The Bard's Debt to Accountants
Gary S. Robson is
an Associate Professor of Accounting;
J. Wilson Mixon, Jr.
is the Dana Professor of Economics; and
W. D. Sockwell is
an Associate Professor of Economics; all at the Campbell School of
Business, Berry College, Mount Berry, Georgia
"And the winner of picture of the year is ... Shakespeare In Love." Music and applause fill the room as the speakers approach the podium. "I'd like to thank the Academy for its recognition of our work, William Shakespeare for providing such wonderful material, and the accounting profession for making it all possible." The accounting profession? Making it all possible? As Puck put it, "Lord, what fools these mortals be (A Midsummer-Night's Dream, Act III, Scene II)." But, is thanking the accounting profession really such foolishness? Perhaps no more so than recognizing the contributions of Shakespeare.
Genius that he was, Shakespeare did not invent the stories that his plays bring alive. He borrowed them. Especially, he borrowed them from the Italians. The Bard was very much a product of the mass market for printed materials that the printing industry made possible and, one step removed, of modern accounting methods. Italy was not only the region where the printing industry exploded into prominence, it was also where double-entry bookkeeping, the forerunner of modern accounting, was first successful. Since large scale mass production of books relied on modern accounting practices, it will be argued that the Bard's success owed much to the accounting profession.
Accounting in Large Organizations
In her widely-acclaimed Worldly Goods, Lisa Jardine (1996) concludes the Renaissance was a period of intense commercialism and one of spectacular artistic and scholarly achievement. In drawing the connection between commercial achievements and advancing humanism, Jardine shows the central role of the printing industry in the Renaissance. That books are central to the spread of knowledge and of the arts is not a novel point. Rather, the point that Jardine drives home is that printing was much like any other industry, with attention directly to the bottom line rather than to social implications of printing decisions. In doing so, she admirably demonstrates that printing a new book was a complex and expensive endeavor. Quite apparently, just having the technological breakthrough of movable type was not sufficient for printing for the mass market. Several conditions were necessary for such large-scale undertakings, one of which was the orderly processing of information that accounting made possible.(1)
When discussing disarmament talks with the former Soviet Union, President Reagan was fond of stating his motto: "Trust but verify." Absent verification, financial interactions as well as others are limited to the extent that trust or direct oversight is adequate to ensure integrity. Thus businesses would be small, often involving kinship arrangements. As communications and transportation improved, however, the limitations imposed by poor record-keeping became increasingly onerous, since the advantages of larger-scale, specialized enterprises became increasing obvious. The degree of potential specialization, as Adam Smith noted, is limited by the extent of the market. It is also limited by the ability of firms to grow large enough to exploit economies of scale. A.C. Littleton [1981: 9] cites Sieveking as perhaps the first to suggest that "bookkeeping arose as a direct result of the establishment of partnerships on a large scale, a feature of expanding commerce."(2)
Evidently, for mass market printing to enjoy the economies of scale necessary to be successful, accurate information was imperative and some form of accounting was essential.
Another way of thinking about the role of accounting in organizations is to refer to an organization as a set of contracts among agents [Sunder, 1997: 3]. The contracts can be formal or informal and the agents can be individuals or organizations. Simply stated, optimal execution of contracts requires common knowledge; using variables that are not common knowledge enables contention or deception to arise. When everyone knows about an event and everyone knows that everyone knows, conflict and self-interested behavior are reduced. In this model, accounting is a major source of formal information and contributes to reducing deception. Whether we think about accounting as providing a formal means of sharing information or as necessary to keep track of information in increasingly complex organizations, it is clear that as large scale organizations increase their trade, some form of accounting is indispensable.
The Advent of Double-Entry Bookkeeping
Accounting did not spring forth at the time of the Renaissance. It dates back at least to 5000 BC, with formal education in accounting techniques being offered in Babylonia and Egypt. Though accounting declined during the Middle Ages, it revived in Italy during the Crusades. Double entry bookkeeping (later dubbed the "The Method of Venice" though emerging in Genoa) appeared about 1340.
Advances in accounting did not move rapidly to other regions, however. For example, the Cely brothers, London wool and wheat merchants who in 1486 expanded into ship-owning and Bordeaux wine trade, tried to maintain control by summarizing accounts themselves and by insisting on written accounts of their agents. Furthermore, they dispatched George Cely's family servant to act as ship banker and to dole out funds in small increments [Hooper, 1995: 89-90]. In part, the spread of accounting awaited the printing press.
Between the documented use of double-entry bookkeeping and its dissemination through publication, one had to search for knowledge of this important innovation. In 1473, fourteen year old Jakob Fugger was sent from Germany to Venice by his father to learn "Italian accounting" (Jardine, 1996: 320-321). Within a generation, trips like Fugger's had become unnecessary. An explosion of "how-to" books for merchants allowed them to learn closer to home. The writers of such works included prominent mathematicians, notably Luca Pacioli. Pacoli's Summa, illustrated by DeVinci and one of the earliest books printed using movable type, contains several chapters on accounting(3)[(Ainsworth et al., 1996: 3].
Though commonly asserted, it is important to emphasize that the advent of printing fostered the spread of modern accounting procedures. Equally noteworthy is that causation ran both ways: Mass printing faced the same hurdles as large-scale shipping endeavors, and improved accounting facilitated the rise of the large publishing houses that undertook this enterprise. Accounting textbooks proudly tell us that the voyages of exploration could not have happened without accountants. The same is true of the large-scale printing that made Italian literature available to Londoners.
The Sixteenth Century Printing Industry
The early years of the sixteenth century witnessed a transformation in the printing industry. At the turn of that century, high-cost limited editions were the norm. For example, the prominent Venetian printer Aldus Manutius issued the complete works of Aristotle, in Greek, in five volumes. The price was equivalent to a month's salary for a relatively well-paid humanities professor (Jardine, 1996: 135). By mid-century, everything had changed: Printed materials were a technological convenience with printers issuing staggering numbers of new titles annually. Ornamental beauty and typographical accuracy were exchanged for low cost and speed of issue [Jardine, 1996: 160]. As a result of these advances a contemporary observer, Marcus Antonius Sabellicus, in the preface to his early edition of Livy, notes: "The art of printing has with incredible speed crammed not just Italy but the whole of Europe full to bursting with a marvellous wealth of books" [Jardine, 1996: 208].
Achieving this widespread distribution implied massive changes in the printing industry itself. Printing operations were first and foremost businesses, and big businesses at that. Thus, they required the type of internal and external communications that could be had only with the use of adequate accounting procedures.
The business of printing was complex, involving (by historical standards) large supplies of paper, the efforts of many of the period's premier scholars, the acquisition of financial backing, and the development of sophisticated and adaptable distribution networks. In every respect, the business of printing rivaled that of trade as regards complexity and scale.
Insofar as the physical product was concerned, paper was of course crucial. It accounted for about two-thirds of all production costs. The quantities involved made the logistics daunting. Jardine  estimates that paper production for the printing industry was between 2.25 and 4.5 million sheets per day during the sixteenth century. Thus, it is not surprising that a single printer, Jean Crespin and Henri Estienne as examples, would contract to buy the entire annual production of one paper mill [Jardine, 1996: 163].
Acquiring a reliable, affordable supply of paper was just one of the difficulties of maintaining a successful printing enterprise. One imperative was that the printer had to maintain a supply of material to print. Printers sought materials that ranged from the workers of classical authors, in original or in translation, to the original writings by contemporary authors. If the author were an Erasmus, he could make considerable demands on the printer, and could sometimes ignore reciprocal demand with impunity. Indeed, Erasmus appears to have "connived in, or at least turned a blind eye to, the passing of a printed text of a work that was selling well to a printer in another location to extend its market distribution" [Jardine, 1996: 153]. Whatever the relationship between the publisher and a translator or author, it implies a set of managerial difficulties that demands sophisticated accounting.
Another difficulty of the book publisher was that the printing industry utilized a significant portion of the sixteenth century's supply of scholars. An escalating number of university graduates were needed to staff the printing operation--authors, editors, typesetters, proof-correctors, and indexers [Jardine, 1996: 167].
The relationship between the scholar and the printer was in continual flux. By 1520, book production and scholarship had unified and had become less exclusive. Gifted scholars dedicated their labors to a single publisher rather than to a private patron. During the publication process of an edition, a scholar would edit, correct, proof-read and oversee the publication process while the publisher directed the commercial opportunities in mass markets [Jardine, 1996: 227].
Some scholars, notably Erasmus, lamented the ascendancy of printers in the book production industry.(4) Not much more than a century after the first appearance of the printed book, scholars and educators had lost power and influence. "The book took over as the transmitter of European written culture. (Erasmus, writing in 1526, complains that,) 'It is provided by law that no man shall sew a shoe together or make a cupboard, unless he has been approved by his trade guild; yet eminent classical authors, to whose work we owe religion itself, are published to the world by men so ill-educated that they cannot so much as read, so idle that they are not prepared to read over what they print, and so mercenary that they would rather see a good book filled with thousands of mistakes than spend a few paltry gold pieces hiring someone to supervise the proof-reading'" [Jardine, 1996: 228].
Certainly, scholars sharing Erasmus's opinion of printers (and, likely, printers who reciprocated), would lean more toward verification than trust.
The financing of printing operations was from the start an international undertaking. Even before the center of printing moved northward from Venice, printers often sought financing from Swiss and German banking houses. "German merchants from the very outset [considered the printed] book a consumer commodity with enormous commercial prospects and potential for mass marketing" [Jardine, 1996: 318-319]. In part, this recognition is due to the brilliant mathematician Regiomontanus, a native of Nuremberg, who gained the backing of a Nuremberg businessman to establish his own printing house in 1470 [Jardine, 1996: 320].
While financing was often forthcoming from German or Swiss bankers, on other occasions, Italian bankers underwrote overseas aspects of a publishing venture. One such speculative commercial venture occurred in 1475. The Strozzi agents in Venice arranged financing and shipped an entire printed edition of Italian language books to London rather than commissioning individual copies of the book. This venture placed the financial risk on the backers rather than the printer. On February 14, 731 ducats were transferred between the Strozzi and the Agostini bank in Venice for the purchase of 86 bales of paper to print the Italian Pliny [Jardine, 1996: 144-145].(5)
Distributing books was as cosmopolitan an aspect of publishing as financing them. (The two were often intimately intertwined as in the example above.) Advancement in book distribution paralleled that of other consumer goods, with the same remarkable efficiency. "In striking contrast to today, a new book published in Rome in 1500 was available to readers in the Low Countries and England within a matter of weeks" [Jardine, 1996: 319]. Distribution arrangements were flexible and often tailored to the exigencies of the venture at hand, sometimes involving long-term commitments on the part of the parties involved.(6)
Italian Books and Sixteenth-Century London
At least since Boccaccio's Decameron in the mid-14th century provided grist for The Canterbury Tales, Italian literature had influenced that of England. This influence expanded dramatically with the advent of mass-produced books, providing a backdrop for the explosion of literary output that characterizes Elizabethan England, output of which Shakespeare's works form the apotheosis.(7)
The trade in Italian books extended to London and intensified with the move to mass production. In large part, this reflects a political reality. The Tudor dynasty from Wales settled in London, with all Tudor parliaments meeting at Westminster. Moreover, with the church's role as employer diminishing, the court and its patronage became more attractive as a source of employment. As Reese [1980: 70] notes: . [T]o London came the adventurers, the men of ambition, the poets, the country gentlemen with money to spend, the innocents hopeful of enlarging the "small experience" available in their provincial homes. One such innocent, almost certainly, was William Shakespeare.
Part of the "larger experience" for these innocents, of course, was easier access to the literature of the classical world and of contemporary Europe. Such was the milieu into which Shakespeare arrived in 1592. By 1594, he was a shareholder in the Lord Chamberlain's company of players, in whose fellowship he remained until his retirement--a period of about 20 years.
That Shakespeare was well prepared to absorb the material that the London's atmosphere made available is indicated by his grammar school training in Stratford. In 1571, the same year that his father became chief alderman of Stratford, the seven-year old William entered school. By his second year, he would have been drilled in short phrases in Greek and Latin. On this foundation much familiarity would be built:
Many scholars have questioned Shakespeare's familiarity with the classics. In part, this reflects his failure to read systematically. Rather, he read as it served his purpose to do so:
- In his third year, he would take up Cato's Maxims and Aesop's Fables; in his fourth he would begin Ovid and Cicero…. In his fifth and sixth years he would read parts of Virgil, Horace, Terence, Plautus, and the Satirists [Boas, 1969: 99].
There were many sources, in large part, because of the exploding industry of printing.
- When Shakespeare's interest was engaged and the germ of a play was forming in his mind, his curiosity might be inexhaustible, and at times he would lay hands on any book, play or pamphlet that would satisfy it. Originality of thought, or even of phrase, was not expected of him, for the Elizabethans set little store by inventiveness and he was free to plagiarize a speech or a sentence as appropriate a plot. The true originality of his mind lay in the integration of ideas gathered from many sources and in his poetic gift of seeking new-found resemblances and expressing them in memorable verse [Reese, 1980: 273].
As a whole, the Bard was very much a product of the mass market for printed materials and, one step removed, of modern accounting methods. So the boisterous atmosphere so well depicted in Shakespeare in Love owes much to those we often caricature as gnomes wearing green eye shades. Who'd have thought?
1.Jardine  does document the rise of double-entry bookkeeping--"Italian accounting" or "the Venetian method." She does not emphasize its centrality to the undertaking of large-scale enterprises like voyages of discovery or mass-market book distribution.
2. Littleton  goes on to suggest that accounting principles did not change dramatically from the time they were first published in the late fifteenth century until there was another large increase in firm size and complexity in the nineteenth century.
3.Luca Pacioli, Summa de Arithmetica, Geometria, Proportioni et Proportionalita [Mathematical Compendium, 1494].
4.Others, notably, Dürer found the new methods most congenial.
5.The 731 ducats roughly equals five times the annual salary of a well-paid humanities professor. A master mason might make between 50 and 100 ducats per year.
6.The Strozzi venture cited earlier provides an example of how distribution arrangement were fit to the occasion. "[T]he small number of copies of Pliny sent off to London [in 1475] were in the end 'spin-off' from a large-scale publishing adventure, a partnership between the financier who had spotted the opportunity, close associates of his in the business world, and the printer who provided the technology and the skills, but did not have the resources to carry the commercial risk" [Jardine, 1996: 145].
7.Italy was the preeminent source of the literature that influenced the Elizabethans, but authors from elsewhere had their impact. For example, German legends that took their literary form in the Volksbuch, published in Frankfurt, provide Christopher Marlowe the materials for Doctor Faustus [Boas, 1969: 45]
Ainsworth, Penne, Dan Deines, R. David Plumlee, and Cathy Xanthaky Larson (1996) Introduction to Accounting: An Integrated Approach. Chicago: Irwin,.
Boas, Frederick S. (1969) Shakespere and His Predecessors. New York: Greenwood Press. [London: John Murray, 1896]
Hooper, Keith. "The Cely Shipping Accounts: Accountability and the Transition from Oral to Written Records," The Accounting Historians Journal, Vol. 22, No. 2: 85 - 115.
Jardine, Lisa (1996) Worldly Goods: A New History of the Renaissance. New York: Doubleday.
Littleton, A. C. (1981) Accounting Evolution to 1900. University, Alabama: The University of Alabama Press. [New York: American Institute, 1933]
Reese, Max Meredith (1980) Shakespeare, his world and his work. New York : St. Martin's Press.
William Shakespeare, A Midsummer-Night's Dream.
Sunder, Shyam (1997) Theory of Accounting and Control. Cincinnati: South-Western.