MERCANTILE INCENTIVES: STATE-SANCTIONED MARKET POWER AND ECONOMIC DEVELOPMENT IN THE ATLANTIC ECONOMY, 1553-1776 (JOINT-STOCK, POTASH, LEVANT COMPANY, TRADE DEVELOPMENT, ENGLAND)

If market power is the second-best solution for inadequate incentive for rational individuals to expend resources on risky search for innovation, is it possible to extend its application to larger-scale activities like new trade channels and goods markets? This paper explores various institutional relationships in which market power figures as a catalyst for economic development. Particular emphasis is placed on the power of English mercantilist company patents because of their success in market development and their special relationship between state and entrepreneurial interests. While lending its legal authority to private-sector companies, the English state provided little actual financial or military support. Given this alliance of private resources and state authority, two particular arrangements stand out. The joint-stock company was the preeminent expression of state-sanctioned market power in mercantilist economic development. Joint-stock firms tended to precede their respective market structures making their market power absolute. Yet, their power facilitated rather than inhibited the emergence of the market. In similar fashion, the domestic capital market developed as a result of the interaction of private firms and the state. This alliance proved to be necessary in lieu of a well-organized domestic capital market.;The last two chapters provide a complement to the theoretical discussion as studies of the North American potash industrial development as well as the revival of English trade to the Eastern Mediterranean through the Levant Company. In both cases, the presence of trade distortions created unfavorable economic situations for the English. While tariff restructuring provided colonists with incentive to produce potash for English import substitution, colonial monopolies speeded up the process of change, reducing transactions costs. The Levant Company overcame substantial trade impediments to re-establish a stable trade. After doing so, the company switched to a regulated organization. Yet, in developing particular market segments, such as Morean currant production, the company found the joint-stock/monopolistic form the most successful of the alternatives employed. This use of market power illustrates many of the theoretical implications of the initial chapters.