Could the crown credibly commit to respect its charters? England, 1558–1640

This chapter offers a twofold shift in the application of the ‘credible commitment’ concept laid down by North and Weingast (1989). It examines the concept in the context of charter-granting, rather than in that of the national debt and the government bond market, and applies the concept to the pre-Civil War period, rather than the post-Glorious Revolution period.Standard analytical frameworks.Since the 1950s, the classic economic theorisation of charters has been within the frameworks of regulation, public choice, and rent-seeking. Under these frameworks entrepreneurs are conceived as buyers. The crown or the state, or their agents, are perceived as sellers. The charter is the regulatory good being sold (Buchanan 1968; Stigler 1971, 3–21). Buyers are willing to pay for charters as part of their rent-seeking activity (Krueger 1974, 291–303). They particularly aim at the monopoly provided by the charter, which allows entrepreneurs to add a monopolistic rent to the free-market price of goods imported into England. The payment that entrepreneurs are willing to make to the crown for a charter depends on the expected value of monopoly rents over the lifetime of the charter. The better a group of merchants can organise to lobby the crown for the regulatory product it wishes to buy, the more likely it is to win in competition against other bidding groups. The smaller and more coherent the group, and the more it is based on pre-existing organisational infrastructure and the like, the more likely it is to be better organised and better able to solve free-rider problems (Olson 1971; Olson 1982; Miller 1989, 83–132; Macey and Miller 1991, 347–98).