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Emergent Recordkeeping Changes the Course of Economic History By Sudipta Basu John Dickhaut1 Gary Hecht Ivo Tafkov Kristy Towry and Gregory Waymire NOTE: This paper is being prepared for submission to a science journal. The rest of the paper reports additional material that would be published online only as a supplement to the print article. This material is included as a separate document. October 24, 2006 Please Do Not Quote 1 Dickhaut is affiliated with the Carlson School of Management at University of Minnesota. All other co-authors are affiliated with the Goizueta Business School of Emory University. We acknowledge financial support of this research from the Carlson School of Management and the Goizueta Business School. Emergent Recordkeeping Changes the Course of Economic History Sudipta Basu(, John Dickhaut?, Gary Hecht(, Ivo Tafkov(, Kristy Towry(, Gregory Waymire( Physical recordkeeping is a deeply rooted and ubiquitous feature of exchange in modern economies. Artefacts from 10,000 years ago reveal a “paper trail” that arose in concert with increases in the scale and complexity of human interaction1-2. Despite recordkeeping’s pervasiveness, no economic theory implicates its necessity for economic exchange. Consequently, no scientific study demonstrates recordkeeping emerges naturally with exchange complexity and little is known about the economic forces unleashed by this simple, and often overlooked, economic institution. We demonstrate experimentally that recordkeeping emerges with complex exchange and then alters fundamentally the history of consummated exchange. A record of exchange serves as a useful mnemonic aid when people exchange repeatedly for several periods in a multi-agent setting. Agents act on better memory of partners’ past cooperation, leading to greater gains from exchange and increased commitment to and fairness in exchange. Ultimately, agents’ economic choices are conditioned on a fundamentally different history o