Business History Review 85 (Spring 2011): 9–37. doi:10.1017/S0007680511000018 © 2011 The President and Fellows of Harvard College. ISSN 0007-6805; 2044-768X (Web). A Mark Casson and John S. Lee The Origin and Development of Markets: A Business History Perspective The origins of the market are obscure, but substantial docu- mentary evidence survives from the eleventh century on- ward, when chartered markets and new towns were estab- lished across Western Europe. The expansion of the market system is important for business history because it created new opportunities for business growth. There has been no systematic literature review on market evolution since Henri Pirenne and Raymond de Roover, and this article attempts to fill the gap. It shows that successful markets were regulated— often by civic authorities—to maintain a reputation for rea- sonable prices and quality control. Markets were located at both transport hubs and centers of consumption, even when the latter were quite remote. However, as transport and com- munication costs declined, shakeouts occurred and only the larger markets survived. ccording to Adam Smith, “The division of labour is limited by the extent of the market.” 1 The market is the key to specialization. Firms cannot specialize in particular product lines, or particular stages of production, if they cannot sell a sufficient quantity of their output. It is the growth of the market that facilitates both the emergence of new production methods and the growth of the firms and industries that ex- ploit these methods. The market does not just allocate resources—it stimulates innovation too. The market is an arena of competition. In a market where entry is easy, monopoly power is eroded by the entry of competitors. Even in The authors thank Adrian Bell, Janet Casson, James Davis, Peter Scott, James Walker, and Margaret Yates for incisive comments on an earlier draft. They particularly thank Rich- ard Hoyle for providing the initial impetus to write this article and for invaluable comments on which they have freely drawn; and the editors of Business History Review, who were very supportive in encouraging the submission of the article for peer review. 1 Adam Smith, Wealth of Nations, Glasgow edition (Oxford, 1976), 34.