Adam Smith Blog

Was Luca Pacioli overrated?


One of my favourite chapters in Fifty Things That Made The Modern Economy (UK) (US) is on double-entry bookkeeping. You can read a briefer adaptation of the chapter on the BBC website. Luca Pacioli, Renaissance mathematician admired by the likes of Leonardo da Vinci, is one of the stars of my story. I have read in various places that Pacioli invented double-entry bookkeeping (I won’t embarrass the authors by naming names) but this isn’t true, as I write:

Pacioli is often called the father of double-entry bookkeeping, but he didn’t invent it.

Why, then, give Pacioli a starring role? Because of his grand treatise:

Summa de Arithmetica, Geometria, Proportioni et Proportionalita was an enormous survey of everything that was known about mathematics – 615 large and densely typeset pages. Amidst this colossal textbook, Pacioli included 27 pages that are regarded by many as the most influential work in the history of capitalism. It was the first description of double-entry bookkeeping to be set out clearly, in detail and with plenty of examples…. His book enjoyed a long print run of 2,000 copies, and was widely translated, copied, and plagiarised across Europe.

Pacioli, then, did not invent double-entry bookkeeping but we can trace its influence to his work. Or can we?

Professor Jacob Soll, author of The Reckoning (UK) (US) writes to suggest that I dig deeper. For one thing, was a 2000-copy print run really so impressive? Accounting caught on in England and Holland, but was Pacioli the source? Prof. Soll writes in an email:

The accounting section was extracted and transcribed, but often changed and not attributed to him.  It is more likely than Jan Ympyn’s book was the actual version that fell into the hands of Englishmen and Germans who went to Holland to literally learn complex capitalism. When industrial capitalism rears its head in Britain around 1706, the British manuals are the ones that are the basis of the revolution.  Did they come from Pacioli?  Possibly, a little?  By that time there were so many Dutch manuals and the great accounting teachers were Dutch and then low Churchmen…  It was only later, as historians tried to date these things, that Pacioli is named the father of the tradition.

Richard Dafforne’s English-language guide to accounting, from 1636, credits the Dutch as his influence.
Moving on from Pacioli to the foundation of management accounting techniques, another loyal reader, Greg Finch, writes:

I hadn’t previously been aware that Josiah Wedgwood used his accounts as a basis for improving his business. However, now I become one of those correspondents who -perhaps irritatingly- disputes one of your points. Doubtless many did follow what they saw Wedgwood doing but I don’t believe management accounting started with him. In Northumberland merchants turned lead miners/processors were using unit cost analysis drawn from their accounts to decide on where to locate smelting mills and to seek cheap sources of ore at least as early as 1680, and had already put in place quantitative ‘KPIs’ they expected managers to report on regularly. I don’t claim this was where it started either -though I am finding Newcastle and the north-east was an interesting hotbed of developing business practice at the time…

My sources included Jane Gleeson-White’s Double Entry (UK) (US), the BBC’s ten-part Brief History of Double-Entry Bookkeeping (which alas is not currently available), and William Goetzmann’s Money Changes Everything (UK) (US). Professor Soll points me towards an authoritative source that I had missed, B. S. Yamey’s Scientific Bookkeeping and the rise of Capitalism.  One of the joys of this project is that I keep on learning.

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