the social models of friendship and gift-giving reciprocity, and it formalized these in mathematically sophisticated ways. Reputations cleared markets, as much as did prices.
We develop this thesis about the structure and operation of the Renaissance Florentine economy through the following steps. After describing our comprehensive quantitative data on commercial credit from the 1427 tax census (catasto), we document the magnitude of reliance on commercial credit among Renaissance Florentine companies in various industries and markets. Next, we analyze these commercial credits statistically, in order to measure correlations between business credits and various social and political relations among the partners of companies. Finally, we examine a sample of business letters from the period in order to illustrate the cultural mentalité through which the behaviors measured by our statistics were produced. Florentine businessmen's frequent use of the language of friendship (amicizia) and honor (onore) in their letters to one another illustrates both how deeply the language of social obligation infused their economic relations and how business credit expanded the range of application of such mental models well beyond their family and neighborhood origins. We conclude with brief comparisons of Florence to Venice and Genoa and with some implications of this historical research for contemporary economic theory.
The Industrial Structure of Florentine Commercial Credit
The statistical part of this study is possible because of the 1427 catasto, or tax census, described at length in the pathbreaking book of David Herlihy and Christiane Klapisch-Zuber.5 Herlihy and Klapisch-Zuber computerized large portions of this rich archival source and analyzed their data primarily from a demographic and family-history perspective. In addition to the data those authors coded, however, the catasto also contains extensive lists of debtors and creditors, with amounts owed, for each household tax return, which McLean has coded.6 Business debitori and creditori were included within the household tax return of the lead partner in the company—an indicator of the incomplete separation of personal and business domains in the Florentine world. Such lists of debts existed in the catasto because this very innovative taxation procedure systematically assessed taxes on the basis of net wealth—that is, assets minus liabilities. Debts, in other words, were tax deductible. Florentine law required the itemization of outstanding credits as well as debts in order to give tax officials the ability to disallow deductions if one person's declared debit did not equal the other person's declared credit.
This remarkable breakthrough in public finance was possible only because of the highly commercialized character of Florence's underlying economy. Florentine merchants filled out the business parts of their 1427 tax returns by copying summaries of their account books into their tax declaration, as those account books existed as of the date of the tax submission. Later catasti in Florence became notoriously unreliable, but this first catasto seems to have been fairly accurate in the financial data it contained.7 Hence, the 1427 catasto provides a high-resolution snapshot of the credits and debits of the entire Florentine economy at one specific, fleeting moment in time. Virtually all of the account books from which this information originally was drawn have subsequently been lost.8 This Florentine source, therefore, is remarkable: no other comparably comprehensive data set about economic transactions exists for such an early time.9
The details of our coding of these creditori lists were reported in a previous publication; hence, that description will not be repeated here.10 Both business and personal debts were coded, even though only business debits and credits will be analyzed in this article. The main coding rules relevant to this article were these: only debts of value greater than or equal to ten florins were coded, and only debts to other Florentines were coded. An effect of the first coding rule is mostly to exclude artisans from our data set. An effect of the second coding rule is that trading among Florentines (even when they were resident abroad) is the focus of the data set, rather than trading between Florentines and foreigners. The joint effect of both constraints is that the data describe, with great richness, the structure of the core export-oriented segment of the Florentine economy as of 1427, including both merchant bankers and cloth manufacturers.11
Within these constraints, coverage is thorough. Numerous passes through the catasto were performed in order to code a high percentage of companies' accounts or bilanci. Ultimately, 65.4 percent of the bilanci of active companies in our core industries were coded. Comprehensive coding was least successful for international merchant companies located abroad, for small low-quality wool companies whose accounts were hardest to distinguish from household credits and debits, and for a number of companies connected to the export-oriented sector but not formally located within any of the key industries we targeted.12 For Florence- and Pisa-based banks, merchants, merchant banks, silk manufacturing, high-quality wool manufacturing, and cloth-retail companies, the bilanci coding rate approached 80 percent. Debts were coded not among a predefined list of all companies (such a list did not exist until this study) but rather among all companies and people meeting the above standards. As a result of our procedure of coding credits to Florentine companies outside of previously coded bilanci, however, even the debits of companies whose accounts were not coded directly often were found indirectly in the credit accounts of coded companies. Because of such cross-referencing, we were able to compile, for the first time, a complete census of companies active in 1427. A tabulation of this census, industry by industry, is presented in table 1. The detailed list of the companies underlying table 1 is publicly available on Padgett's Web page (http://home.uchicago.edu/∼jpadgett).
Table 1 Census of 1427 Companies/Partnerships in Major Industries
We estimate that 33.4 percent of the total number of all debits and credits of companies participating in the export-oriented industries of the Florentine economy were finally included in our data set.13 Likewise, we estimate that these debts and credits accounted for 62.3 percent of the total monetary value of all debits and credits in these industries.14
The first stage in our analysis is descriptive: How important was commercial credit to the Renaissance Florentine economy? In what types of economic exchanges and markets was credit most used? And what was the ratio of transactional to (multitransactional) relational credit in various markets?
One common way in finance of measuring the magnitude of credit is leverage: the ratio of outstanding debt to assets. The higher the ratio, the more important is credit in the operation of the company. Higher leverage can generate higher profits but at greater economic risk. “Assets” in the Florentine context primarily means the start-up capital specified in the partnership contract, called corpo. Table 2 reports leverage so defined, and it also provides two more liberal definitions of assets, which progressively add to corpo the partners' reinvestments of past profit and company inventory.15
Table 2 Capital Structure of 1427 Catasto Companies
Using the strict definition of leverage, our findings are that Florentine merchant banks were leveraged on average at 5:1 of their corpo, that Florentine cloth retail and dyeing companies were leveraged at a little over 2:1 of their corpo, and that Florentine companies producing wool and silk cloth were leveraged at about 1:1 of their corpo. These leverage ratios are not really comparable to modern figures because modern firms borrow for the most part from specialized banks, whereas these companies borrowed chiefly from their trading and exchange partners. Nonetheless, the ordering of these ratios is consistent with the known facts that merchant banks were generally more profitable as personal investments, but also more risky, than were wool and silk production companies.16 In general, it is fair to say that virtually all Florentine companies, but especially merchant banks, were highly leveraged and that most of their business was conducted on credit.
On average, larger and wealthier companies operated on higher leverage than did smaller companies. The most extreme example in our data set was Cosimo de' Medici's bank branch in Rome, which had the highest outstanding debt of any company in Florence, yet its start-up capital was zero, generating a leverage ratio of infinity.17 Clearly, name, reputation, and connections were more central in the generation of commercial credit in fifteenth-century Florence than was asset security. Without other firms being willing to extend credit to a given firm, that firm could not really be in business at all. Credit, based on reputation, was the mechanism that “kept everyone in line.”
Figure A1, available in the online version of the Journal of Modern History, presents a computerized visualization of our commercial credit data, using a network visualization program called Pajek. Figure 1 visualizes these company- credit data in a more aggregate way, as Leontief input-output flows of credit between and within industries. In particular, figure 1 shows observed deviations in credit flows from those randomly expected, the latter calculated on the basis of aggregate volumes of industry credit alone. Four specific trading patterns are worth highlighting in this snapshot of the Florentine macroeconomy in 1427:
a) Credit flow among merchant banks of all three sorts (Florentine merchant banks abroad, Florentine trading companies located in Pisa, and Florentine domestic banks or tavole) was enormous. Metaphorically, the merchant-banking sector was a whirlwind of products, bills of exchange, and credits cycling around. This high liquidity was one secret to Florence's economic success.
b) Woolen-cloth consignments from woolen-cloth manufacturers (lanaiuoli) flowed more to cloth retailers (ritagliatori) than to merchant bankers.18
c) Silk-cloth consignments from silk-cloth manufacturers (setaiuoli) flowed more to merchant bankers than to local cloth retailers.19 Reciprocally, setaiuoli received a higher flow of credits (including raw silk) from domestic merchant banks, relative to statistical expectation, than did lanaiuoli.20
d) Silk firms exchanged with and gave credit to one another, whereas wool firms for the most part did not.
Fig. 1. Input-output of credits between industries: shown if (observed credits — expected credits)/expected credits >.10. Dotted lines show weaker ratios.
Credit pattern a documents statistically Goldthwaite's observation in this article's opening epigraph that Florentine merchant banks were not an industry of independent firms in competition. They were instead a cooperative economic network, with “competing” merchant bankers providing much liquidity and business to one another.21 We explain in the next section, through social and political networks, this central feature of the Florentine economy.
Credit/trade patterns b–d reflect trends in the early fifteenth-century Florentine economy. The core of the Trecento Florentine economy had been the finishing, production, and export of woolen cloth. In the late 1200s and early 1300s, Florentine merchant bankers in the Calimala guild imported unfinished cloth from Flanders and exported finished and dyed woolen cloth. By the mid-1300s, Florentines were importing raw wool and exporting completely manufactured woolen cloth. However, Florentine wool production suffered a 72 percent decline between 1373 and 1437, due primarily to aggressive expansion of woolen-cloth production in England.22 The raw-material flow of prized English wool, on which the high-end San Martino segment of cloth production had depended, diminished, forcing a higher percentage of production of lower-quality woolen cloth called garbo. The San Martino cloth still left was sold both to merchant bankers—especially those with warehouses in Pisa—and to ritagliatori, whereas garbo cloth in this period was sold overwhelmingly to ritagliatori.23
The Florentine merchant community and government, under the political control of the Albizzi oligarchy, responded to this economic crisis by aggressively trying to develop silk-cloth production.24 The mechanism of this sponsorship was liberal credit and investment from upper-class merchant bankers to new-men silk manufacturers.25 Woolen-cloth production still exceeded the newer silk-cloth production in total volume and also in total employment, but our data show that this centrally encouraged industrial transformation from wool to silk was well underway in 1427. The credit mechanisms analyzed in this article help to explain how the Florentine economy successfully adapted to its challenging international situation.26
Table 3 provides information about the specific goods funded through credits, broken down by aggregated industrial clusters and by transactional versus relational credits, to be explained shortly. Unfortunately only 11 percent of our credits had their content or purpose listed in the catasto. No doubt all of these purposes were described in detail in the original account books, but there was no tax reason for businessmen to copy this text into their tax returns. Nonetheless, an 11 percent sample provides a coarse-grained portrait.
Table 3 Substantive Content of Credits (When Known)
The modal activities reported in table 3 are what any knowledgeable historian would expect. Namely, among merchant banks, the modal type of credit was the current account (conto corrente). In these cases, a single recorded “credit” in the tax returns summarized many underlying business transactions.27 As per their monikers, merchant banks engaged precociously in both merchant and banking activity. But the primary international banking transaction was the bill of exchange.28 As such, bills of exchange were transactions, and conti correnti were the formalized economic relations containing these and other transactions. Between merchant banks and other companies, the primary credit activity was trading raw material for cloth on consignment. Banking services also were provided on credit by merchant bankers to textile producers. Accounts called conti di esercizio orchestrated recurrent trade among such trading partners.29 Conti di esercizio between merchant bankers and textile manufacturers were not as common as were conti correnti between merchant bankers. Among other cloth-producing companies, the modal credit activity was lending raw materials and cloth to one another, on a transactional basis.
“Current accounts” and “accounts of use” were the formalized accounting vessels that contained and measured strong economic credit relationships among Florentine companies. Double-entry bookkeeping slowly percolated throughout northern Italy during the first half of the fourteenth century, but it was adopted in Florence only in the late fourteenth century.30 Bilateral format in Florentine merchant account books—the physical layout of the pages often associated with double-entry bookkeeping—became widespread in the 1380s, precisely in conjunction with the invention and rapid diffusion of the partnership system.31 From the point of view of credit, the most significant aspect of that accounting change is its instantiation of the current account, which visually was displayed so neatly in bilateral-format pages.32 Simplifying a bit, to open up an account book in bilateral format was to place into clear sight the writer's own economic relationship with a single person or company.33 Credits (both monetary amounts and descriptions of content) between the writer and that person or company were listed on one side of the open account book, and debts of the writer with that same person or company were on the facing page. Such accounts usually were initiated with an opening deposit or a credit of some sort, but after that initiation a whole series of transactions ensued, with accounting money (not necessarily physical money) flowing both in and out, all registered neatly and precisely in parallel columns.34 Earlier more primitive single-entry account books, in contrast, were registers of the writer's transactions, ordered by date irrespective of trading partner, each described in paragraphs with complicated systems of cross-reference to help figure out whether the credit was ever repaid.35 To put this accounting development simply, the foundational organizing unit of single-entry bookkeeping was the transaction, while the organizing unit of bilateral double-entry bookkeeping was the economic relationship.36
As relational accounts grew to manage business between companies, reliance on transaction-specific contracts declined. Conti correnti between merchant bankers and conti di esercizio between merchants and manufacturers were the most advanced technical means in Florence through which economic credits were managed.37 Essentially, paired companies began to maintain complementary and quasi-permanent “bins” within each other into which their credits and debts could be transferred at will on an ongoing basis. Such networks of open-ended credit involved both partnership systems, with legally separate branches linked through common partners, and separately owned companies that did frequent business with one another—so-called corrispondenti. In our section on business letters, we shall have occasion to observe more closely corrispondenti relations in action.
Anticipating the statistical results of the next section about social embeddedness, we point out here that paired current accounts are not inconsistent in form from reciprocity in anthropological social exchange.38 Both in primitive social exchange and in the technically sophisticated conti correnti, one party offers a “gift” to the other, thereby “making” or constructing that person (or his business), and is repaid not in cash but in reciprocal gifts, which thereby “make” in turn the initiating person (or his business). A credit or loan, in this social-exchange understanding, is just a nonreciprocated gift. Much recurrent business was conducted by Florentine companies in this open-ended gift-exchange manner of reciprocity, without requiring cash, even though of course serious risks of bad debts and cheating were incurred thereby.39 These economic accounts formalized personal relations, we find, rather than making them impersonal. Economic and social relational logics had a strong tendency to bleed into each other in Renaissance Florentine markets.40
An important subsidiary message in table 3 about exchange content is its diversity. Table 3, column 3, tabulates the dispersion of multiple credits across content categories, between specific exchange partners, in those pairs of companies for which we have more than one instance of content reported. With the exception of trading among cloth producers and ritagliatori, in recurrent exchange relationships between Florentine companies, merchant activities, banking activities, and account activities (which really could cover anything: merchandise, bills of exchange, even daughters' dowries) were all mixed up. While distinct in terms of guild membership, upper-tier Florentine companies were not sharply specialized in terms of actual exchange behavior. On the margins, Florentine industries blended into one another, with a single company capable of morphing its business into another industry.41 Such company plasticity, we believe, was an organizational consequence of the generalist social exchange instantiated (and precisely measured) within conti correnti and conti di esercizio.
Motivated by our knowledge of current accounts, in table 4 we move on to disaggregate overall credit flows into transactional and relational credits. “Relational credits” we define as credits between companies who had more than one observed credit between them at the moment in time captured by our data. “Transactional credits” are those credits between companies who had only one observed credit between them.42 Relational credits in turn are of two types: (a) reciprocal credits, where credits flowed in both directions, and (b) multiple credits, where more than one outstanding credit existed in a single direction. Reciprocal credits are our observable proxies for corrispondenti relationships.
Table 4 Volume of Credits: Relations versus Transactions
We should not interpret relational credits as “personal” and transactional credits as “impersonal” because any credit at all implies that the creditor knew the debtor at least well enough to judge him creditworthy. But relational credits go beyond mere knowledge of creditworthiness to connote a social relationship of trust. “Multiple credits” either means extending to debtors a second (or more) credit even before they have paid off their first debt or it means maintaining multiple accounts with the other. Some sort of trust in the debtor by the creditor seems virtually a prerequisite for this pattern of repeated and risky lending behavior. It is notable in the Florentine case that often such credits flowed back and forth (e.g., two credits one way and three credits the other way), without their being aggregated into a net balance (e.g., into one net credit owed). Each credit account ultimately had to be cleared separately, even if not necessarily in cash.
Within the high-volume merchant-banking sector, table 4 shows that 45 percent of the credits in our data were reciprocal credits, that 50 percent were multiple credits, and that 63 percent were relational credits of either version. Relational exchange, in other words, was fundamental to the operation of Florentine merchant banks.
Between banks and other companies, and among other companies, the proportion of total credits in relational form was not as high as it was among merchant banks themselves, but it was still substantial. In our data, 33 percent of the credits between banks and other companies were relational credits, and 29 percent of the credits among nonbank companies were relational in character.
By these measures, credits within merchant-banking industries were on average more “personal,” both in relational-credit style and in their embedding in noneconomic social networks (see below), than were credits involving the textile-manufacturing and cloth-retail industries. Relational credit was the nonspecialized social-exchange logic through which the highest volume of Florentine commercial credit flowed, precisely recorded in account books through conti correnti and conti di esercizio. Regardless of whether credit was relational or transactional, however, commercial credit was crucial to the operation of all advanced sectors of the Renaissance Florentine economy.
Statistical Analysis of Florentine Commercial Credit
Florentine businessmen were not just businessmen. They were also fathers, brothers, neighbors, in-laws, republican officeholders, factional fighters, humanists, and patrons of the arts. The colloquialism “Renaissance man” reflects the Florentine social reality that the intellectual, economic, and political activities of its elite merchant republicans were remarkably diverse.43 Among their many activities, the pursuit of business did not necessarily assume first place in their career ambitions or in their biographies. The average period during which a Florentine banker was actually doing banking was only 8.2 years.44 Success in business often was a stepping stone toward other elite activities, like becoming a city councilor, an ambassador, a rentier, or an art patron.45 Cosimo de' Medici was not unique in this regard. In such a social context, “there is scant reason to expect that Renaissance economic exchanges, occurring within dense and multi-textured social networks, lack broader cultural meanings shared by other Renaissance exchange systems: gift giving, hospitality, the exchange of greetings, or the exchange of women.”46 The strategic implication of this dense social-network overlap is that “single actions [such as the granting of business credit] are moves in many games at once.”47
Renaissance Florence was not a large city by modern standards—in 1427 there were only 37,246 residents.48 Thus, most Florentine businessmen knew much about one another, both in business and outside of business, if only through reputation. Even were a Florentine businessman to desire to withdraw from the inquiring eyes of the social networks around him,49 reputation and the subsequent flow of business credit and business opportunities would compel him not to, or else he would fail in his business. In this section, we analyze more specifically which social networks were important for which commercial credit behaviors in which industries.
In the statistical analyses to follow, the commercial credits already described will become the dependent variables. For social-context independent variables, Padgett and his assistants have collected and computerized a wide variety of primary- and secondary-source data about the attributes and networks of these businessmen and others:50 namely, patrilineage,51 marriage,52 neighborhood,53 personal wealth,54 political office holding,55 voting,56 social-class membership,57 and factional affiliation.58 These data will be used to reconstruct the “dense and multitextured social network” context within which Florentine commercial credit operated.
In the appendix table, available in the online version of the Journal of Modern History, we present our full logit-regression statistical analyses of commercial credits among our companies active in 1427, using various social attributes and social networks of the Florentine partners who owned them as independent variables.59 This analysis was conducted for each market—for example, for the set of all possible pairings between domestic banks and silk manufacturers or among international merchant banks—and, within markets, first for all commercial credits and then subsequently for credits subdivided into reciprocal-credit and asymmetric-credit subsets. To simplify the presentation, we extract only salient statistically significant coefficients from the more complete appendix table data to present in table 5.
Table 5 Extract of Significant Coefficients from Logit Regressions on Company Credit
For those readers who do not consult the full data in the appendix table, it is important to note that more variables were included in the full statistical analysis than are presented in table 5. Five variables were included as statistical controls: (a) baseline null expectations of numbers of credits between companies, based on the sizes of the companies alone,60 (b) two binary variables for whether company accounts were coded directly from the catasto or were inferred indirectly from the records other companies provided,61 and (c) the total taxable personal wealth of all partners in creditor companies and in debtor companies, as reported in the catasto. To avoid misleading results, social influences on commercial credit are considered to be significant only if they exist above and beyond these statistical controls.
Eight other substantive variables apart from those listed in table 5 were also analyzed, but we did not find them to be significant: namely, (a) neighborhood at the coarse-grained level of a quarter (above and beyond the more fine-grained gonfaloni), (b) three social-class variables (percentage “upper class” popolani and magnate partners, percentage “middle class” new-men and new-new-men partners, and percentage “lower class” families-never-admitted-to-Priorate partners),62 and (c) four political offices other than Priorate or city council—namely, the Buonuomini, the Gonfalonieri, the guild consuls, and members of the Mercanzía or commercial court. It is therefore a substantive finding, albeit a negative one, that quarter, social class, and political offices other than Priorate did not consistently affect commercial credit in 1427.
To facilitate later comparison with business letters, the findings in table 5 will be discussed within categories that our Florentines would understand—namely, famiglia, amicizia, onore, and, finally, partnership systems. We close this statistical section by supplementing our discussion of the statistical significance of these social-embeddedness variables with discussion about the relative volumes of credits they explain.
Famiglia
We measured family four ways, sidestepping the thorny question of choosing one definition of the Florentine family rather than another.63 Two companies were measured to have a “nuclear family” relation with each other by the percentage that partners in the two different companies were members of the same nuclear family (i.e., father and sons or brothers). Two companies were measured to have a “patrilineage family” relation by the percentage that partners in the two companies were members of the same patrilineage, above and beyond nuclear family (i.e., cousins or uncles with same last name). Two companies were measured to have an “in-law” relation by the percentage that one set of partners married into the nuclear families of the other set. And two companies were measured to have a parentado relation by the percentage that one set of partners had the same last names as the other set of partners' wives.
Not surprisingly, family relations among partners in different companies, when they were present, exerted frequent and strong effects on those companies' credit behavior toward one another. And these effects were ranked in the intuitive way—namely, nuclear family (fourteen significant coefficients) > patrilineage family (seven significant coefficients) > parentado family (five significant coefficients).64 All versions of Florentine “family,” in other words, affected Florentine commercial behavior.
These statistical effects are not surprising because when family relations interpenetrated commercial relations, credit exchanges between companies became as much social obligations as economic investments. We shall see in our analysis of business letters that even nonkin sometimes evoked fictional-kinship language with one another, which strengthened the obligatory connotations of economic exchange. In all domains, not excluding the economic, kinship was central in Renaissance Florentine thinking and behavior.
While true in almost all Florentine markets, there is a remarkable density of nine significant family coefficients in the four reciprocal-credit markets involving international merchant bankers.65 Reciprocal credits are our observable proxies for corrispondenti relations, often implemented through paired conti correnti. When Florentine businessmen were resident outside their native soil, they relied even more than they did otherwise on family as the social ligaments on which they constructed their corrispondenti. In their riskiest business climates, Florentines tended to close ranks within intimate social relations for their strongest credit connections. Since Florentine families in international business were spread geographically all over Europe, some of the heaviest early fifteenth-century flow of international finance throughout Europe coursed through upper-class Florentine families' veins, making them very wealthy indeed.66
Amicizia
Our imperfect proxy for friends is neighbors. We acknowledge the imperfection of the match, but neighbors are measurable in our data, whereas friends are not. The social intimacy of Florentine neighborhoods has been documented extensively in the literature, so the assumption is well grounded that neighborhood was highly correlated with social-interaction frequency, even though close interaction could lead to hostility as well as to friendship within neighborhoods.67
Gonfaloni were the sixteen administrative districts or wards into which Florence was divided geographically. We measured a “same gonfalone” relationship between companies as the percentage of times that the partners in two different companies lived in the same gonfalone. “Same quarter” (excluding same gonfalone) relations were measured similarly.
The statistical findings regarding same gonfalone are remarkably sharp: at very high significance levels, markets involving domestic merchant banks resident in Florence almost always relied on neighborhood relations to structure their commercial credit relations. Put simply, Florentine banks and merchant banks resident in Florence disproportionately extended commercial credit to those wool-manufacturing companies, silk-manufacturing companies, international merchant banks, and other domestic banks and merchant banks whose partners lived in the same gonfaloni as partners of the focal company. Whereas Florentine international merchant-banking business was organized substantially through family relations, Florentine domestic-banking business was organized substantially through neighbors and friends. As was the case with the association between family and international corrispondenti, moreover, domestic merchant bankers and their recurrent exchange partners frequently referred to one another in business letters as friends, whether or not they really were. Causality went as much from business to friends as it did from friends to business.68
In another article, Padgett has demonstrated that the effect of neighborhood on marriage, while always statistically significant, declined in absolute importance in Florence from 1300 to 1500.69 Whether a similar temporal decline was true for economic credit cannot be assessed with data on 1427.
Onore
The Italian word onore means both “honor” and “political office,” reflecting the historical reality in Italian republics that to be elected to a public office was conceived to be an honor, bespeaking respect from one's fellow citizens. Office holding in the Florentine republic was not a matter for professional politicians. Many normal “amateur,” but respected and articulate, citizens were elected to serve short stints in Florentine public office, taking temporary and unpaid time out from their normal business or other pursuits.70 It is surprising to modern eyes to see how anxious and honored Florentine republican citizens were to be elected by their social superiors and peers to high political office, with no overt reward or payment other than prestige.71
As mentioned above, no political office other than the top office—namely, the Priorate or city council—had consistent statistical effects on commercial-credit behavior among Florentine companies. But republican service in this very top office of Priorate, measured as the percentage of both companies' partners serving in the Priorate before 1427, had frequent and strong consequences for commercial credit in all markets involving domestic merchant banks. This was especially true for reciprocal credits, but it was true also for all credits and for asymmetric credits. In this regard the variable “Priorate” behaved statistically just like “same gonfalone.” In addition to amicizia, the social logic of onore, conceptualized as personal honor but manifest as republican office holding, was at the core of commercial credit among companies dealing with merchant banks resident in Florence.
The concentration of strong statistical Priorate effects on commercial credit, especially in markets related to domestic banking and to domestic merchant banking, makes sense. Florentine international merchant bankers were scattered all over Europe, far away from Priorate service back home. And the density of social ties observing and calibrating onore, measured in scrutiny voting, was higher at home in Florence than it was abroad. Public reputation could not really be ignored anywhere, but it was especially salient and observable at home.
It has been shown previously that political office holding had effects on business and wealth, via state finance, at the very highest echelons of the elite.72 However, this is the first demonstration of a pervasive office-holding effect on business throughout wide segments of Florentine society. Perhaps this widespread causal effect is related to the fact that eligibility for the Priorate had increased substantially from 1343 to 1427.73
In table 5, we also report statistical results for scrutiny voting and for political factions. Scrutiny voting in 1433, measured as the votes received by the sum of the highest vote receivers in each company, had numerous statistical effects on commercial credit in 1427, but these effects were scattered among international and domestic merchant-banking markets. Likewise, factional membership in the Medici and Albizzi parties of 1433 had numerous statistical effects on commercial credit in 1427, but these also were scattered among merchant-banking markets. Perhaps the lack of clear patterning may be related to the six-year gap between the two sets of data.
At the very least, we can conclude that politics mattered in economic credit markets in 1427. It is even clearer that economics mattered in the early 1430s construction of the Medici political party or faction.74 Florentine commercial behavior, especially in merchant banking, was no more segregated from political participation than it was from kinship or friendship.
Partnership Systems
The partnership system was a new organizational form in the history of financial capitalism, invented in Florence.75 Partnership systems were sets of legally autonomous companies, with their own account books, linked in ownership through single persons or through a holding company of controlling partners. Usually, although not necessarily, the linked companies in question were diversified across industries, with international merchant banks and domestic merchant banks dominating in number and with domestic merchant banks serving as the managerial headquarters. Padgett and McLean documented the rapid diffusion of this organizational form after its Ciompi-revolt-induced birth in 1383.76
Table 5 reveals strong credit interconnections in 1427 among companies linked in partnership systems throughout the merchant-banking sector and occasionally in other sectors as well. This is not surprising, for companies linked through common owners presumably were ordered to cooperate, even though they were legally autonomous.77 More impressive, however, within the domestic-banking industry is the extent to which partnership systems themselves cooperated strongly and significantly among one another through reciprocal credits. This demonstrates coordination among titular “competitors” at the very apex of the Florentine economy. Senior-partner leaders of these partnership systems became captains of finance in Florence, monitoring and managing large credit flows across multiple markets through their visible hands.
Such concentration of ownership of multiple companies into fewer hands is inadequately understood without placing it into its political context, namely, the consolidation of a citywide oligarchy among elite Florentine merchant republicans in response to the Ciompi revolt in 1378.78 Economic market restructuring through partnership systems was one aspect of a broader political and social transformation in elite structure. Through this elite-transformation process, economic partnership systems took their place among the social-network constituents of that elite, transforming merchants on the one side and republicans on the other even more deeply into multifaceted merchant republicans.
Volume of Social-Context Effects
Statistical significance is a necessary but not sufficient criterion for assessing the volume of any factor's impact. “Nuclear family,” for example, frequently exerted a significant impact on companies' extension of commercial credit to one another when such close family relations linked those companies, but there are not really enough brothers to go around to organize an entire credit market. Table 6, therefore, reports the percentage of commercial credits affected by the significant social-context variables reported in table 5. Here, we report volume only for markets involving merchant banks, because ritagliatori markets were shown in table 5 mostly to have operated “impersonally”—that is, independently of our social-context variables.
Table 6 Volume of “Personal” Credits for All Merchant-Banking Markets, by Clusters of Significant Coefficients
Table 6, column 5, reinforces our interpretation of reciprocal credits as social exchange. In merchant-banking markets (except for international merchant bank/silk), from 42 to 96 percent of reciprocal commercial credits were rooted in dense and multitextured social networks. Reciprocal credits were the inner skeleton of merchant-banking markets in Renaissance Florence, and these were constructed largely out of social-network materials.
Nonreciprocal or asymmetric credits were on the whole not as socially embedded as were reciprocal credits. In two out of three markets internal to the merchant-banking sector, however, they were just as socially embedded: 76 and 89 percent of the nonreciprocated commercial credits in the domestic merchant bank/international merchant bank market and in the domestic merchant-banking market could be correlated with measurable social contexts, respectively.
Putting both the reciprocal and the nonreciprocal sides together, the global economic-network portrait that emerges is roughly one of concentric circles: (a) within the Florentine export-oriented economy as a whole, the merchant-banking sector was the credit core (see fig. 1); (b) within the merchant-banking sector itself, reciprocal credits, often instantiated in corrispondenti relations and conte corrente, were the credit core (see tables 4 and 6); and (c) reciprocal credits, in turn, were built on social-network foundations (see table 5). Conversely, as one moved away from the merchant-banking inner core of the Florentine economy and out toward its ritagliatori periphery, commercial credit relations became more nonreciprocal and impersonal, in the sense of not having correlations with other observable social networks. In general, the Florentine economy was socially embedded. But more specifically, Florentine merchant banks—in their commercial relations both with one another and with other companies—were embedded in, and regulated by, the social networks of a socially open republican oligarchy.
Even in 1427, Florentine commercial credit markets stood very firmly on the late-medieval social foundations of family and neighborhood. Yet two Renaissance institutional innovations—partnership systems and republican electoral reforms—pushed different families and neighborhoods into greater network intercalation with one another, at least within the political reggimento, thereby spanning previously deep divides.79 The complementary consequences of this increased social-network connectivity were greater liquidity in credit markets and greater elite consolidation in politics.80
At the elite pinnacle of the economy, diversified partnership systems bridged not just families but industries as well. This new post-1383 type of Florentine economic network emerged out of political reaction to the Ciompi revolt, and it breached the previously sharp segregation of business partnerships into distinct guilds.81 Senior partners in partnership systems evolved from being industry-specific entrepreneurs into being cross-industry financiers.82
Republicanism did not affect the organization of Florentine credit markets as directly as did partnership systems. But ex-members of the city council provided a pool of highly respected citizens, certified to have honor.83 Such persons were a filtered subset of citizens whose past behavior was judged to be exemplary, as citizens but also (as we shall see in the Dati example below) as businessmen. They were elected in the first place because they were deeply enmeshed in Florentine networks and institutions—hardly the types to cut and run. Arguably, such electoral filtering became stronger on the individualistic and elite-defined grounds of “character” after the post-Ciompi electoral reforms than it was before, when voting had been based more on group membership.84 Of course, being a good citizen was not necessarily the same thing as being a reliable businessman, but the distinction between generalist “honor” and economically specialized “credit worthiness” was not one that the Florentines shared.
In addition to its public certification function, republican election into the reggimento provided direct-access benefits to budding businessmen: (a) participation in verbally oriented political councils increased the level of direct observation that merchant republicans had of one another, and (b) indirect introductions, recommendations, and gossip about reputation functioned far more efficiently within the republican elite than outside it. Thus, although the direct material rewards for businessmen joining the Priorate were nonexistent, the indirect payoffs of access and reputation were substantial for anyone trying to operate in commercial credit markets.
A dramatic example of this Florentine link between economic credit and republican election is provided in the diary of Gregorio Dati. Dati was one of the successful new-man silk merchants in our 1427 data set, but earlier, in 1408, after twenty-four years of partnerships in the silk business, he had suffered this fate:
As a result of the adversity which overtook us in Barcelona, and of the lawsuits which followed it, and of the suspicions concerning [my brother's] ventures and the calumnies that were spread around, we were very short of credit. So we were forced to withdraw from business and collect whatever we could to pay our creditors, borrowing from friends and using all our ingenuity, suffering losses, high interest, and expenses in order to avoid bankruptcy and shame. Although my partner was in favor of going bankrupt so as to avoid some losses and expenditures, I was resolved to face ruin rather than loss of honor.85
After four years of financial hardship but also of demonstrable integrity, “I was in debt for over 3,000 florins. That same year 1412, my name was drawn to be Standard-bearer of Justice, and I served in that office. That was the beginning of my recovery.”86 This financial recovery through revived commercial credit was strong enough to allow Dati to report a taxable wealth of 3,368 florins in the 1427 catasto.87 This placed him among the wealthiest 7 percent of Florentine households at that time.
Table 6 shows that, out of all of our social-context effects, political embedding, and in particular past Priorate membership, had the largest volume of impact on commercial credit. Family and neighborhood provided strong traditional foundations on which Florentine commercial credit could grow. Partnership systems coordinated the cross-industry apex of the commercial-credit system. But previous election to city council induced the broadest reach and connectivity in Florentine credit markets.
One common criticism of personalistic markets is that they are inherently self-limiting in extensibility and scale compared to impersonal markets. This criticism has less force when discussing topologically open-ended social networks, like porous elites, than it does when discussing topologically closed and fragmented social networks, like families. Florentine merchant-banking credit markets were very personalistic. Yet they radiated geographically all over Europe and brokered much of Europe's international trade, without reliable judicial support. The organizational secret of the Florentines in their markets was their blending of multiple social networks into dense but socially open merchant-republican elites. Members of these overlapping elites reciprocally offered commercial credit to one another and to their clients, not as competitors but as honorable Renaissance men. Using gossip, ostracism, and reputation to discipline their wide extension of credit to one another, such men “kept everyone in line” through the same dense and multitextured social networks that had created them in the first place.
Business Letters and the Mentalité of Credit
We close with a textual analysis of business letters from the general time period covered by this article, in order to illustrate the discursive framings and the cognitive mentalité of the Florentine businessmen who produced the commercial-credit behavior documented above. Statistical and textual evidence provide complementary perspectives on the phenomenon of commercial credit, we believe, as long as care is taken to align them. Textual evidence provides insight into the psychology of businessmen from a distant culture, at the risk of a tiny and perhaps unrepresentative sample. Statistical evidence measures the behaviors of the entire population of Florentine businessmen, at the cost of loss of detail about individuals. Even with perfect data, there is no guarantee that these two perspectives will yield the same answers. Not all talk translates into action, and not all actions are self-conscious. Consistent answers or not, we believe that juxtaposing diverse evidentiary perspectives deepens our understanding of Florentine commercial credit.
Because of the importance of relational credits in our statistical analysis, we focus on letters between corrispondenti—that is, between legally autonomous companies that had extensive and recurrent two-way business with one another.88 Primarily, we examine published business letters to and from the Francesco Datini company in Milan and unpublished business letters to and from the Andrea de' Bardi company in Florence.89 Within this small sample of letters, we highlight Florentine businessmen's use of the language of friendship (amicizia) and of honor (onore) in discussing deals with one another.
An important theoretical point in our discussion will be the two-way causality between language and social relations. On the one hand, linguistic expressions reference “real” social relationships and obligations in the writers' past experience. On the other hand, Florentine linguistic tropes and learned cognitive models, like “family” (famiglia) and “friends” (amici), were extended far beyond their objective referents as businessmen sought to frame and interpret one anothers' market actions in such terms. This loose coupling or ambiguity between Florentine language and objective reality enabled both the creative construction of new social relationships and the creative construction of lies.90 On the whole, the benefits of the former apparently outweighed the costs of the latter. Linguistic ambiguity was the medium through which economic and social logics bled into each other.
Here are two examples of corrispondenti relations between companies, in Florentine businessmen's own words:
Of the affairs you still have to complete here, point yourself still towards Pisa with my company there, and also write often to me in Bruges, because I am going to live there, and in three days I am leaving here to go there. With the grace of God I will stay there a little while, and if there is anything I can do for you, write to me of it and I will do it, for you and for your whole company, as if it were for myself alone.91
Anything that comes to you for us, you may commit to Paris or London, if it be to your own [company] there, to ours in Barcelona, in Lucca to Bartolomeo Belbani & co, and in Venice to the Medici: continue in this way if no one instructs you otherwise. We do not wish you to lend [credere] our money, nor the money of our company to any Venetian or Lombard, nor to Antonio Quarti & co, nor to Niccolaio Tonghi, nor to Filippo Rapondi or others that might bring business to you from Dino Rapondi of Paris. Follow these instructions, and with the others [with whom you correspond] do as you wish and as if it were for yourself, having always due regard to lending well and, again, not to get yourself too indebted with anyone, and especially with Diamante degli Alberti & co.92
Within very explicitly stated constraints, partners in corrispondenti relationships each offered to do whatever the other requested and was authorized to take discretionary action on behalf of the other, taking advantage of local opportunities. The accounting methods for keeping tabs on these discretionary actions were the paired conti correnti and conti di esercizio discussed above. An example of the mechanics of this is as follows: correspondent A would take discretionary action on behalf of correspondent B, charging B's current account in A's book and recording therein A's actions taken and B's financial commitments.93 This was really A giving credit to B since this was B's account money but A's disposable cash being used. Typically B would do likewise for A, thereby paying back the “loan” not with cash but with reciprocated discretionary actions. If all went well, which it did not always, each side actively made money for the other.
The word “to lend” in these and other Renaissance business letters is credere, which normally means “to believe” or “to believe in.”94 The language of medieval and Renaissance Italian expresses the idea that to offer someone credit typically meant having confidence in them, not only financially but also morally. “To give credit” and “to believe in someone” were essentially the same idea. Having credit was a sign that others trusted you to record your debts accurately, regard them seriously, and pay them promptly. It was also a sign that you were a person of character and honor, in more domains than just the economic.
Amicizia
While fifteenth-century Florentine business letters overwhelmingly focus on the day-to-day details of transactions, spelling them out monotonously and repetitiously, it is also true that they are inflected sufficiently often with the rhetorics of friendship and fictive kinship to see these framings as constitutive of commercial interaction. This is how Andrea Bardi could directly link the terms merchantivolemente (in a merchantlike way) and amichevolmente (in a friendly way) in a letter concerning the resolution of a differenza to the Orlandini company in Bruges on March 26, 1405.95 Consider the following additional examples:
Your offer we accept like dear friends [chari amici], and we see that by your Tommaso you have written concerning our condition and company: this he did as a worthy [valente] person and out of courtesy. … And although you have many friends here who serve you, nonetheless we offer ourselves to all of your pleasures and, wanting advice concerning one thing or another, tell us and I will do it willingly [faròllo volentieri].96
As much as you offer to do with love in this matter, all of it we have observed, and we thank you for it, and we are certain you would do even more; and if anything occurs in Avignon or here that needs to be done, we will commit ourselves to you loyally [con fidanza], advising you of it first. … As for us, you may do with us as you would with your own, and we will do all we can. Thus we have told your Tommaso and prayed him to have such confidence in us as one could with you.97
I will take confidence with you as I believe I may, and I would like that this confidence remain between us.98
In part, the language in these passages may reflect important concerns of the theologians who elaborated the Church's usury doctrine and whose ideas appeared in the confessional guidebooks consulted by the laity.99 Here, we have in mind specifically the idea that the economy was constituted by a community of the faithful linked together in love and the theologians' emphasis on the importance of a completely, unconditionally free will for an economic transaction to be considered legitimate.100 But the language also recalls the language of patronage letters. The final sentence of the Borromei letter is a common concluding element of much correspondence, but it appears with particular regularity in patronage-related letters in which writers assure recipients of their loyalty to one another.101 Amicizia was not a word that had a single, clear-cut meaning: it could be understood in religious, political, economic, or even humanistic inflections, depending on the context.102
Florentines saw no contradiction between friendship and making money.103 One purpose of helping one another was to make money, but one purpose of making money was to make friends, through generosity in gifts.104 Profit and friendship were paired concepts in the Florentine understanding because both were facets of the same social-exchange mentality of constructing one another through reciprocity. A businessman from a later period phrased the idea as follows:
With regard to Galilei and company, I see that there is no more need of blandishments for in truth they do things like gentlemen. The letter which I have from them now is so full, so much to the point, and so agreeable that I feel under a permanent bond of obligation to them. … Maintain close relations with them and we over here will always perform our part duly as we do every day; of this you and they will be the judge.105
Interpreting business relations as friends occurred not only when business was going well but also when business turned sour:
We want only what is owed to us. May it please you also to want to do thus, and truly, for in good faith not a little have we discussed this dispute between us. May you or yours also wish to settle it as is done between friends. And so let it please you that not having sent these letters [i.e., business correspondence germane to the dispute] to [your office in] Florence, to send them without further delay.106
I am advised by many letters that Basciano [da Pessina] is not there. You will have spoken with him about these blessed accounts that, by his shortcomings, are not settled, and truly it is a great wrong; this is not the friendship [amicizia] and brotherhood [fratelanza] that I had with him, and he has not done well in clamming up with me [pigliare gozzo], and I don't know why. … And I must observe that when he made accounts with me in Avignon, that amounted to 40,000 pounds or so, there was not even a penny missing, we had such a great relationship, so that one could go so far as to say that if I owed him 1000 florins, I would approach him and say to him how I considered him more than a brother, and I still do. And despite what he has done to me, I will never forget the love and brotherhood that was between him and me.107
The ambiguous meanings of amizicia, or even of amore, were in no way precise enough to imply what exactly to do in markets. Invocating amicizia in business was instead an attempt to negotiate empathetic understanding of one anothers' interests. Words by themselves could not enforce reliable economic behavior. For that, the social anchoring of language in actual families and in actual neighborhoods, with third-party observers and enforcers, was useful. But ambiguities in shared language were essential for the creative relational extension and groping of Renaissance businessmen beyond the limits of their social inheritance. The language of amicizia was an important first step in this Florentine relational extension from family and neighborhood into markets. By itself, however, that dyadic trope was not sufficient for scaling up into large, far-reaching, and highly connected credit networks.
Onore
Like amicizia, the word onore did not have a single unambiguous meaning in Renaissance Florence. As was evident in our statistics, the republican conception of onore as public office or service to the state was alive and well in the Florence of 1427. But medieval conceptions of onore as ancient lineage or as martial glory had hardly vanished. And sober guildsmen's conceptions of onore as thrift, discipline, and hard work maintained their appeal, especially among new men. Newer conceptions of onore as patronage, in the senses of liberality and magnificenza so prominent in the Medici regime soon to come, were starting to gain traction. These alternative meanings of onore and nobility were put into contrast with each other in the humanist dialogues of the time.108 To the extent that the inflection was on the republican conception of onore, service to the community was highlighted, with commercial credit flowing in recognition of that.
Regardless of precise inflection, business-letter discussions of honor came up most often in times of economic trouble. Thus, for example, in a dispute concerning a thousand florins missing because of the actions of a certain Michele, Andrea de' Bardi wrote to both Antonio di Sandro Cittadini and Domenico Pazzi in May 1405 that they should take action “for the honor of said Michele.”109 And in a letter of March 31, 1404, Bardi wrote to Alberto Aldobrandini in Paris urging him to settle a particular deal because it redounded to both his honor (onore) and his advantage (utile).110 In the same letter quoted above about the deadbeat Basciano, Datini went on to assert that “I would come back a thousand miles to do my duty towards him and every other good affair; and it concerns his honor not to do likewise to me, even if I did not merit it.”111
In this context, complimenting people about their honor might gain overtones of a veiled threat about loss of that honor:
Dearest friend, … When I was there I spoke to you many times about the money that you owe to the heirs of your partner Antonio di Tuccio Manetti. And now Andrea di Buonaventura has arrived there, who comes there for this reason and for other business of his, and he has begged me that I write to you concerning this matter, and that I pray of you that you should wish to act towards him as the worthy man that you are. And I am quite certain it need not be said to you, that you will pay your debt to him in this matter, both out of duty, and also to lighten the burden on your heart. And I pray of you that you should wish to do this for them like the worthy man that you are.112
Indeed the question of honor was always tied, overtly or covertly, to the issue of reputation (fama). Fama typically refers to other merchants' collective evaluation of one's character. Gossip—either orally or through letters—was the mechanism through which such collective evaluations were made. Such gossip could help you:
I, Andrea, have received letters from Ciandrello. I have told him so much about you, and that you have done him such honor, that if something pertained to you alone it would suffice [to obtain his help]. And if it were not already the case that I were obligated [obrighato] to you in every respect, now I am [obligated to you] that much more, and I thank you.113
Or such gossip could hurt you:
We have heard via letters from Montpelier that this Guglielmo Pigniolo has lost the confidence [of others: avea perduto la fede]. We do not know if this is true. These times are too dangerous. Tell us what you hear of it, and similarly how the affairs of the Bocci are proceeding, having seen these fail and how many evils have come this year to merchants.114
Tommaso Spinelli provides a clear example of the link between merchant gossip and personal anxiety about honor. In a letter to his friend Gherardo Maffei about the setbacks he received as a papal banker, Spinelli referred to his honor—as Jacks and Caferro put it, the banker's most precious commodity—half a dozen times, sometimes in salvific terms. He wrote that the Pope “has found out the truth and has recognized that I did my duty, and he has endorsed me as a faithful man and a good merchant, and it is clear that I have done the greatest service to the Church of God for a long time, and thus he absolves me and imposes silence on whosoever would speak to the contrary.” The last part of the absolution pleased him the most, as it would clear his name “in the presence of merchants, and I greatly desire this strictly for honor's sake. … I will have lost my [goods], but I will at least have conserved my honor.” All of this was driven by Tommaso's strong desire to leave the Pope's employ with a good reputation for himself (ch'io lassi buona fama di me).115
The establishment and measurement of honor through gossip among businessmen was important to the discipline of Florentine markets. But in social exchange there is also the deeper idea of making one another through gifts. “For Paolo da Certaldo, ‘a man without a friend is like a body without a soul’ and ‘a man who loses his friends is worse than dead.’”116 This was no mere metaphor in Renaissance Florentine markets. Because credit was the lifeblood of Florentine business, fellow businessmen made you by extending credit and business to you, and they could destroy you by withdrawing that from you. Social exchange, friends, and reputation were not peripheral to markets; they were the discipline that made personalistic markets work.
Republican elections to the Priorate did not eliminate this process of intense gossip among merchants about one another's honor. Rather they built on it by measuring and certifying gossip about character into a public status observable by all. Election to the Priorate was not an automatic guarantee of one's economic creditworthiness. But it was an institutionalized signal that even someone not known directly by you might be worth taking a business chance on. Thereby, cliquish personal networks based on private amicizia opened out into elitist personal networks based on public onore.
Our emphasis on the blending of economic, social, and political logics in commercial credit is reinforced by the widespread presence of the same language of raccomandazione in both business and patronage letters.117 By raccomandazione, Florentines did not simply mean being recommended to others, and certainly not only being recommended to others for specific tasks or opportunities. Raccomandazione was equally, but more profoundly, a plea for recognition. To be in a circle of raccomandazione yielded material benefits, but it also signified one's membership in a community of people who promised to act responsibly and supportively toward one another, in a manner similar to obligational claims to honor. To deny the need for raccomandazione was not to deny its value but to uphold the certainty of its being offered. This is the cultural meaning behind Bartolomeo Rustichi's assertion to the Datini company in Genoa that “we do not recommend to you very much our own affairs: it does not seem to us necessary, but we consider you will undertake them employing such diligence as were they your own; and this we remind you, and pray of you and we will do the same for you.”118 Businessmen in markets and politicians in state offices did not do the same things in Renaissance Florence, but they communicated in similar ways. This is not altogether surprising since there was so much dual-role overlap between these two sets of actors. Despite the potential for divergence across the two sets of evidence, in fact, our statistical and textual analyses came to similar conclusions.
Conclusion
Here, first, we briefly compare Florentine commercial credit with financial activities in Venice and Genoa in order to situate Florence in a broader understanding of the late medieval and early Renaissance economy. Second, we outline what we consider to be crucial elements of a theory of personalistic markets, in order to guide future research in this area.
No quantitative study of Venetian credit exists, but the following observation of Reinhold C. Mueller about Rialto domestic banks (banchi di scritta) is pertinent: “Payment in bank money was a legitimate means of extinguishing a debt. … Bankers kept a cash reserve for only a fraction of their liabilities, and one banker kept current accounts with the other bankers.”119 These giro accounts acted like checking accounts, facilitating the clearance of debt across accounts and across multiple parties while also providing opportunities for overdrafts at crucial times. In these respects, Venetian banchi di scritta resemble the smaller Florentine cambio deposit banks and arguably predate them.120 But commercial credit in Venice differs from that in Florence in crucial ways. The banchi di scritta were always very few in number—typically no more than four or so at any one time. They were not international, with branch offices all over Europe, and they did not engage in merchant activity.121 Florentine banking, in contrast, was less a specialized industry than it was a widespread system of extending credit among diverse companies.
Venetian international merchants, a group quite distinct from Venetian bankers, kept their accounts in venture accounting, that is, a separate account for each voyage.122 Venture accounting of ship voyages is inconsistent with current accounts for persons and companies.
Florentine commercial credit was more like Genoa than Venice in its decentralized diffusion throughout the economy, but still there were significant differences. On the basis of his quantitative analysis of the famous notarial records of medieval Genoa, Van Doosselaere recently has reported extensive credit contracts among Genoese merchants over two centuries.123 These were technically sophisticated for their time.124 Van Doosselaere did not distinguish transactional from relational credits, but most of his credits appear to be transactional in character.125 Genoese sea loans, overland and maritime exchange (cambium), and promissory notes were transaction-specific contracts, not account books.
In a study more contemporaneous with our own, Jacques Heers reports that Quattrocento Genoese companies were formed by capitalist investors fluidly pooling their money: each investor often had investments in many companies, workmen in the industry were not included in investor partnerships, and investors easily switched from investment to investment.126 This stands in contrast to Florentine systems, which were more stable partnerships between a dominant investor and his industry-specialized branch managers. While data on Genoese commercial credit from this period do not exist because of the paucity of surviving account books, it is unlikely that long-term relational credit on the Florentine scale could have developed on such a fluid capital foundation.127
Undoubtedly, the organization of financial markets varies a great deal across cases and across spatial, temporal, and cultural contexts. Neoclassical economic theory eviscerates this variation. The neoclassical approach, influential in economic history, is constructed on the assumption of impersonal markets—choices are made on the basis of goods and their prices, not on the basis of the identities of the persons transacting. But as we have shown, Renaissance Florentine markets did not operate like this, especially in the most technically advanced sectors of the Florentine economy. Rather than simply dispute the core assumptions of neoclassical economics, however, we feel there is value in specifying positively the important elements that any alternative theory of personalistic markets should incorporate.
This multidisciplinary task has only begun, but the case of Florence suggests the following components:128
a) Social exchange and reciprocity are the micromechanisms of economic exchange, with credit being the currency. Capitalist inventions like double-entry accounting and partnership systems formalized personalistic social exchange; they did not displace it.
b) Gossip about reputation provides discipline to the market, as much as do prices.
c) Economic exchange in the market grows on the lattice of other social networks that provide its context. Socially embedded economic networks can be cliquish and incestuous, or they can be open and expansive, depending on how multiple networks are arrayed. Porous elites with social mobility are helpful to sustain open and expansive personalistic markets.
d) Political institutions are important for the development of markets not just because of the rule of law. Republican political institutions may add public transparency and efficiency to the operation of private gossip, and they can induce the overlay of multiple social roles, such as merchant and politician.
e) Linguistic ambiguity induces creative exploration and innovation in social relationships, even as it enables free riding and lies.129 Policing the latter should not be so strict as to squelch the former.130
How these features generalize to other historical and comparative settings remains to be explored in depth, but we suspect their widespread applicability.
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* We would like to acknowledge and thank those who have directly contributed invaluable research labor to this project over the years: Christopher Ansell, Nicoletta Baldini, Skye Bendor-deMoll, Nick Collier, Matteo Columbi, Sasha Goodman, Michael Heaney, Doowan Lee, Peter McMahan, Piera Morlacchi, Pip Pattison, Katalin Prajda, David Sallach, Ethel Santacroce, Douglas White, and Xing Zhong. Paul D. McLean also appreciates the valuable comments of Chip Clarke, Frank Dobbin, Neha Gondal, Ann Mische, and Tom Rudel. John F. Padgett acknowledges the generous financial support of this project from the Santa Fe Institute, the Hewlett foundation, and the National Science Foundation's program on Human and Social Dynamics.
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1. Richard A. Goldthwaite, “The Medici Bank and the World of Florentine Capitalism,” Past and Present 114 (1987): 3–31, 23–24.
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2. For an overview, see Raymond de Roover, “The Organization of Trade,” in The Cambridge Economic History of Europe, vol. 3, Organization and Policies in the Middle Ages (Cambridge, 1963), 42–118. See also Richard A. Goldthwaite, The Economy of Renaissance Florence (Baltimore, 2009).
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3. See, e.g., Karl Polanyi, “The Economy as an Instituted Process,” in Trade and Markets in the Early Empires, ed. Karl Polanyi, Conrad M. Arensberg, and Harry W. Pearson (Glencoe, IL, 1957), 243–69; and Mark Granovetter, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology 91 (1985): 481–510.
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4. John F. Padgett and Paul D. McLean, “Organizational Invention and Elite Transformation: The Birth of the Partnership System in Renaissance Florence,” American Journal of Sociology 111 (2006): 1463–1568; John F. Padgett and Christopher K. Ansell, “Robust Action and the Rise of the Medici, 1400–1434,” American Journal of Sociology 98 (1993): 1259–1319; John F. Padgett, “Open Elite? Social Mobility, Marriage and Family in Renaissance Florence, 1282–1494,” Renaissance Quarterly (Summer 2010): 357–411.
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5. David Herlihy and Christiane Klapisch-Zuber, Tuscans and Their Families: A Study of the Florentine Catasto of 1427 (New Haven, CT, 1985). The Herlihy–Klapisch-Zuber data set is publicly available online at http://www.stg.brown.edu/projects/catasto.
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6. Archivio di Stato di Firenze (hereafter ASF), Catasto 64–85, contain scribal summaries (campioni) of all Florentine households' tax declarations in 1427. ASF, Catasto 15–63, contain the original tax submissions (portate) of the Florentine households. The latter set of documents was consulted whenever the first set of documents did not itemize the entire list of debtors and creditors for any given business.
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7. Historians have often found examples of cheating on Renaissance Florentine tax returns, but mostly these refer to catasti after the original one in 1427: e.g., Raymond de Roover, The Rise and Decline of the Medici Bank, 1397–1494 (New York, 1966), 25, 30, 73–74, 99, 236, 312–13; William Caferro, “The Silk Business of Tommaso Spinelli, Fifteenth-Century Florentine Merchant and Papal Banker,” Renaissance Studies 10 (1996): 421–22. A study that finds truthful reporting in 1427 is Rebecca Emigh, “Loans and Livestock: Comparing Landlords' and Tenants' Declarations from the Catasto of 1427,” Journal of European Economic History 25 (1996): 705–23. To sidestep this difficult issue of lying, we analyze below the existence versus nonexistence of a credit, not the reported value of the credit. In addition to the administrative procedure of comparing creditor's and debtor's declarations, tax officials could also request to see legally liable business account books in the case of disputes. While hardly foolproof, these two procedures at least inhibited massive cheating in 1427.
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8. Richard Goldthwaite has brought to our attention three surviving account books, which overlap with our catasto summaries of them: those of Andrea Banchi, silk manufacturer; Alamanno di Jacopo Salviati, wool manufacturer; and Lorenzo di Palla Strozzi, merchant banker.
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9. There are only two other published studies of premodern credit on this scale. One is Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal, Priceless Markets: The Political Economy of Credit in Paris, 1660–1870 (Chicago, 2000). That study of Parisian financial markets covers a period two centuries after ours. Comparison is limited because that is a study of brokered personal lending, rather than commercial credit. The most comparable other research, albeit without the equivalent social and political contextual data of ours, is a recent quantitative study of medieval Genoese contracts: Quentin Van Doosselaere, Commercial Agreements and Social Dynamics in Medieval Genoa (Cambridge, 2009). We briefly discuss this welcome new book in the Conclusion.
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10. Paul D. McLean and John F. Padgett, “Was Florence a Perfectly Competitive Market? Transactional Evidence from the Renaissance,” Theory and Society 26 (1997): 209–44. The full data set, including both personal and business debts, contains 15,317 debts; the company subset analyzed here contains 4,992 debts.
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11. The export sector was composed of the following industries: (a) Florentine international merchant banks resident in non-Tuscan locations; (b) merchant trading companies in Pisa; (c) domestic banks and merchant banks in Florence; (d) silk manufacturers (setaiuoli); (e) wool manufacturers (lanaiuoli) in the San Martino district (high-quality cloth); (f) wool manufacturers (lanaiuoli), other districts (lower-quality cloth); (g) cloth retailers (ritagliatori); and (h) cloth dyers (tintori). Companies were coded into industries on the basis of their self-identification, their location, or their primary transactional content.
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12. The compliance of the firms located abroad with catasto requirements evidently was handled with some flexibility, perhaps due to the special difficulties they faced in submitting their books for examination in Florence.
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13. Our procedure to arrive at this estimate is explained in John F. Padgett and Paul D. McLean, “Economic and Social Exchange in Renaissance Florence,” Santa Fe Institute Working Paper 02-07-032 (Santa Fe, NM, 2002), 45–46, http://www.santafe.edu/research/publications/publications-working-papers.php.
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14. Two types of transactions present in our complete data set are systematically excluded from analysis in this article: credits and debts with artisans and firms working outside the export-oriented economy and credits and debts with individuals rather than with companies. Had it been possible to calculate the more correct denominator of “all debts and credits among companies in export-oriented industries,” percent coverage would have been much higher than the conservative numbers reported here.
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15. Fixed-cost assets in this setting were low. Cloth manufacturing occurred in the home through the putting-out system, and hence required low investments.
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16. Federigo Melis, Aspetti della vita economica medievale: Studi nell'Archivio Datini di Prato (Siena, 1962), table 69. De Roover, Rise and Decline of the Medici Bank, 47, 55, 69; Richard A. Goldthwaite, Private Wealth in Renaissance Florence (Princeton, NJ, 1968), 48. Tommaso Spinelli, in the second half of the fifteenth century, earned profit rates in silk comparable to those among merchant bankers: Philip Jacks and William Caferro, The Spinelli of Florence: Fortunes of a Renaissance Merchant Family (University Park, PA, 2001), 78–79.
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17. The rather astonishing total debt figure for this one branch was 158,238 florins. The corresponding total credit figure was 147,987 florins. Cosimo's companies, like others but even more so, relied on massive volumes of two-way turnover and credit flow, organized through a partnership system.
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18. This statement remains true when recalculated on the basis of total florin value, instead of on the basis of total numbers of debts. The total monetary value of wool, San Martino, credits to all merchant banks combined (i.e., international merchant bank plus Pisa merchant plus domestic bank) was 40,592 florins, compared to credits of 58,392 florins to ritagliatori. And the total value of wool, other, credits to all merchant banks combined was 18,247 florins, compared to credits of 32,260 florins to ritagliatori. However, credits sent to merchant banks tended to be larger on average than those sent to ritagliatori.
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19. Merchant bankers still received roughly twice as much in volume of their cloth input from wool manufacturers as from silk manufacturers. Even though wool was on the decline, and silk on the rise, the older wool industry was still much larger in 1427 than the newer silk industry.
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20. Again, to measure this in terms of monetary value, domestic banks gave 33,662 florins of credits to setaiuoli in our data set, whereas they gave 27,080 florins to wool, San Martino, lanaiuoli and 15,682 florins to wool, other, lanaiuoli. As a baseline comparison, there were over two-and-a-half times more lanaiuoli companies than setaiuoli companies in 1427 (see table 1).
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21. These data imply economically healthy banking and merchant-banking industries in 1427. This is not inconsistent, however, with a soon-to-come recession in 1430–33 induced by the fiscal crisis caused by war with Lucca. See De Roover, Rise and Decline of the Medici Bank, 230; Anthony Molho, Florentine Public Finances in the Early Renaissance, 1400–1433 (Cambridge, 1971), 153–63; Elio Conti, L'imposta diretta a Firenze nel Quattrocento, 1427–1494 (Rome, 1984), 34. The high leverage rates documented in table 2 help to explain the vulnerability of an otherwise healthy economy in 1427 to recession in 1430–33, since exorbitant tax extractions needed to be paid in cash, not in credits.
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22. Franco Franceschi, Oltre il “Tumulto”: I lavoratori fiorentini dell'Arte della Lana fra Tre e Quattrocento (Florence, 1993), 13; Hidetoshi Hoshino, L'Arte della Lana in Firenze nel basso medioevo (Florence, 1980), 227–31; Sergio Tognetti, Un'industria di lusso al servizio del grande commercio: Il mercato dei drappi serici e della seta nella Firenze del Quattrocento (Florence, 2002), 16. Debates continue about the causes of this decline, but the argument in the literature that seems the most compelling to us is the rapid growth of English woolen-cloth production in this same period. This deprived Florence of much of its primary input—namely, high-quality English raw wool. Hoshino, L'Arte della Lana, 233; E. M. Carus-Wilson and Olive Coleman, England's Export Trade, 1275–1547 (Oxford, 1963), 122, 138.
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23. Eventually when the Ottomans conquered Byzantium, Florentine garbo woolen cloth found favor in the Levant, prompting a recovery in the low end of the wool industry in the second half of the fifteenth century. Hoshino, L'Arte della Lana, 239–44, 268–75.
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24. Bruno Dini, “L'industria serica in Italia. Secc. XIII–XV,” in La seta in Europa, Secc. XIII–XX, ed. S. Cavaciocchi (Florence, 1993), 91–123; Franco Franceschi, “Florence and Silk in the Fifteenth Century: The Origins of a Long and Felicitous Union,” Italian History and Culture 1 (1995): 3–22; Tognetti, Un'industria di lusso al servizio del grande commercio, 11–42.
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25. In 1427, 66.4 percent of merchant bankers of all types were upper-class popolani or magnates: see Padgett and McLean, “Economic and Social Exchange in Renaissance Florence,” 48. Conversely, 64.6 percent of setaiuoli were middle and lower class in social background (i.e., new men, new-new men, and never admitted to Priorate). Hence, the economic sponsorship of silk manufacturing by merchant bankers through liberal credit had the social-class overtones of patron-client relations. For comparison, 48.8 percent of wool manufacturers in 1427 were popolani or magnates. For cloth retailers, it was 39.7 percent, and for cloth dyers, it was 14.8 percent. See also Tognetti, Un'industria di lusso al servizio del grande commercio.
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26. There is a long and contentious literature about whether there was a “depression in the Renaissance.” One viewpoint was articulated by Robert S. Lopez and H. A. Miskimin, “The Economic Depression of the Renaissance,” Economic History Review 14 (1962): 408–26. They pointed to the decline of the wool industry, among other things. A contending view was anchored by Carlo M. Cipolla, “Economic Depression of the Renaissance,” Economic History Review 14 (1962): 519–24; and by Richard A. Goldthwaite, Wealth and the Demand for Art in Italy, 1300–1600 (Baltimore, 1993), 13–39. They pointed to the rise of the silk industry, among other things. Judicious overviews of this debate are provided by Judith C. Brown, “Prosperity or Hard Times in Renaissance Italy?” Renaissance Quarterly 42 (1989): 761–80; and by Franco Franceschi, “The Economy: Work and Wealth,” in Italy in the Age of the Renaissance, ed. John M. Najemy (Oxford, 2004), 124–44. We regard the fifteenth-century adaptation of the Florentine economy as a success story in the narrow sense that the silk industry was developed to offset the decline in wool. Whether the successful development of silk was enough quantitatively to offset the sharp contraction of wool is a topic we leave to others to decide.
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27. Because of this fact, our statistical summary underrepresents the significance of recurrent transactions funded through credit. When single nonreciprocated credits (coded here as “transactional”) were current accounts, then “relational” would have been a better linguistic description of that. We could have cleaned up this source of measurement error in our data if content information had been recorded for more than 11 percent of the credits.
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28. De Roover, Rise and Decline of the Medici Bank, 108–41.
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29. Federigo Melis, “La grande conquista trecentesca del ‘credito di esercizio’ e la tipologia dei suoi strumenti sino al XVI secolo,” in his La Banca pisana e le origini della banca moderna, ed. M. Spallanzani (Florence, [1972] 1987), 307–24.
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30. Raymond de Roover, “The Development of Accounting prior to Luca Pacioli according to the Account Books of Medieval Merchants,” in his Business, Banking, and Economic Thought in Late Medieval and Early Modern Europe, ed. Julius Kirshner (Chicago, [1956] 1974), 143–46.
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31. For documentation of the timing and rate of the diffusion of bilateral-format accounting in Florence, see Padgett and McLean, “Organizational Invention and Elite Transformation.”
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32. In today's Italian Civil Code (chap. 26, arts. 1823–24) il conto corrente refers to a contract between two private parties in which no money is exchanged but rather reciprocal credits are recorded. We thank Alessandro Lomi for bringing this modern descendent to our attention.
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33. The complication is that there could be more than one account linking the same pair of persons, if multiple startup deposits or credits were made for whatever reasons.
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34. In the 1416 founding contract of a company with partners Giovanni de' Medici, Benedetto and Larione de' Bardi, and Matteo di Andrea Barucci (ASF, Mediceo avanti il Principato [hereafter MAP] 94, fol. 116), Matteo promised “to keep good accounts, as if they were money in cash.”
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35. De Roover, Business, Banking, and Economic Thought, 121–25.
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36. There was a third transitional form of accounting in which credits were collected in the first half of the account book and debts in the second half, with elaborate cross-referencing between the two halves (ibid., 132–34). This form permitted double-entry profit calculations without making current accounts the fundamental unit of the system. A good example of this intermediate form is found in the Alberti libri mastri of 1348–59, published and analyzed by Richard A. Goldthwaite, Enzo Settesoldi, and Marco Spallanzani, eds., Due libri mastri degli Alberti: Una grande compagnia di Calimala, 1348–1358 (Florence, 1995). In particular, “Accounts with other firms or outside persons were opened, for the most part, for single transactions. If later a client presented himself another time, the accountant of the Alberti preferred to open new accounts” (113). Truly ongoing current accounts did exist in the 1348–59 Alberti libri mastri, but only for Alberti family members and for company employees (so-called conti interni).
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37. At the international level, where different currencies were involved, current accounts could become quite complex, internally differentiating into four separate financial components: nostro (our) and vostro (your) accounts for each merchant-banking side of the ongoing economic relation. Raymond de Roover, “Early Accounting Problems of Foreign Exchange,” Accounting Review 19 (1944): 381–407. The Bardi correspondence of 1404–5 and the bilanci in the 1427 catasto, discussed below, more commonly used the expressions per noi (for us, on our account) and per voi (for you, on your account).
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38. Marcel Mauss, The Gift: Forms and Functions of Exchange in Archaic Societies (New York, [1925] 1967); Alvin Gouldner, “The Norm of Reciprocity,” American Sociological Review 25 (1960): 161–78; Andrew Strathern, The Rope of Moka: Big-Men and Ceremonial Exchange in Mount Hagen, New Guinea (Cambridge, 1971).
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39. Hence, “a French satirist, in the fifteenth century, marveled at the ability of the Italians to do business without money. In dealing with them, he said, one never sees or touches any money; all they need to do business is paper, pen, and ink” (De Roover, “Early Accounting Problems of Foreign Exchange,” 381). Goldthwaite, Economy of Renaissance Florence, chap. 6, discusses the use of “offset” among private Florentine individuals, as a form of “banking” outside of banks, without making reference to anthropological social exchange. We thank Richard Goldthwaite for prepublication access to this impressively broad and deeply researched work, the capstone of a brilliant career. We would add that “offset” (or as we would say “relational credit”) behavior was characteristic of the core of Florentine merchant banking, as well as of Florentines as private citizens. That the same lending behavior was characteristic both of businesses in markets and of private people in their friendships reinforces our point about the homology between capitalist business corrispondenti and social exchange.
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40. Economic logic bleeding into the social is evident in Florentine family diaries or ricordanze, which often tell the narrative history of a family within the format of that family's account books. These ricordanze described personal events, and sometimes even feelings, mixed together with money matters.
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41. For well-documented examples of this company plasticity, see Sergio Tognetti, “L'attività di banca locale di una grande compagnia fiorentina del XV secolo,” Archivio Storico Italiano 155 (1997): 595–648; Florence Edler de Roover, “Andrea Banchi, Florentine Silk Manufacturer and Merchant in the Fifteenth Century,” Studies in Medieval and Renaissance History 3 (1966): 223–85, esp. 271; Gertrude Richards, ed., Florentine Merchants in the Age of the Medici: Letters and Documents from the Selfridge Collection of Medici Manuscripts (Cambridge, 1932).
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42. Having only one outstanding debt at a time, of course, does not preclude that debt from being part of an iterated sequence of debts. One piece of anecdotal evidence from the catasto supports our strong sense that many of our so-called transactional credits were iterated. Parigi di Tommaso Corbinelli's bilanci stand out for reporting the dates on which credits were initiated. One entry, a credit he had with Zanobi di Gherardo Cortigiani & Co. for fifty-three florins, is crossed out and marked pagato on May 20. Subsequently, he records a credit with the same company dated November 14. Thus, our reported relational-credit figures certainly underestimate the true rate, were it possible to include repeat business in our operational definition of relational exchange.
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43. Vespasiano da Bisticci, Renaissance Princes, Popes and Prelates: The Vespasiano Memoirs; Lives of Illustrious Men of the XVth Century (New York, [ca. 1480] 1963).
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44. Data are compiled from the annual guild censuses of banks from 1340 to 1399 contained in ASF, Arte del Cambio 11, 14.
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45. Lauro Martines, The Social World of the Florentine Humanists, 1390–1460 (Princeton, NJ, 1963); Goldthwaite, Private Wealth in Renaissance Florence; Francis William Kent, Household and Lineage in Renaissance Florence (Princeton, NJ, 1977); Gene Brucker, The Civic World of Early Renaissance Florence (Princeton, NJ, 1977); Michael Baxandall, Painting and Experience in Fifteenth-Century Italy (Oxford, 1988); Padgett and Ansell, “Robust Action and the Rise of the Medici”; Jacks and Caferro, Spinelli of Florence.
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46. Ronald E. Weissman, Ritual Brotherhood in Renaissance Florence (New York, 1982), 35.
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47. Padgett and Ansell, “Robust Action and the Rise of the Medici,” 1263.
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48. Herlihy and Klapisch-Zuber, Tuscans and Their Families, 56.
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49. As Francesco Datini, the “merchant of Prato,” would have liked to have done: Iris Origo, The Merchant of Prato: Daily Life in a Medieval Italian City (New York, 1957), 82–83; Richard C. Trexler, Public Life in Renaissance Florence (Ithaca, NY, 1980), 134.
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50. These data, collected over twenty years, were coded for purposes of Padgett's larger research project, which is documenting and studying the coevolution of political, economic, and kinship networks in Florence over two centuries, from 1300 to 1500. Currently, there are 53,152 Florentines in Padgett's ACCESS social-network database: 40,381 males and 12,771 females. Padgett gives special thanks to the people cited in the acknowledgment footnote for helping him with this large task.
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51. Parent-child relations were inferred from last and middle names, since Florentine males took the name of their father as their own middle name (as in Giovanni di Francesco), and from numerous collateral sources of dating information. This large task was complicated by the fact that names are often not consistent across archival sources. Currently, there are 1,732 genealogically linked families in the data set, each visually displayable into computerized family trees. See online appendix to Padgett “Open Elite?” for an itemization of these families.
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52. Dated marriages were coded from numerous sources, the most important being the fourteen volumes of the Carta dell'Ancisa, located in the ASF. Most of the original dowry contracts, from which dell'Ancisa worked, have now been lost. There are 11,039 marriages in the current Padgett data set, estimated to comprise about 40–50 percent of all marriages between 1350 and 1500 of Florentines with last names. See Padgett, “Open Elite?” for data details and statistical analysis of these marriages.
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53. Florence was divided administratively into four quarters. Each quarter was subdivided into four gonfaloni, or wards, making sixteen gonfaloni in all. Unfortunately, parish information was registered too sporadically in the catasto to be useful, there being no official tax reason to register.
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54. Information on both neighborhood and taxable personal wealth is contained in the 1427 catasto and is available online at http://www.stg.brown.edu/projects/catasto. In addition to integrating this online data set into his relational data set, Padgett has coded and computerized other Florentine tax censuses as well: namely, the 1351 estimo, the 1378 prestanza, the 1403 prestanza, the 1458 catasto, and the 1480 catasto. Padgett thanks Sam Cohn for providing microfilm copies of the 1351 estimo and the 1378 prestanza. He also thanks Anthony Molho who generously provided the 1480 catasto data set coded by him and Julius Kirshner.
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55. All members of the Priorate or city council from 1282 to 1500 (11,312 members in all) were coded by Padgett from an early eighteenth-century copy of the Priorista Mariani (ASF, Manoscritti 248–52) located at the Newberry Library in Chicago—namely, Priorista descritto a Tratte riscontro con quello delle riformagioni e con alter scritture publiche. All members of the Mercanzia, or commercial court, from 1310 to 1500 (3,316 members in all) were coded by Astorri, McLean, Padgett, and Prajda from the Fondo della Mercanzia located in the ASF. Subsequent to our independent coding efforts, the Tratte office-holding data coded by David Herlihy before he died became available on the Web (http://www.stg.brown.edu/projects/tratte), thanks to the labors of R. Burr Litchfield and his assistants. From these online resources, Xing Zhong has integrated the political offices of Buonuomini, Gonfalonieri, and various guild consuls into the Padgett relational data set.
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56. Scrutiny votes in 1433, secret to citizens at the time, are recorded in ASF, Tratte 359, for Tre Maggiore public offices.
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57. Social-class background, in the Florentine context, refers to the date of first entry of a patrilineal ancestor to the Priorate and hence can be reconstructed from Priorate office-holding data, together with family genealogies. Popolani were Florentine patrilineages who first were elected to the Priorate from 1282 to 1342; new men were Florentine patrilineages who first entered the Priorate from 1343 to 1377; new-new men (our label, not theirs) were Florentine patrilineages who first entered the Priorate from 1378 to 1433; magnates were old “feudal” families specifically prohibited from holding Priorate office in 1293: Carol Lansing, The Florentine Magnates: Lineage and Faction in a Medieval Commune (Princeton, NJ, 1991), 239–40. Subsequently, some of the branches of these families were rehabilitated through specific legislation: Christiane Klapisch-Zuber, Retour à la cité: Les magnats de Florence, 1340–1400 (Paris, 2006), 453–57. The subcategory of “ex-magnates” was created to cope with such rehabilitations. Any Florentine patrilineage not included in the above categories is labeled “families never admitted to Priorate” (by 1433).
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58. Membership in the 1433–34 Medici and Albizzi political factions, previously analyzed in Padgett and Ansell, “Robust Action and the Rise of the Medici,” was originally reconstructed and reported in Dale Kent, The Rise of the Medici: Faction in Florence, 1426–1434 (Oxford, 1978), 352–57.
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59. A logit regression is a statistical procedure for measuring the effect of a set of independent or “predictor” variables on whether an outcome will occur—in our case, the presence or absence of a credit tie between any given pair of companies. Within this procedure, we controlled for heterogeneity. That means that we used company ID as a fine-grained categorical variable, to control for potentially important missing factors for which we do not have data. This conservative technique makes it more difficult to detect statistical significance, by correcting observed coefficients' estimated standard errors.
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60. This was computed as follows: (total number of dichotomized credits of giving company) × (total number of dichotomized debits of receiving company)/(total number of dichotomized credits in the market in which they conduct their joint business). This is the expected number of between-company credits, if all that is known is the credit volumes (sizes) of the respective companies in that market.
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61. Use of these binary variables is important to control for sample bias: namely, the fact that directly observed company tax records are more likely to produce credits for our data set than are companies only indirectly observed.
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62. In Padgett and McLean, “Organizational Invention and Elite Transformation,” 1513, we reported that social class in 1427 was statistically significant for domestic-banking partnerships for all three social classes. Social class, in other words, influenced partnership (how banks were formed), but not commercial credit (what those banks did).
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63. We are referring to the debate between Goldthwaite, Private Wealth in Renaissance Florence; and Kent, Household and Lineage in Renaissance Florence, on the salience within Renaissance Florence of nuclear family versus patrilineage.
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64. Nuclear in-law relations were statistically significant six times, but we do not report this in table 5 because the number of examples of marrying the sister of another company's partner was small.
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65. Family was almost always insignificant in all markets involving ritagliatori. Indeed almost none of our social-context variables are significant in these relatively “impersonal” markets.
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66. Padgett and McLean, “Organizational Invention and Elite Transformation,” 1536, document that Florentine domestic merchant bankers were wealthiest in 1427, compared to 1351, 1378, 1403, 1458, and 1480.
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67. Samuel K. Cohn, The Laboring Classes in Renaissance Florence (New York, 1980); D. V. Kent and Francis William Kent, Neighbours and Neighbourhood in Renaissance Florence: The District of the Red Lion in the Fifteenth Century (Locust Valley, NY, 1981); Christiane Klapisch-Zuber, “Kin, Friends, and Neighbors: The Urban Territory of a Merchant Family in 1400,” in Women, Family, and Ritual in Renaissance Italy (Chicago, 1985), 68–93; Francis William Kent, “Ties of Neighborhood and Patronage in Quattrocento Florence,” in Patronage, Art, and Society in Renaissance Italy, ed. Francis William Kent and Patricia Simons (Oxford, 1987), 79–98; Nicholas A. Eckstein, The District of the Green Dragon: Neighborhood Life and Social Change in Renaissance Florence (Florence, 1995); Gene A. Brucker, Florentine Politics and Society, 1343–1378 (Princeton, NJ, 1962), 126, 131; Kent, Rise of the Medici, 68, 178.
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68. Compare Klapisch-Zuber, Tuscans and Their Families, 89.
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69. Padgett, “Open Elite?” 25.
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70. For the nine-person Priorate or city council, elected tours of duty were for two months, during which time councilors lived in the Palazzo Vecchio, or city hall, leaving their business to be run by others. After electing a large number of eligibles every five years through an oligarchic voting procedure called the scrutiny, successful name tags were placed into a monastically controlled bag, from which actual officeholders were selected randomly. Candidates did not know that they had been selected for city council until their name was drawn. The random component of this two-staged voting procedure was designed to minimize control of the state by small factions. For the evolution of Florentine voting procedures, see John M. Najemy, Corporatism and Consensus in Florentine Electoral Politics, 1280–1400 (Chapel Hill, NC, 1982); and Nicolai Rubinstein, The Government of Florence under the Medici, 1434 to 1494 (Oxford, 1966).
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71. Gene Brucker, ed., Two Memoirs of Renaissance Florence: The Diaries of Buonaccorso Pitti and Gregorio Dati (New York, 1967), 125–26; Najemy, Corporatism and Consensus in Florentine Electoral Politics, 299–300, 302.
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72. L. F. Marks, “The Financial Oligarchy in Florence under Lorenzo,” in Italian Renaissance Studies, ed. E. F. Jacob (London, 1960), 123–47; Molho, Florentine Public Finances in the Early Renaissance, 166–82.
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73. Anthony Molho, “Politics and the Ruling Class in Early Renaissance Florence,” Nuova Rivista Storica 52 (1968): 401–20; Ronald G. Witt, “Florentine Politics and the Ruling Class, 1382–1407,” Journal of Medieval and Renaissance Studies 6 (1976): 243–67; Najemy, Corporatism and Consensus in Florentine Electoral Politics, 263–76; Padgett and Ansell, “Robust Action and the Rise of the Medici,” 1261; Padgett, “Open Elite?” 9, 47.
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74. Molho, Florentine Public Finances in the Early Renaissance, 166–82; Anthony Molho, “Cosimo de' Medici: Pater Patriae or Padrino?” Stanford Italian Review 1 (1979): 5–33; Padgett and Ansell, “Robust Action and the Rise of the Medici,” 1276–77, 1305–6.
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75. See Padgett and McLean, “Organizational Invention and Elite Transformation,” and references therein.
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76. Ibid., 1474–85, 1548–60.
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77. The voluminous correspondence of the Milan branch of the Datini system offers copious evidence of this coordinated cooperation. See Luciana Frangioni, ed., Milano fine trecento: Il carteggio Milanese dell'Archivio Datini di Prato (Florence, 1994).
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78. Padgett and McLean, “Organizational Invention and Elite Transformation,” 1494–1522.
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79. Cohn, Laboring Classes in Renaissance Florence, 52 and 118–23, has shown that greater rates of intermarriage across neighborhoods at the level of the elite was offset by decreased rates of intermarriage across neighborhoods at the level of working classes.
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80. The effect is similar to percolation models in physics and biology, which exhibit sudden phase transitions in both aggregate flow and autocatalytic self-organization once the density of ties in random networks reaches a threshold critical value. “Giant component” connectivity suddenly emerges. See Stuart A. Kauffman, The Origins of Order: Self-Organization and Selection in Evolution (New York, 1993), 308. On politics, see Cohn, Laboring Classes in Renaissance Florence; Najemy, Corporatism and Consensus in Florentine Electoral Politics.
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81. Padgett and McLean, “Organizational Invention and Elite Transformation,” 1474–85.
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82. Ibid., 1535–39.
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83. The public certification aspect of office holding is clear from the fact that Priorate memberships were statistically significant, even with the simultaneous inclusion of scrutiny votes in the regressions. Scrutiny votes could be considered a more precise measure of reputation, but because they were secret they did not broadcast collective assessments of onore publicly.
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84. Marvin B. Becker, “The Renaissance Territorial State and Civic Perspective,” in Florence in Transition (Baltimore, 1968), 2:201–50; Najemy, Corporatism and Consensus in Florentine Electoral Politics, 262–300.
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85. Brucker, Two Memoirs of Renaissance Florence, 130.
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86. Ibid., 139–40.
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87. ASF, Catasto 66, fol. 421ff.
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88. Because of our focus on reciprocal corrispondenti, the extensive theoretical literature in economics on asymmetric principals and agents is not really relevant. That is more relevant to employers and employees or to home-office partners and overseas branch managers.
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89. On Datini, see Frangioni, Milano fine trecento. On Bardi, see ASF, MAP 84, 87, 94. Andrea Bardi, like Goro Dati, was still actively in business in our 1427 data set.
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90. For Florentine examples, see Padgett and Ansell, “Robust Action and the Rise of the Medici,” on the “robust action” of Cosimo de' Medici; Paul D. McLean, The Art of the Network (Durham, NC, 2007), esp. 1–34; and Ronald Weissman, “The Importance of Being Ambiguous: Social Relations, Individualism, and Identity in Renaissance Florence,” in Urban Life in the Renaissance, ed. Susan Zimmerman and Ronald Weissman (Dover, DE, 1989), 269–80. Weissman (Ritual Brotherhood in Renaissance Florence, 1–42), on “Judas the Florentine,” cogently discusses the dark side of the credit behavior analyzed here. Lying and cheating, while no doubt existing (and documented here), were not common enough to destroy the system.
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91. Frangioni, Milano fine trecento, letter 657: Manno di ser Iacomo & Co. in Milan to the Datini company in Barcelona, March 24, 1397. This and subsequent translations are by McLean.
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92. ASF, MAP 87, fol. 341r: Andrea Bardi to the Orlandini in Bruges, April 6, 1405. Note that prohibited trade is specified more in terms of people than in terms of types of transactions. See also Andrea Bardi's letter to Domenico and Poldeo Pazzi in Paris, March 27, 1405 (ibid., fol. 352r), where he instructs them to honor bills of exchange for any amount with the Tornabuoni of Bruges, the Medici of Venice, and the Bardi companies of Barcelona and Florence, but imposes limits of 500 or 1,000 florins on exchanges involving certain other companies: the Sacchi, Antonio Grisolfi, Zanobi di Taddeo Gaddi of Venice, Guglielmo del Pontico of Lucca, and so on. Instructions written in 1441 for Gerozzo de' Pilli, the Medici's partner in London (ASF, MAP 94, fol. 214ff.; see also de Roover, “Andrea Banchi,” 91) remain substantially the same as those written around 1400.
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93. The expression “pay it and post it to our account” (pagate e ponete a nostro conto) became a common feature of business correspondence in the 1390s. The earliest example we found in Datini's Milan correspondence appears in late 1383 (Frangioni, Milano fine trecento, letter 334). A variant of the expression appears in a letter of March 1387 from Lemo and Ghiselo and partners of Milan to the Datini company in Pisa (ibid., letter 137), the first occurrence we find between companies not tied by a shared partner.
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94. Florence Edler, A Glossary of Medieval Terms of Business (Cambridge, 1934), 34.
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95. ASF, MAP 87, fol. 339r.
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96. Frangioni, Milano fine trecento, letter 751: Giovanni Borromei to Datini and his company in Barcelona, April 1400.
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97. Ibid., letter 606: Manno di ser Iacomo & Co. in Milan to the Datini company in Barcelona, December 16, 1396.
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98. ASF, MAP 87, fol. 353r: Francesco Bardi to Francesco Mannini in Bruges, June 5, 1405.
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99. For recent scholarship on the topic of usury, see Odd Langholm, The Legacy of Scholasticism in Economic Thought: Antecedents of Choice and Power (Cambridge, 1998); Giacomo Todeschini, I mercanti e il tempo: La società cristiana e il circolo virtuoso della ricchezza fra Medioevo ed età moderna (Bologna, 2002); Giovanni Ceccarelli, Il gioco e il peccato: Economia e rischio nel tardo Medioevo (Bologna, 2003); Lawrin D. Armstrong, Usury and Public Debt in Early Renaissance Florence: Lorenzo Ridolfi on the Monte Commune (Toronto, 2003); Giacomo Todeschini, “La riflessione etica sulle attività economiche,” in Economie urbane ed etica economia nell'Italia medievale, ed. Roberto Greci, Giuliano Pinto, and Giacomo Todeschini (Laterza, 2005); and Diego Quaglioni, Giacomo Todeschini, and Gian Maria Varanini, Credito e usura fra teologia, diritto e amministrazione (Rome, 2005). On guidance pamphlets, see Langholm, Legacy of Scholasticism in Economic Thought, 10; and Todeschini, “La riflessione etica sulle attività economiche,” 184.
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100. See Todeschini, “La riflessione etica sulle attività economiche,” 185; Langholm, Legacy of Scholasticism in Economic Thought, 61ff.
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101. See McLean, Art of the Network, esp. chap. 4.
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102. Leon Battista Alberti wrote an extended debate on the various contemporary meanings of the idea of amicizia: see The Albertis of Florence: Leon Battista Alberti's Della Familia, ed. and trans. Guido A. Guarino (Lewisburg, PA, [ca. 1433] 1971), bk. 4.
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103. As Weissman, Ritual Brotherhood in Renaissance Florence, 40, puts it, “It is useful to remember that although personal relations in the Renaissance were often accompanied by demonstrations of strong affection, it was the perception of moral obligation, not the modern criterion of psychological intimacy, that distinguished relations between friends from relations between strangers. And Florentines could be cold and calculating in their acquisition and cultivation of personal relations.”
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104. Alberti, Albertis of Florence, 263–73; Weissman, Ritual Brotherhood in Renaissance Florence, 36–41, gives many quotations to support this.
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105. Richards, Florentine Merchants in the Age of the Medici, 85: Giovanni Maringhi to ser Niccolo Michelozzi, May 4, 1501.
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106. ASF, MAP 87, fol. 339r: Andrea de' Bardi to the Orlandini company in Bruges, March 26, 1405. In practically identical terms, Bardi also wrote to the Baldesi company in Bruges that “we have wanted, and still want, to settle this dispute as one must do between friends” (ibid., fol. 346r: July 6, 1405). And several times in the same letter he claimed to have acted toward them “with love and faith, as one must do between friends.” According to another letter he wrote the same day to the Orlandini (ibid., fol. 347v), he believed that between friends “one may be more forthright in speech” and remarked that “we hold it dear that you have spoken from your heart at length.”
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107. Frangioni, Milano fine trecento, appendix, letter 8: Francesco Datini to Tieri di Benci in Avignon, August 4, 1392.
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108. See Alberti, Albertis of Florence; McLean, Art of the Network, chap. 3; and Albert Rabil, Knowledge, Goodness, and Power: The Debate over Nobility among Quattrocento Italian Humanists (Binghamton, NY, 1991).
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109. ASF, MAP 87, fols. 343r and 343v. Honor, he noted elsewhere, required that corrispondenti look out for one another's salvation (salvezza) as well as their own (fol. 345v).
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110. Ibid., fol. 335v.
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111. Frangioni, Milano fine trecento, appendix, letter 8: Francesco Datini to Tieri di Benci in Avignon, August 4, 1392.
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112. Ibid, appendix, letter 18: Tommaso di ser Giovanni to Lorenzo di Tingo, May 28, 1400.
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113. ASF, MAP 87, fol. 337r: letter of October 1, 1404, from Andrea de' Bardi to Orlandini company in Bruges. Honor typically communicated both an obligatory, internalized commitment and an expectation of assistance by others—a duality succinctly expressed by Bardi in a letter to Simone and Iacopo Covoni in the fall of 1404 (ibid., fol. 337v). Here, he both expressed his obligation to them (in su quello vi si scrisse esserne voi obrighato) and urged them to honor their obligation to him: “as long as we both shall live I am certain you will do your duty.”
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114. Ibid., fol. 340r: Andrea de' Bardi to Lorenzo di Dinozzo & Co. in Avignon, April 4, 1405.
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115. See Jacks and Caferro, Spinelli of Florence, 75–76, 303–4. On the notion of fama in general, see Thelma Fenster and Daniel Lord Smail, eds., “Fama”: The Politics of Talk and Reputation in Medieval Europe (Ithaca, NY, 2003).
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116. Weissman, Ritual Brotherhood in Renaissance Florence, 28.
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117. See McLean, Art of the Network, chap. 6.
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118. Federigo Melis, ed., Documenti per la storia economia dei secoli XII–XVI (Florence, 1972), doc. 10: October 1395.
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119. Reinhold C. Mueller, The Venetian Money Market: Banks, Panics, and the Public Debt, 1200–1500 (Baltimore, 1997), 16 and more generally chap. 1. See also Reinhold C. Mueller, “The Role of Bank Money in Venice, 1300–1500,” Studi Veneziani 3 (1979): 47–96.
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120. Tognetti, “L'attività di banca locale di una grande compagnia fiorentina del XV secolo.”
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121. Indeed the Florentines took care of Venetian international banking needs (Mueller, Venetian Money Market, 255–56).
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122. Frederic C. Lane, Andrea Barbarigo: Merchant of Venice, 1418–1449 (Baltimore, 1944), 163–71, and “Venture Accounting in Medieval Business Management,” Bulletin of the Business Historical Society 19 (1945): 164–73; De Roover Business, Banking, and Economic Thought, 161–64.
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123. Van Doosselaere, Commercial Agreements and Social Dynamics in Medieval Genoa, esp. chap. 4. While the volume of credit relations is roughly comparable between our studies, his data on notarial contracts thinly cover a long span of time, 1154–1406, whereas our data from the catasto thickly cover one year. Van Doosselaere explicitly challenges the “individualistic” stereotype of medieval Gemoa modeled by Avner Greif, Institutions and the Path to the Modern Economy (Cambridge, 2006).
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124. Robert J. Reynolds, “Genoese Trade in the Late Twelfth Century,” Journal of Economic and Business History 3 (1931): 362–81; R. D. Face, “Techniques of Business in the Trade between the Fairs of Champagne and the South of Europe in the Twelfth and Thirteenth Centuries,” Economic History Review, 2nd ser., 10 (1958): 427–38; Rosalind Kent Berlow, “The Development of Business Techniques Used at the Fairs of Champagne,” Studies in Medieval and Renaissance History 8 (1971): 3–31.
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125. “I found no fewer than forty-nine credit agreements tying him to forty-four different people” (Van Doosselaere, Commercial Agreements and Social Dynamics in Medieval Genoa, 144).
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126. Jacques Heers, Genova nel ‘400 (Milan, 1983), 135–41.
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127. One exception is Jacques Heers, ed., Le livre de comptes de Giovanni Piccamiglio, hommes d'affairs Génois, 1456–1459 (Paris, 1959).
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128. For useful but incomplete steps in this direction, see Neil J. Smelser and Richard Swedberg, eds., The Handbook of Economic Sociology (New York, 1994, 2005); and James E. Rauch and Alessandra Casella, eds., Networks and Markets (New York, 2001), and the many works cited therein.
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129. McLean, Art of the Network, chap. 1.
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130. John F. Padgett, Doowan Lee, and Nick Collier, “Economic Production as Chemistry,” Industrial and Corporate Change 12 (2003): 843–77, esp. 854–55 and 863–64.
