Avner Greif is a professor of economics, best known to medieval historians for his work on the Maghribi traders, Jewish merchants who immigrated from Iraq to North Africa in the tenth century and then traded extensively in the Mediterranean world. In Institutions and the Path to the Modern Economy, he has produced a significant contribution to interdisciplinary scholarship. It brings together techniques from the social sciences to address economic development in the late Middle Ages in Europe and the Muslim world through comparative contexts, historical analysis, and theory. His rationale can be summed up: “We use theory to delineate various possibilities and the conditions conducive to the existence and functioning of a particular institution; we use evidence to direct the analysis toward particular issues and possibilities rather than others” (p. 451). Greif's definition of an institution is complex: “An institution can therefore be defined as comprising cognitive, coordinative, informational, and normative social elements that jointly generate a regularity of (social) behavior by enabling, guiding, and motivating it” (p. 151).

The author clearly wants to make this work accessible to many different audiences. Thus, guideposts are everywhere. Detailed appendices also speak to this concern. Greif advises readers with interests in the analysis of institutions to concentrate on certain chapters and two appendices, B, “Is Homo Sociologicus Strategic” and C, “The Role of Theory: Reputation-Based Private-Order Institutions.” Whereas readers interested in the historical moment should address themselves to other chapters, with chapter 12 common to both lists. To assist novices in game theory he has presented a primer in Appendix A. He is mindful of the reality that models do not always fit the facts and is anxious to avoid tautology “by adjusting the model to fit the data” (p. 352).

The historical contexts within which Greif tests his analysis are rich and varied: among them, Maghribi traders, Genoa, the Hansa, the Champagne fairs, European (especially Italian) communes, medieval England, and nineteenth-century California. He emphasizes the Maghribi experience and that of the Genoese, for both of which remarkable sources remain: the Genizah documents of Cairo for the Maghribi and chronicles, notarial registers, and diplomatic documents for Genoa.

The commune and the merchant guild are examples of corporate institutions that evolved in late medieval Europe to provide a basis for modern economic institutions. Genoa outdid Pisa in commercial expansion; its several rival clans were forced to cooperate to face external threats and to use arbiters (the podesteria) to control internal violence. Modeling first, Greif then comments: “History confirms the relationships between an external threat, joint mobility, and commercial expansion that are predicted by the conjecture regarding the centrality and implications of mutual deterrence in the consular system” (p. 234). In regard to the Hansa: “In its constant efforts to preserve trade rights and supremacy, the Hansa crushed the other traders' groups (Greif 1992). Thus a merchant guild that had facilitated trade in the late medieval period was transformed into a monopolistic organization that hindered trade expansion during the pre-modern period” (p. 122).

Greif makes distinctions between European institutions and those of the Muslim world, of which the Maghribi were a part. Collective punishment as a response to cheating proved to be the Maghribi response to the needs of self-regulation. Greif contrasts the bilateral reputation mechanism of the Genoese with the collective punishment of the Maghribis. According to their cognitive system, “a Maghribi merchant is expected to hire only an honest Maghribi agent and to reciprocate in sharing information” (p. 131). The Genoese reputation-based institutions allowed them to hire nonfamily members as agents able to commit ex ante to being honest ex post in keeping with their individualistic cultural beliefs and a predilection to conceal information.

Throughout his study Greif is interested in change and the parameters of change. He is arguing for the introduction of a “historical-process perspective” into “social-science oriented historical research” (p. 156). Desirous of putting aside a deterministic theory of history, Greif asserts, “The historical-process perspective suggests an alternative: history unfolds based on the nondeterministic impact of past institutions on outcomes in general and institutional dynamics in particular” (p. 156).

The book suffers from a lack of nuance, as in the treatment of slavery, which did not disappear from medieval Europe as Greif states. Occasional anachronisms such as the use of the term Holy Roman Empire in an eleventh-century context creep into the text. The assignment of Venetian origin for double-entry bookkeeping would entail more than a passing commentary as proof. In the otherwise interesting development on the perhaps unique European community responsibility system, the policing mechanism of the Champagne fairs—impounding or distraints and “holding every member of a community liable for each member's default in intercommunity exchange”—could have been effectively linked to a treatment of the law of marque (p. 328). The massive bibliography has some notable omissions (e.g., fama). Occasional typos (e.g., pp. 23, 332) and awkwardness of style do not detract from the contributions of the author. Using history and theory, Greif is able to shine new light on European economic developments and to suggest some explanations for European success based on “self-governed, non-kin-based corporations” rather than the role of the state (p. 390). These ideas and his approach should generate considerable future discussion.