750 JOURNAL OF POLITICAL ECONOMY of trading activity when a simple reputation mechanism could not. Section III concludes the paper by considering the subsequent his- tory-the transformation and decline of the merchant guild associ- ated with the rise of the state-and suggests other applications of the theoretical framework. I.The Commitment Problem and the Role of Merchant Guilds Institutions and Commitment Long-distance trade in late medieval Europe was based on the ex- change of goods brought from different parts of the world to central cities or fairs located in geographically or politically favorable places. Yet the presence of gains from trade and locations suitable to conduct exchange does not imply that exchange could occur without an insti- tutional environment in which the merchants and their property were secure.The concern that rulers felt to provide security,reflected in the words of Edward I quoted above,should be understood against the background of events such as the following one that occurred in Boston,England,in,or shortly before,1241.A Flemish merchant accused an English trader of not repaying a commercial loan.This resulted in an uproar on all sides and the English merchants assembled to attack the Flemings,who retired to their lodging in the churchyard....The English threw down the pailings,broke the doors and windows and dragged out Peter Balg [the lender]and five others,whom they foully beat and wounded and then set in the stocks.All the other Flemings they beat, ill-treated and robbed,and pierced their cloths with swords and knives....Their silver cups were carried off as they sat at table,their purses cut and the money in them stolen,[and] their chests broken open and money and goods,to an un- known extent,taken away.[Curia Regis,121,m.6;pub- lished by Salzman (1928)] Such disorders were not peculiar to England but mark the history of long-distance medieval trade.For example,the commercial relations between Byzantine and Italian city-states were often hindered by inse- curity during the twelfth century.The Genoese quarter in Constanti- nople was attacked by the Pisans in 1162.At least one merchant was killed,and the other Genoese merchants had to escape to their ship leaving all their valuables behind them.In 1171 the Venetians at- tacked and destroyed the same Genoese quarter.About 10 years later750 JOURNAL OF POLITICAL ECONOMY of trading activity when a simple reputation mechanism could not. Section III concludes the paper by considering the subsequent his￾tory-the transformation and decline of the merchant guild associ￾ated with the rise of the state-and suggests other applications of the theoretical framework. I. The Commitment Problem and the Role of Merchant Guilds Institutions and Commitment Long-distance trade in late medieval Europe was based on the ex￾change of goods brought from different parts of the world to central cities or fairs located in geographically or politically favorable places. Yet the presence of gains from trade and locations suitable to conduct exchange does not imply that exchange could occur without an insti￾tutional environment in which the merchants and their property were secure. The concern that rulers felt to provide security, reflected in the words of Edward I quoted above, should be understood against the background of events such as the following one that occurred in Boston, England, in, or shortly before, 1241. A Flemish merchant accused an English trader of not repaying a commercial loan. This resulted in an uproar on all sides and the English merchants assembled to attack the Flemings, who retired to their lodging in the churchyard.... The English threw down the pailings, broke the doors and windows and dragged out Peter Balg [the lender] and five others, whom they foully beat and wounded and then set in the stocks. All the other Flemings they beat, ill-treated and robbed, and pierced their cloths with swords and knives.... Their silver cups were carried off as they sat at table, their purses cut and the money in them stolen, [and] their chests broken open and money and goods, to an un￾known extent, taken away. [Curia Regis, 121, m. 6; pub￾lished by Salzman (1928)] Such disorders were not peculiar to England but mark the history of long-distance medieval trade. For example, the commercial relations between Byzantine and Italian city-states were often hindered by inse￾curity during the twelfth century. The Genoese quarter in Constanti￾nople was attacked by the Pisans in 1162. At least one merchant was killed, and the other Genoese merchants had to escape to their ship leaving all their valuables behind them. In 1171 the Venetians at￾tacked and destroyed the same Genoese quarter. About 10 years later