Human Capital Investment

This chapter explores how guilds dealt with human capital investment, a second sphere in which markets are often thought to fail. Many guilds imposed comprehensive training requirements, as in the case of the seventeenth-century Toledo silk-twisters who justified their exclusive legal privileges on the grounds that “the art of silk is useful and has many secrets; because of the quality and secrets of the said art, no matter how deft a man may be, he cannot master them except through long practice and the passage of time.” The chapter then looks at the externalities and information asymmetries which could cause markets in human capital investment to fail, and the ways in which guilds regulated training in pre-industrial crafts and services.