Without language, we might be much more akin to discrete Cartesian ‘inner’ minds, in which high-level cognition relies largely on internal resources. But the advent of language has allowed us to spread this burden into the world. Language, thus construed, is not a mirror of our inner states but a complement to them. It serves as a tool whose role is to extend cognition in ways that on-board devices cannot. Indeed, it may be that the intellectual explosion in recent evolutionary time is due as much to this linguistically-enabled extension of cognition as to any independent development in our inner cognitive resources.#
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 . . .