Trading on reputation: stateless justice in the Medieval Mediterranean.

• Author: Faille, Christopher
• Position: Institutions and the Path to the Modern Economy: Lessons from Medieval Trade - Book review

Institutions and the Path to the Modern Economy: Lessons from Medieval Trade, by Avner Greif, New York: Cambridge University Press, 526 pages, $80

IN THE EARLY 11th century a trader from Tunisia, momentarily residing in Sicily, wrote a long, distraught letter to a business associate in Egypt. Sumhun ben Da'ud complained to his correspondent, Joseph ben 'Awkel of Fustat (old Cairo), that "my reputation is being ruined." Sumhun had asked Joseph to pay two of Sumhun's creditors in Fustat, and Joseph hadn't done it. Now Sumhun complained that those unpaid creditors were writing to parties all along the Mediterranean basin, letters "filled with condemnations," which have "reached everyone."

Sumhun and Joseph were both members of a social group, the Maghribi traders, that emerged in the 10th century. As the social and political environment in Baghdad under the Abbasids deteriorated, many Jewish traders left, heading for the western part of the Arab world, the "Maghrib." They were ignored by and in turn largely ignored the Fatimids, the nominal rulers of their new home.

Avner Greif, an economic historian at Stanford and a 1998 recipient of a MacArthur Foundation "genius" grant, diagnosed the social context of this letter and related documents in a brilliant series of articles in the late 1980s and early '90s. His work from those years is summed up in his latest book, Institutions and the Path to the Modern Economy. It tells a story whose implications cut to the heart of both political philosophy and political practice.

If there's one thing about the nature and purpose of government that almost everyone agrees on, it's that a state-supplied judicial system is indispensable. Even those who see the state as a necessary evil make sure to include the judicial system in the "necessary" part. But the story of the Maghribis is the story of a complicated system of international trade that mostly refused to use government courts.

The Fatimid dynasty, founded in 909 by Abdullah al-Mahdi, was on the rise just as the Abbasids to the east were in decline. When the Jewish emigres who became the Maghribi traders began arriving, Fatimid terrain consisted of present-day Morocco, Algeria, Tunisia, and Libya. That realm soon expanded, incorporating Egypt in 972, then Syria, Sicily, and parts of the Italian coast somewhat later.

As Greif tells it, the Fatimids had a weak bureaucracy that saved itself administrative trouble by relying on community associations. If the newcomers wanted to govern their own affairs among themselves, they were welcome so to do. And they did...