Medieval Economics : Planet Money Knights are extortionists. Guilds knock down your house if you don't play by their rules. And you have to wait until the black death kills a third of Europe before anything changes.

Medieval Economics

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PAUL BETTANY: (As Geoffrey Chaucer) My lords, my ladies and everybody else here not sitting on a cushion...


BETTANY: (As Geoffrey Chaucer) ...Today - today, you find yourselves equals.


LEE FIELDS AND THE EXPRESSIONS: (Singing) They say money is king of our world. Without a nickel, without a dime, my brother, you're not worth anybody's time.


Hello, and welcome to PLANET MONEY. I'm Alex Blumberg.


And I'm Jacob Goldstein. Today's Friday, May 6. And that was a clip from the movie "A Knight's Tale" you heard at the top.

BLUMBERG: An you heard that clip because today on the podcast, it's all about knights, guilds and medieval economics but first, the PLANET MONEY Indicator from you, Jacob Goldstein.

GOLDSTEIN: Today's PLANET MONEY Indicator is 244,000. The U.S. economy added 244,000 jobs in April. So really it's a good strong jobs number. It's higher than what analysts were expecting. And it's the biggest one-month jump we've had in several years.

BLUMBERG: And that is all really great news. But it's very confusing news because there was another key number out today that went in the exact opposite direction. The unemployment rate went up from 8.8 percent back to 9 percent.

GOLDSTEIN: So this is confusing. And it's something we see from time to time with these jobs numbers. And the bottom line here is there are actually two different surveys that the government does every month. One of them gives you the number of jobs added or lost. The other one gives you the unemployment rate. They're totally different. So over time, of course, they tend to track, right? You add jobs. The unemployment rate goes down. But once in a while, you just get a weird month like what we just saw where you say, on the one hand, oh, we added all these jobs. But on the other hand, the unemployment rate jumped up.

BLUMBERG: I know. But what makes this as strange as I've seen it where you add a lot of jobs, but the unemployment rate doesn't fall that much or doesn't fall at all. But I've never seen them go in totally opposite directions. Like, this is a really good jobs number - way better than people were thinking. And it's a really bad unemployment number - way worse than people were expecting.

GOLDSTEIN: Yeah. And basically, the bottom line is what economists say is these two will work out over the long term. And when they move in different directions in one month, pay attention to the jobs number and ignore the unemployment number.

BLUMBERG: So we should be happy that we added 244,000 new jobs and not be that disappointed that the unemployment rate went back up because that's probably the noisier number.

GOLDSTEIN: That's right. But I do want to say one other thing, which is if you step back - so OK. So the change in unemployment - 8.8 percent to 9 percent - that was probably noise. But the absolute number, whether it's 8.8 percent or 8.7 percent or 9 percent, it's really, really bad, right? Normal unemployment in this country is somewhere like 5 or 6 percent. So I think the unemployment rate is useful in its sort of general picture of where it is to say, you know what? Things are still really bad. Even though we've been adding jobs, we're nowhere near a good healthy job market.

BLUMBERG: Right. And we're going to need a lot, lot more months like this of 240,000 or 250,000 jobs added before we start to make a dent.

GOLDSTEIN: Years - it's going to be years.

BLUMBERG: Thanks, Jacob. OK - on with the show. Today, we are going back in time to the 12th and 13th century. And we're going to talk about the medieval economy. Our guide is Philip Daileader, a history professor at the College of William and Mary. We interviewed him for a podcast that originally aired in 2009, one that I hosted with Adam Davidson.


ADAM DAVIDSON, BYLINE: All right, Jacob. There is one condition for our journey.

BLUMBERG: Oh, OK. What is it?

DAVIDSON: I would like you to be a peasant.

BLUMBERG: (Laughter) I see. Is this - are you so insecure that in all of our radio dramas you have to put me in some sort of position of, you know, subservience to you? Is that the way it is?

DAVIDSON: Yes. That is exactly the way it is. And I do feel better, by the way. It does make me feel really good that you are weak, and I'm strong.

BLUMBERG: It's sad, but fine. If it helps, go ahead. Be the king.

DAVIDSON: No, no, no - not the king - that's the interesting thing. We're in the 12th and 13th century. Kings are not as big a factor in most local economies. Daileader explains that life is very local, and it's all about the local knight. The king is far away in Paris or something. And you, the local peasant, you don't even think about the king. You have probably never gone more than, like, 10 or so miles from the house you were born in. And most of the stuff you produce, the agricultural stuff or other stuff - much of it goes into the hands of others.

BLUMBERG: And not the greedy king or the central government.

DAVIDSON: Exactly, right - not them. This is way before there's, like, a nationwide royal taxation. Philip Daileader says that the main people collecting money at this time - the main people collecting from the peasants...


DAVIDSON: ...People like you - the main people doing the collecting were people like me, the knights.

PHILIP DAILEADER: Mostly you're paying it to local knights and local castellans, individuals who own castles and who, in return for theoretically protecting you, have the right to levy exactions on you that resemble taxes. Although, they're often levied arbitrarily. You can pay random amounts of money at any time that the local knight or castellan demands it. And you have to pay. You have to pay that. And often there will be multiple knights in the neighborhood who are levying these exactions on you, fining you for various crimes that you've committed. So the burden of payment is heavy, but it goes to local strongmen rather than to a king living in far-off Paris.

DAVIDSON: Now, you grew up in New York, I know, like I did.


DAVIDSON: And this sounds an awful lot like those neighborhoods in New York where, you know, the mob got a piece of everybody's business. Even Greenwich Village where I grew up - my understanding is...


DAVIDSON: ...Just about every business had to pay. It sounds more like that. I mean, protection is really in quotes. You're paying protection so that that person doesn't kill you. They're not protecting you from someone else.

DAILEADER: That's exactly right. And we tend to think of medieval knights in terms of chivalry and chivalric behavior, that they're supposed to be protectors of the weak. The reason chivalric literature develops is because knights were not protecting the weak. They were extorting from the weakened chivalric heroes like Lancelot or held up as models for knights to emulate when the reality is that knights were thugs. And because they are encased in armor when they go out of their castles - they're encased in stone when they are within their castles - so there's really nothing to the non-knight can do to protect himself or herself against against knights when they come to a village and ask you to hand over whatever you happen to possess at that time. So it's a fairly brutal situation.

BLUMBERG: So you're a thug. And I'm a poor, helpless peasant who you're picking on all the time. This is an easy radio (unintelligible) I got to say (laughter).

DAVIDSON: It feels like our life? (Laughter) That's not fair.

BLUMBERG: No, that's not true at all.

DAVIDSON: You're giving the wrong impression.

BLUMBERG: I am. So, like, this - all of this thing that we hear about chivalrous knights and all that sort of stuff - that's just all a big myth.

DAVIDSON: Yeah. It was specifically created. It was like a medieval version of the Stop The Violence campaign.

BLUMBERG: By the Trappist monk KRS-One?

DAVIDSON: Yes, exactly (laughter).

BLUMBERG: All right. All right.

DAVIDSON: So this is part of the economy of the - what is called the high Middle Ages, the 12th and 13th century. There's - you have this thuggish knight who kind of shows up every once in a while and just steals your stuff arbitrarily. He calls it a tax.

BLUMBERG: (Laughter) Yeah, all right - just really - just to steal, basically, right?

DAVIDSON: Right. And that's not all. The knight would also say to peasants like you, hey, you got to work for me. You got to do work on my land. You got to - you know, you got to farm my land. Maybe a few days, maybe a few weeks every year, you have to just basically be an indentured servants.

BLUMBERG: Right. So my life - you're making my life really suck because I have to pay you. And I also have to work for you for free. But I do have one out, which is that I can flee to a city or a town where I might get a little bit more of protection. And you know that I can flee, so that keeps you from treating me too badly.

DAVIDSON: Yeah. And if you get to a city and you're able to stay there - generally, the time frame was one year and one day specifically - 366 days - then you are no longer obligated to whatever knight you fled from. You are just a free man living in the city. And also, life was way more laid back, he says, than it is now. People just weren't working all that often. They didn't have, like, a 9-to-5 job. They wouldn't even understand the idea of just working all day. You might work just a couple days a week whenever your customers showed up. Then you'd work. And if they didn't show up, you wouldn't work.

BLUMBERG: So I could basically - that doesn't sound that bad at all. So I can basically work as much as I want. If I want to work really hard, really build my business, I can do that. Or if I just want to loaf around, that's OK, too?

DAVIDSON: No. Actually, you can only loaf around.


DAVIDSON: This is - Daileader says this is one of the biggest differences between life in a medieval village and life now - the guild system, which is - I used to think, oh, guild system - that's just like unions - not at all. It's much more all-encompassing.

DAILEADER: The purpose of the guild system was to eliminate competition. It is there to benefit producers at the expense of consumers. And it limits competition by forbidding advertising, for example, by limiting the number of hours that anyone can work in a given day by specifically defining the techniques that each craftsman must follow. And it squelches innovation. If you come up with a faster way to make shoes or a cheaper way to make shoes and the guild finds that you're doing it, they will forbid you to practice this craft anymore because that would give you an unfair advantage over the other shoemakers, and you'd put them out of business eventually.

DAVIDSON: And this is something that I find really interesting. So if we look at European history, something happens in the late 1700s, early 1800s that creates the conditions for entrepreneurial investment and technological investment. And suddenly, unbelievably rapidly, workers become much more productive, at least some workers become far more wealthy.


BLUMBERG: Many don't, but some do. This is not happening in the world we're describing in the 12th and 13th century, right? Or do you see any entrepreneurship, anything we'd recognize as entrepreneurship?

DAILEADER: You do see it. And the reason why the guilds exist is precisely to stop it from getting the upper hand. And if there hadn't been individuals who were willing to experiment with new production techniques, then there would've been no need for guilds to exist. It's not really until the 14th and 15th centuries, though, that you start to see the guild system begin to break down. And it begins to break down in large part because of the Black Death, and the loss of 1 out of 3 to 1 out of 2 Europeans in the loss of a four-year - in a four-year period.

And that massive die-off caused an economic crisis that allowed merchants who had capital available to them to begin to buy out artisans. Essentially they begin to turn them into wage laborers. They buy their tools. They buy their shops. They buy their raw material, so they start to sell the finished product. And so the groundwork for that later period of massive experimentation in the 1700s and 1800s is really laid back in the 1400s and 1500s.

DAVIDSON: Wow. So if there had not been the Black Death, we wouldn't have the modern world that we live in today?

DAILEADER: It certainly is a boon to the merchant class in terms of its relationship to those who are producing the goods that they sell. And it's this mercantile class that later on will begin to experiment with agricultural techniques in the 18th century, so you can draw a connection of sorts there.

DAVIDSON: So - but going back to our period, to the 12th and 13th century, the 1100s and 1200s, so if I'm a shoemaker, am I just making shoes - like, I have size 12 shoes, size 8 shoes, whatever, and I'm just making a bunch of shoes?

DAILEADER: Yes. You make the - the specialization of labor in the 12th and 13th centuries is something that's frowned on by guilds because they see that will lead to skill dilution and to the loss of social status and economic clout. If you're a shoemaker, you make the whole shoe. You have to - you make the soles, you make the tongue, you make the eyelets if they have them. You have - you make the entire product from beginning to end, and you make to order more often than not. You'll sit in your shop and - you don't build shoes on spec. You wait till somebody places an order and then you make the shoe, which helps to account for the very irregular work patterns for - nobody might walk in for four days, so for four days you just sit and do nothing.

But again, the guilds regulate membership very closely. They set a number of shoemakers. There will be 12 shoemakers in this town. And they do that to prevent a glut of production, which would hurt the producers. And so if you're number 13 and you're trying to make shoes and they find you're trying to make shoes, they will knock your house down, and they will take your tools and get rid of them and try to have you thrown out of the town.

DAVIDSON: Really? And would the shoemaker guild side up with the glazier guild and the stool - or the woodworker guild or whatever? Would they work together to beat up on this rogue, under - black market shoemaker?

DAILEADER: More often than not, no. And one of the defining characteristics of the guild system is its intense localization. Even within a town, the guilds - there's a pecking order in which some guilds are considered more prestigious than others. And this is made manifest in urban festivals where the guilds will all march in a specific order that is often laid down in the town's laws. And rivalry between these guilds was often intense. So when members of one guild met members of another guild in the street, they'd probably wind up brawling with one another. If you met members of the shoemakers guild from the neighboring town, you'd probably brawl with them as well. And...

DAVIDSON: Even though I'm a shoemaker in a shoemakers guild.

DAILEADER: That's right. The idea of workers of the world, unite is not one that anyone would have thought of in the 12th and 13th centuries. And the reason why that phrase is so powerful, in part, is because it flies in the face of a much older pre-modern tradition in which the workers of the world brawled with one another and were intensely proud of their own town and of their own guild within that town - to the exclusion of ties to the other guilds and to other places.

DAVIDSON: So thinking about this economically, what I'm finding confusing is that there is so much money left on the table. I mean, we now know - with the benefit of hindsight - that if the shoemakers or the coffin makers or whoever else got together and said, hey, guys, forget this controlling our production.


DAVIDSON: Let's make as much as we possibly can. Let's flood the market. We'll make a lot less on each one, but we'll sell a lot more units. People will not buy...


DAVIDSON: ...One pair of shoes every 10 years. They'll buy one pair of shoes every season...


DAVIDSON: ...Or every few months. Eventually, we can start selling it to those neighboring towns and even to other countries.


DAVIDSON: And we'll all be much richer.


DAVIDSON: And according to, you know, a basic principle of modern economics, is if there's a situation where everybody could be made much richer, someone will think of it, and someone will take advantage of it.


DAVIDSON: Why - so on the one hand, I can see why each guild member doesn't want any other guild member to do that. But why do they - why didn't anybody think of this, you know, when a few hundred years later, everybody's thinking about this?

DAILEADER: Right. Well, two factors - one, cultural and the other, technological. The cultural one is that the Christian milieu of the time regards moneymaking as a sordid activity, you know? The usurers, those who lend money at interests, are considered among the worst sinners out there. And Thomas Aquinas, in the 13th century, says there's something sordid about selling and buying goods, that it's easier for a camel to pass through the eye of a needle than for a rich man to enter heaven. So you have these strong cultural constraints working against trying to amass as much wealth as possible. The technological problem is transportation costs. The idea of mass-producing goods and then flooding markets with them and trying to maximize profits by having razor-thin profit margins but large number of sales, it's not possible when overland transportation is as expensive as it was in the 12th and 13th centuries. You couldn't move green profitably over land probably more than 40 or 50 miles. At that point, it was just too expensive. And many times, there were famines in the 12th and 13th century where there was plenty of food 50 miles away, but it cost too much to load up carts and move it over land. The only economical way to move goods was by water during the Middle Ages. And until those transportation problems were overcome, it really I think was not possible to conceive of a world where instead of trying to make a few sales and make as much profit on those few sales and abandon that for a world where you're just going to make a large number of sales and a small amount of profit on each one.

DAVIDSON: I see because Adam Smith wrote about how there will be specialization to the extent of the size of the market.


DAVIDSON: And the market was effectively 50 miles or even less.


DAVIDSON: And when...

DAILEADER: It was intensely local.

DAVIDSON: And when you do see goods being shipped long distances, it's things that have huge value for the weight - right? - spices and...

DAILEADER: Precisely. That's right, even cloth - which was Europe's main export to the rest of the world in 12th and 13th century - even cloth is starting to - you've reached the limit of what it's economically profitable to ship, considering the value versus the weight. And certainly, medieval merchants - they wanted to deal in items, such as pepper and spices, that weighed very little and that were quite valuable.


LEE FIELDS AND THE EXPRESSIONS: (Singing) It's a sad, sad world when money is king.

BLUMBERG: As always, we want to hear what you thought of today's show. Please email us at, or give us a shout on Twitter or Facebook.

GOLDSTEIN: And for more on those jobs numbers we were talking about at the top, take a look at our blog that's at Our production assistant, Jess Jiang, put together a couple of great graphs that really show you, very well, what's happened across all different sectors - health care, manufacturing, construction - basically how we've lost 6 million jobs over the past several years. I'm Jacob Goldstein.

BLUMBERG: And I'm Alex Blumberg. Thanks for listening.


LEE FIELDS AND THE EXPRESSIONS: (Singing) Father, we need your help - need your help right now. Oh, yeah. Bite your lip. Don't say a thing. I'm gonna keep on saying money is king. And right or wrong don't mean a thing. It's a sad, sad world...

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