Elite Social Network, Public Debt, and State Building in Early Modern Venice

• In Event: Religion and Social Institutions in Historical State Building in Europe

Abstract

By the mid-17th century, the Republic of Venice was in decline. And yet, state revenues doubled compared to previous centuries, while public debt saw a five-fold increase. How did Venice manage to credibly commit to repaying its debts and attracting investors with record-low interest rates, with no growth in sight? Traditional arguments focus on representation and changes in formal institutions. We propose a micro-founded theory of public debt and state-building based on informal institutions – specifically, marriage networks and social integration. The old Venetian elites, who had been ruling the city for four centuries, saw a significant drop in their numbers after the Italian plague of 1629-1631. Thereafter, they admitted new wealthy families into the Great Council, granting them Venetian nobility status. For the first time they also started to marry outside their close circles, with the newly coopted nobles and other wealthy nobles from the mainland. We argue that marriages provided ‘mutual hostages’ and were thereby a source of credible commitment for public debt repayment.

Authors

• Caterina Chiopris, Harvard University

• Yuhua Wang, Harvard University