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
Introduction
"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 [1996] 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?
Footnotes
1.Jardine [96] 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 [1981] 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]
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