THE RATE OF PROFIT IN THE VENETIAN TRADE IN THE FIRST HALF OF THE FIFTEENTH CENTURY

This paper addresses the issue of profitability in the medieval Venetian trade by discussing various methods employed to determine the rate of profit on the basis of the incomplete, sparse, heterogeneous, and often poorly structured quantitative data available from the first half of the 15th century. One possible approach originates in the idea proposed by Adam Smith that the market rate of interest can serve as a rough indicator of the profit rate and that the ordinary proportion between these two variables is approximately 1:2. Insofar as in medieval Venice, the forced loans levied by the Republic were the most common and widely accepted form of interest-bearing credit, the average profit rate deduced under these assumptions would be within the ranges of either 6 to 10% or 10 to 20% depending on whether the coupon yield or the current yield on government bonds was taken as a point of departure. In the second half of the paper, the author aims to test this hypothesis with empirical data from the account book best known as the libro real nuovo of the Soranzo fraterna (1406–1434) and belonging to a family partnership of Venetian merchants, brothers Donado, Giacomo (Jacopo), Piero, and Lorenzo Soranzo. The average profit rate in the commercial operations of their firm was calculated as the percentage ratio of operating profit to the total of sums invested in trade, the latter variable being computed in two alternative ways, that is, relying on the turnover of either merchandise accounts or voyage accounts. The resulting rate of return amounted to either 9,64 or 9,98%, which is generally consistent with the implications of Smith’s hypothesis and points to a rather moderate estimate of profitability in the 15th-century Venetian commerce.

Venice, Venetian Republic, the Middle Ages, history of trade, profit, rate of profit, accounting history, the Soranzo fraterna, State Archives of Venice, Adam Smith