Money and its institutional substitutes: the role of exchange institutions in human cooperation
Cameron Harwick
Abstract This paper offers an increasing returns model of the evolution exchange institutions building on Smith's dictum that ‘the division labor is limited by extent market’. Exchange are characterized a tradeoff between fixed and marginal costs: effort necessary to execute may be economized up-front ‘investment’ in strategies facilitate publication accounting trading histories. Increases size network select for higher-fixed-cost institutions, beginning with autarky, through various intermediate stages, finally mass monetary exchange. By identifying relevant costs money its institutional substitutes across time, both accounts persistence pre-monetary despite ‘inevitability’ seems feature traditional models origin money, illuminates forces driving transition from one another.
Journal of Institutional Economics