Thinking carefully about inclusiveness: evidence from European guilds

Abstract

Policy lessons are often drawn from the emergence in Europe of ‘inclusive’ institutions, which are held to have displaced ‘extractive’ institutions and fostered economic growth. This article analyzes the concept of inclusiveness using evidence on a historical institution that has been widely viewed as inclusive – the guild. It finds that we must differentiate between three types of inclusiveness: community, corporative, and societal. Community inclusiveness refers to the share of individuals involved in an institution's operations, corporative inclusiveness the share of political representation enjoyed by the institution itself, and societal inclusiveness the extent to which the institution enables full economic and political participation by everyone in society. We must also distinguish between general inclusiveness, which takes into account general-equilibrium effects, and partial inclusiveness, which assumes away such effects. Inclusiveness and extractiveness are not opposites in theory, and guilds show why certain types of inclusive institution are likely to behave in extractive ways. Finally, guilds alert us to trade-offs between inclusive economic institutions, inclusive political institutions, and inclusive growth. History does not imply abandoning the concept of inclusiveness, but rather thinking about it carefully.