| The payments mechanism of colonial New England was more complex and sophisticated than the existing literature suggests. Merchants and consumers participated in an intricate payments system that used a variety of payments media, including cash, goods and credit. The payments system challenges the traditional view of transactions development: that individuals began with primitive barter relationships and moved to cash and then credit. Barter, cash and credit were fungible in colonial New England. Merchant account books provide evidence about this system as well as the means of payment. One instrument in particular, book credit, is especially important. Book credit made possible a wider amount of transactions than otherwise by the recording of purchases and payments in an account book. Despite the importance, the existing literature fails to subject the characteristics of book credit, its duration and interest rate charged, to serious empirical testing. We model book credit using Hajnal's (1953) technique, also known as the singulate mean age at marriage, arriving at precise estimates for credit length, and show book credit to be a long-term credit instrument. Regression methods provide the model for the cost of book credit, showing interest to be part of the per unit price charged at the beginning of the transaction. The results point to the need to reevaluate the existing view of economic life in the eighteenth century and the traditional view of transactions development over time, in the colonies and elsewhere. Book credit improved the overall efficiency of payments in New England, overcoming potential frictions caused by insufficient amounts of cash and the associated costs of barter. |
