Market Organization and Enterprises
The 'Mother of all Trades'
One of the subjects relevant for the study of transaction costs is the organization of trade, encompassing the specific organization of the market and of the individual enterprises. Could anyone who so wished engage easily in the grain trade, or were there formal or informal barriers? To what extent were individual merchants able to influence trading conditions and prices? These questions inextricably woven into the market organization are treated in the first section of this chapter. The next
... wo sections concentrate on the enterprises: their number, size, and general characteristics. How many enterprises were there, actually? What was the scale of their operations? How did entrepreneurs finance those operations? To what extent were enterprises specialized? On what grounds did merchants choose partners to co-operate with? Entrepreneurial choices and decisions with respect to the choice of partners, finding resources, the scale of investments, etcetera, all depended to a large extent on the desire to reduce costs, maximize profits, eliminate risks as far as possible and so they all have bearing on transaction costs. We have seen that in the course of the ages, the conditions under which the merchants had to organize their activities changed: during the 'age of expansion' supply of and demand for Baltic grain were generally growing and the market was enlarged to include the Mediterranean; from the middle of the seventeenth century demand contracted and concentrated heavily on the Dutch provinces, presumably creating fiercer competition among merchants; and, from the eighteenth century, the relative decline of the port of Amsterdam as a destination for Baltic grain dominates the picture. To what extent were entrepreneurs adaptable, if the need should have arisen, to those changing circumstances, and what adaptations were made in the way trade was organized in order to deal with new situations? After having studied Dutch enterprises in Sections 2 and 3, we shall briefly turn to the role of foreign enterprises in the grain trade in Amsterdam (Section 4).