There appears to be an upper limit on the size of a group that can be cooperatively organized by the principles of kinship, descent, and marriage, the “integrating” mechanisms characteristically at the disposal of primitive peoples.#
This paper offers an increasing returns model of the evolution of exchange institutions building on Smith’s dictum that “the division of labor is limited by the extent of the market”. Exchange institutions are characterized by a tradeoff between fixed and marginal costs: the effort necessary to execute an exchange may . . .