This article presents a model of the transformation of the Central European economy between the years 1000 and 1800. On the basis of assumptions about the social environment, the actors, and the relations between them, deductions are made that are compared to actual historical developments. The model explains why competitive markets emerged in the high Middle Ages, why anti-competitive corporations and states developed in the period up to the seventeenth century, and why institutions safeguarding market exchange began to be introduced in the course of the eighteenth century.