Governance and institutional change in marine insurance, 1350-1850 Christopher Kingston∗ Amherst College July 3, 2013 Abstract This article explores the development and diffusion of market governance institutions in the marine insurance industry as the practice of insurance spread from its early origins in medieval Italy throughout the Atlantic world. Informal governance mechanisms provided the foundation for the development of insurance law administered by specialist courts. Efforts to tax and regulate the industry frequently met with limited success, both because of interjurisdictional competition and because merchants and brokers could to some extent opt out of the formal system. The divergence in organizational form between Britain and other countries, brought about in part by Britain's Bubble Act of 1720, illustrates the potential for path-dependent institutional change. 1 Introduction Many market transactions are plagued by agency problems that give rise to a \fundamental problem of exchange" (Greif 2000), and in such cases markets can function only if suitable institutions enable transactors to overcome incentives for opportunism. Recent research has therefore studied the role of both formal public and private institutions in the organization and governance of markets (Dixit 2003). Some aspects of market governance institutions be- gin as \spontaneous" local orders or customs that may eventually \harden" into formal rules, while others are deliberately designed by entrepreneurs and lawmakers. \Good" institutions ∗Email:
[email protected]. I am grateful to Anu Bradford, Stephen Haber, the editors, two anonymous referees, and participants in the October 2011 European University Institute conference on `Legal Order, the State, and Economic Development' for helpful comments and suggestions.