How people branded their wares during industrial revolution

What a paper from Gary Richardson of UC Irvine. Various facets and findings of economic history remain amazingly fascinating.

In this paper, author  looks at how people branded or assured people of their products’ quality during industrial revolution. Commerce surely prospered minus the brands/copyrights we have today. How was this done? Moreover, there was huge concern then over copying and poor quality and there was no legal mechanism by which producers could sue imitators and consumers could not sue producers for poor quality and mis-sellling.

The author says guilds/manufacturing associations was the answer:

Manufacturers formed cooperatives now known as manufacturing guilds. Members of these associations lived in the same town, worked in the same industry, and sold standardized products. These artisanal alliances operated in most towns and industries. Guilds specialized in the production of particular products. Successful guilds produced quantities far beyond local or regional needs and exported ever-increasing quantities from their hometowns to rural villages, distant towns, and foreign nations. Guilds from distant towns competed against each other in those markets, where the preponderance of the population lived and where guilds sold most of their merchandise.

These guilds did two things. First ensure guild members stick to quality and second make products with some unique stuff:

Medieval manufacturing guilds, this essay argues, employed a two-step technique to cure the twin afflictions of adverse selection and counterfeit goods. Step one involved intensive efforts to control quality. Guilds of manufacturers inspected members’ merchandise, prohibited sales of shoddy products, and punished members caught selling defective output. These efforts enabled the organizations to consistently sell defect-free merchandise and establish reputations for doing so. Good reputations assuaged consumers’ fears about purchasing products with hidden defects and encouraged consumption of manufactured merchandise. 

Step two involved selling merchandise with conspicuous characteristics. Examples of these unique, observable traits included cloth of a distinctive color, fabric with an unmistakable weave, and pewter which when tapped with a spoon resonated at a particular pitch. These attributes identified merchandise made by particular guilds because consumers could observe them readily, legitimate manufacturers could produce them inexpensively, and counterfeiters could copy them only at great cost if at all. Guilds maintained a cost advantage by keeping manufacturing methods secret, using techniques that required local resources, and selling merchandise whose manufacture required significant investment in specialized equipment. The uniqueness of conspicuous characteristics communicated reputations from producers to consumers.

The author then takes you onto an exciting journey in ind. rev. when different products were sold. He explains what were the issues with each products and what people were concerned with. For instance, durability was a big concern and people were not sure whether the product they buy will serve them longer. Most products like jackets etc formed large share of annual income and hence durability was a serious concern. There was huge info asymmetry with only sellers knowing their products. People were not educated to differentiate etc.

Medieval markets for manufactured merchandised possessed the six precursors of adverse selection. First, manufactured merchandise had attributes that consumers could not observe before purchase such as durability, safety, and effectiveness. Examples abound. Leather’s life span depended on its water content.Steel’s strength depended on its carbon content.13 Gold’s value depended on the ratio of precious to base metal in its alloy. Furniture’s durability depended on the materials used in its construction. Chairs and chests made with unseasoned wood warped, split, and cracked. Cloth’s longevity varied with the length of its fibers, the thickness of its thread, the density of its weave, and the chemical composition of its coloring. Inexpensive dyes
ran in the rain and faded in the sun. Fabric impregnated with wool-processing chemicals gave its wearer an itchy rash.

Second, ordinary men and women could not afford to replace defective purchases.

Purchasers alone bore the consequences of defective purchases, because of the third characteristic of
medieval markets. People who purchased defective merchandise had few remedies.

Anxieties included safety, effectiveness, comfort, and resale value. Product failures could have catastrophic consequences.

Consumers also lacked the ability to retaliate against sellers of defective wares. Men and women rarely knew who made the products they purchased.

The guilds helped lower this info asymmetry.

To facilitate searchers’ efforts, most guilds prohibited work after dark, when – as many ordinances asserted – mistakes could be more easily made and deceitful practices more easily concealed. Many guilds also required members to set up shop in the same neighborhood and keep an eye on each other’s work. Personal relationships among members probably facilitated enforcement. Members attended the same church and gathered frequently for feasts and festivities. They were friends, colleagues, and relatives. Such close contacts must have made it difficult for one guild member to deceive another.

Members caught selling shoddy products were subjected to an escalating series of punishments. Firsttime offenders were punished lightly and repeat offenders harshly. Punishments varied from guild to guild, of course. Typical guilds confiscated first-time offenders’ shoddy products, forced second-time offenders to pay monetary penalties, and expelled third-time offenders from the organization. Expelled members lost the business benefits of guild membership and much more. They lost friends, colleagues, and access to their guild’s social services. All guilds held frequent feasts, festivals, and gatherings. Most hired priests, financed parishes, supported the poor, buried the dead, prayed for the salvation of members’ souls, opened schools, staged plays, extended credit, established liveries, participated in public processions, insured members against the risks of everyday life, and provided social standing in class-conscious medieval society. Fear of loosing these fringe benefits was the glue that held guilds together. 

This guilds system was hugely successful in building reputations. You still associate many products from a region for its quality:

Well-known examples demonstrate that some guilds successfully established reputations for consistently selling high-quality merchandise. For example, in the second half of the fourteenth century, London’s guild of pewterers, developed a European-wide reputation for selling pewterware with a low lead content.

Additional examples abound. In medieval England, everyone knew clothmakers in Beverly, Coventry, Colchester, Kersey, Lincoln, Norwich, Oxford, Salisbury, Stamford, Winchester, and York sold superior cloth. Weavers in York made moderately priced, durable woolens. Weavers from Norwich sold durable worsteds. Clothmakers from Salisbury sold well-made woolen rays. Artisans from Shrewesbury sold fine flannel. York’s armorers’ sold sturdy chain mail. London’s armorers’ assembled rugged plate armor from imported Italian steel plates. The most durable canvas came from Newcastle. Wire drawn in Coventry was the most malleable in the realm. Other well-regarded products included Bristol’s leather goods, Gloucester’s iron, Hanley’s pottery, Shrewesbury’s furs, Haverford’s gloves, Lincoln’s scarlet, Stamford’s hauberge, Beverly’s burnet, Aylesham’s linen, Colchester’s russet, Corfe’s marble, Lincoln’s scarlet, Pontefract’s bows, and Thaxted’s knives. Similar examples come from the continent. Good white wine came from Champagne. A tasty cheese came from Parma. 

Some of them still remain and we have what we now call as Geographical Indications. Read the paper, there are many such examples where you use the product along with the region. This became the brand name and even included in disctionaries now:

Lexicographic evidence indicates ordinary individuals uttered type-town names in everyday speech at least as often as merchants wrote type-town names in mercantile records. Linguistic research reveals a persuasive pattern. Many type-town names evolved into modern words. An example is worsted. Worsted originally meant fabric woven in the parish of Worsted, England. Later, it meant fabric woven anywhere in the Worsted style. Today, it means a woven wool cloth with a smooth, hard surface. Worsted’s metamorphosis from town name to product type to modern word occurred for the same reason Kleenex means facial tissue and Xeroxing means copying.

Names of popular products become associated with similar products made by other manufacturers, acquire broad connotations, and enter the vernacular. Other modern words descended from medieval product names include cordovan (from Cordoba, Spain), drab (from Drab-de-Berry), pistol (from Pistoia, a town in Tuscany), muslin (from Mosul, Persia), and the names of innumerable fabrics, wines, cheeses, and preserved meats. The definitive English-language source on this topic is the Oxford English Dictionary. It indicates that before the end of the sixteenth-century, the names of 14 English towns became bywords for types of cloth. The names of 3 English towns became bywords for types of cheese. The names of other English towns

Simply superb…

Finally some major lessons. The paper explains Smith’s claims of how commerce prosperd in ind. Rev:

This argument’s implications become clear when one considers Adam Smith and Henry Pirenne’s dictum that the expansion of long-distance trade propelled economic progress before the Industrial Revolution. According to the Adam Smith, the division of labor increased output per worker, because specialization allowed manufacturers to do what they did best, enabled workers to engage in particular tasks, created economies of scale, encouraged investment in product-specific skills and machinery, and focused inventors on particular problems, rather than dissipating creative energies on an array of ill-defined and unrelated tasks. Combining Smith’s paradigm and this paper’s hypothesis – that manufacturing guilds served as branding mechanisms – yields a clear conclusion. By mitigating adverse selection and fostering commerce, guilds encouraged economic progress.  

The study solves couple of riddles:

  • Why certain activity was centered around certain towns.
  • Why despite diseconomies of scale and scope  (as cities had limited guilds) things still went off well. The reason is because f guilds, producers earned brand premium which helped them keep high costs of production
  • Why certain towns flourished and others died. Cities that flourished were ones which could discover and replete unique resources
Then there is some superb implications for patents industry. Patents are praised for protecting innovations and encouraging them. However, guilds as brands show it was possible without having patents. Patents have helped via 4 other channels:
  • One was by shifting the costs of enforcing intellectual property rights from the private to the public sector. In the world before patents, manufactures invested time and money to create goods with unique, observable attributes. In modern economies, governments bear the costs of protecting reputations and innovations. The judiciary prosecutes counterfeiters. Criminal courts compensate victims of counterfeiting. Entrepreneurs need not invest large sums in conspicuous characteristics.
  • A second channel was the time-profiles of profits from innovation. In the world before patents, returns from inventive activity accrued over long periods. Profits from successful innovations, conspicuous characteristics, and respected reputations accrued over generations. The ability to capture intergeneration returns may have been a principal reason that guilds formed the nexus of innovation and commerce before modern times. Since the creation of patents, returns from innovation accrue for limited periods, usually 14 years or less. Front-loading revenues makes innovation more attractive to individuals, families, and firms with limited life spans, which have been the nexus of commerce and innovation in the modern era.
  • A third channel was by changing the types of intellectual property that could be protected. In the world before patents, protection existed only in industries with natural or technical barriers to entry. After the establishment of patents, intellectual property could be protected in industries without innate barriers.
  • A fourth channel was by transforming private information into common knowledge. In the world before patents, innovators strove to keep ideas to themselves. Success at keeping secrets enabled entrepreneurs to earn large returns from exclusive markets. Technology often disappeared when bad luck beset those who held key pieces of information in their minds. Today, to receive a patent, an inventor has to describe an idea, what it does, and how it works.
Further, it contributes to three more areas of research:
  • The first investigates the foundations of impersonal markets and the origins of anonymous exchange.
  • The second school of scholarship examines the role of cooperative institutions in the early stages of industrial development and sectors plagued by information and incentive programs
  • The third field of literature studies methods of marketing merchandise when protections for intellectual property are lax or nonexistent.
On third he says, like guilds countries/people have tried to prevent counterfeit trade using technologies. Best example is money:

This method is already used for the world’s most important commodity: money. Governments go to great lengths to prevent counterfeiting of currency. The United States Treasury recently redesigned the five, ten, twenty, fifty, and one-hundred dollar bills. New security features complicate duplication of these denominations, making it easier for cashiers and consumers to distinguish real bills from fake funds. The security efforts of countries around the world often dwarf those of the United States. Latin and Asian nations revise currencies frequently. European nations and former British colonies use multiple colors, metal security threads, and miniature holograms. Whether these methods may be applied to other industries depends on cost conditions.

Just amazing. A paper having so many insights is difficult to write but is such a pleasure to read…

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