The main purpose of a guild was to restrict competition. It came out of medieval economics. Think of a village with limited land, people, and money, where not many others come and go. There, the market is finite. Perhaps there 's room for one blacksmith, maybe two, but not three, so the two form guild, and prevent a third. It's wrong for one to cut his prices to the point where the other starves, so prices are maintained. And, of course, both are expected to do their job well, in order to merit protection from their guild. And, though a neighbor couldn't starve, anyone outside the village is left out..

This village is also based on families: an adolescent boy would be apprenticed to , say, a clockmaker, and taken into the clockmaker's home. He would be fed and clothed and taken to church services, and if he became a journeyman, working in the shop every day for wages, he might well marry the master's daughter...or the daughter of another clockmaker. Or, if the master was old, had taken a younger wife quite late, the best journeyman might marry his widow and they would carry on the business. This should not be seen as automatically delightful, of course: abusive and cruel parents existed then as well as now. Compared to modern businesses, families were usually small in size and so to control the competition guilds often limited the number of apprentices a master might take on, and journeymen as well. Naturally, this did not lend itself well to technological innovation, and guilds typically did not encourage people to try to do things in new ways. They resisted the tendency of any business to expand to meet a growing market, and as commerce grew, in the 18th c., guilds became simply overwhelmed. They only had limited power, usually only within a city, and more modern manufacturing techniques, business models and greater linked markets defeated them. You can see markets outrunning the guilds especially in watchmaking, perhaps because watches were both valuable and easy to transport. England, where truly excellent watches were being made, began to send watches to France in the earlier 1700's, and despite French guilds and tariffs, French watchmakers by 1750 were consequently fewer. By then cheaper watches were made in Geneva, and smuggled into France, where French artists and jewelers, superior to Geneva jewelers. might mount the movements in fancy cases. Geneva's guild restrictions, in turn, didn't apply to the poor peasants and farmers of the neighboring Jura, which then developed its own watchmakers, making watches for even less. Meanwhile, in England, watches continued to be made- but competing with Geneva, they were mostly for a limited, very high class market.

David S Landes: Revolution in Time