Memory, Transaction Records, and The Wealth of Nations
51 Pages Posted: 22 Aug 2007 Last revised: 22 May 2014
Date Written: September 21, 2009
Adam Smith hypothesized that impersonal exchange was necessary for a society to develop specialized division of labor and create wealth. Douglass North and Vernon Smith argue that successful developed economies are the result of institutions. We hypothesize and provide evidence from ethnographic data that the basic accounting technology of recording transactions is associated with more extensive impersonal exchange and increased specialization in the division of labor. Our intuition is that extensive impersonal exchange requires reliable memory of trading partners’ past behavior to sustain trust and encourage reciprocity when a group expands beyond the size of traditional hunter-gatherer groups. Our findings are consistent with the hypothesis that transaction records are necessary for the emergence of complex economies as suggested by the archaeological evidence of recordkeeping in Mesopotamian societies 10,000 years ago.
Keywords: Recordkeeping, accounting history, economic development and institutions
JEL Classification: M40, M41, M46, O10, N20, G20, D20
Suggested Citation: Suggested Citation