Cause and effect: ancient trade and development

By Paul Walker 26/09/2013

In a previous post on the history of globalisation I quoted from Elhanan Helpman’s book Understanding Global Trade. With regard to long-distance trade Helpman noted just how ancient trade is,

While long-distance trade plays an essential role in modern economies, it was also a salient feature of economic development after the Neolithic Revolution, as hunter-gatherers evolved into sedentary societies that specialized in food crops. The importance of trade further increased with the emergence of cities and early civilizations. Caravans traveled along the Fertile Crescent, trading between Mesopotamia and the Levant, and trading routes expanded over time to distant parts of Asia and Europe.

With regard to a later period Silver (1995: 67) notes that

“Large commercial houses flourished in Babylonia from the seventh to the fourth century. The House of Egibi, for example, bought and sold houses, fields, and slaves, took part in domestic and international trade, and participated in a wide variety of banking activities.”

Thus trade is an old human activity. But given that it is, what is the relationship between trade and economic development even in the earliest times. Did hunter-gathers become farmers because of trade or was trade the result of a more sedentary society? Did cites and civilisations cause an increase in trade or did increasing trade cause cites and civilisations? What is the cause and what is the effect?

As to the development of farming we know that farming is an ancient human activity:

“The first clear evidence for activities that can be recognized as farming is commonly identified by scholars as at about 12,000 years ago [ …]” (Barker 2006: 1).

Tudge (1998: 3) writes

“I want to argue that from at least 40,000 years ago − the late Palaeolithic − people were managing their environments to such an extent that they can properly be called ‘proto-farmers’.”

But what was the relationship between farming and trade in these times. Ofek (2001: chapter 13) argues that agriculture developed with a symbiotic relationship with exchange/trade. There is a conflict between the fact that we specialise in production but diversify in consumption. This conflict is reconciled by redistribution, i.e. via exchange/trade. Ridley (2010: 127-30) goes further and argues there would be no farming or cities and civilisation without trade, that trade was a precursor to both:

“One of the intriguing things about the first farming settlement is that they also seem to be trading towns. [ …] it is a reasonable guess that one of the pressures to invent agriculture was to feed and profit from wealthy traders − to generate surplus that could be exchanged for obsidian, shells or other more perishable goods. Trade came first” (Ridley 2010: 127).


“To argue, therefore, that emperors or agricultural surpluses made the urban revolution is to get it backwards. Intensification of trade come first. Agricultural surpluses were summoned forth by trade, which offered farmers a way of turning their produce into valuable good from elsewhere. Emperors, with their ziggurats and pyramids, were often made possible by trade. Throughout history, empires start as trade areas before they become the playthings of military plunderers from within or without. The urban revolution was an extension of the division of labour.” (Ridley 2010: 163-4)

So in this line of reasoning, trade is not a result of economic development it is one of the causes of farming and civilisation. Trade extended the size of the market, a larger market makes greater specialisation and an increased division of labour possible and this, as Adam Smith would argue, leads to greater production and wealth. Smith wrote in The Wealth of Nations,

This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no extensive utility; the propensity to truck, barter, and exchange one thing for another.

And the rest is, as they say, history.


  • Barker,Graeme (2006). The Agricultural Revolution in Prehistory: Why did Forages Become Farmers?, Oxford: Oxford University Press.
  • Ofek, Haim (2001). Second Nature: Economic Origins of Human Evolution, Cambridge: Cambridge University Press.
  • Ridley, Matt (2010). The Rational Optimist: How Prosperity Evolves, New York: HarperCollins Publishers.
  • Silver, Morris (1995). Economic Structures of Antiquity, Westport Connecticut: Greenwood Press.
  • Tudge, Colin (1998). Neanderthals, Bandits and Farmers: How Agriculture Really Began, New Haven: Yale University Press.