Egbert Koops, Price Setting & Other Economic Controls in the Roman Economy
Rome’s 'economic liberalism', the state tried to influence supply and demand through spending, monetary controls, taxation, production incentives, but accepted the resulting prices as necessary..
In his chapter on Price Setting and Other Attempts to Control the Roman Economy published in 2016,
Egbert Koops wrote:
Chapter 46
Section 3
Formation of Market Prices
A developed economic theory was absent in the classical world, but it should come as no surprise that more than a basic awareness of market operations existed, even if rising prices were often blamed on profligates and profiteers for moral reasons.
Tacitus’ analysis of the financial crisis of 33 AD may serve as an example. Some moneylenders had supplied money at usurious rates, in defiance of a law issued by Caesar to regulate moneylending and property-owning in Italy. They were denounced to the senate, which decided to enforce Caesar’s law but give the moneylenders—many of them senators—an eighteen-month indulgence to set their affairs in order. The result was a credit crunch. Hoping to restore the flow of money, the senate decreed that every creditor had to invest two thirds of his currently outstanding claims in Italian land. But fearing that defaulting debtors would leave them unable to meet this obligation, creditors called in the full amount of debt to buy land. This led to a general panic, court cases and foreclosures, leading in turn to too much land and not enough money on the market, falling land prices, and further defaults and ejectments.
In the end, Tiberius had to assuage the crisis by slashing interest rates to 0 per cent for the next three years and injecting 100 million sesterces into the economy, which slowly restored trust until private lenders reappeared (the story is not without earlier or later parallels).
Trial and error led Augustus and subsequent Roman emperors to arrive at an almost Keynesian approach to economic crises, by a mix of currency depreciation (the classical equivalent to deficit spending) and increased government expenditure. Less complex examples may be found as well. According to Dio, so much money entered the city following Augustus’ conquest of Egypt in 30 BC that prices soared and loans were taken at a third of the usual interest rate. And the agronomists stress the importance of nearby markets and means of transportation in the selection of crops and farm localities, as well as the effects of cyclical price fluctuations, which in turn led the Roman jurists to produce complicated agricultural contracts, selling or pledging the produce in advance. …
… The “embedded” nature of the essentially regional Roman economy, whether embedded in “overriding values” or the “networks of the Bazaar”, is commonly set against the fluidity of capital, labour and (some) transportable goods, as well as the degree of monetisation and the institutional flexibility offered by Roman law, to argue either for or against the existence of integrated markets and a market economy. At least for high-value, transportable commodities such as slaves, most interpretations favour the existence of an integrated market. In this context, it should be noted that the Roman state directed traffic through a differentiated structure of tariffs and customs, even going so far as to encourage integration with the Italian market by abolishing customs dues on goods coming into Italy. Tacitus indicates that transaction costs were indeed passed on, stating that Nero remitted the sales tax on slaves in name alone, as it was now imposed on the vendors who raised their prices accordingly.
Prices were generally not set by state intervention but by the forces of supply and demand. Apart from Diocletian’s Edict on Maximum Prices [later section], by far the best price series come from the papyri uncovered in Roman Egypt. As [Dominic] Rathbone notes, “the prices in private sales seem, on the whole, to be ‘real’ prices arrived at individually by market bargaining rather than being standardised, customary or notional prices”. This is, of course, not to say that all bargaining happened on equal terms. Asymmetrical information and differences in status influenced bargaining power, as always, and so the jurist Paul warns that it is “naturally” allowed to buy what is worth more for less, and sell what is worth less for more, and generally for parties to a transaction to run rings around one another. As a legal norm, the bona fides coloured the performance of contractual duties rather than the formation of the contract, and as long as two capable and consenting parties bargained for a licit end, in proper form and in the absence of mistake, fraud or duress, the contract would be upheld. …
… Fair dealings in the market place were supervised by the aediles, who checked measures and weights and had jurisdiction over complaints concerning slaves and cattle. They could offer rescission or price reductions in case of defects, the latter of which involved an appraisal of the value of the defect thing and a comparison to the notional value of the same thing without this particular defect. The aediles were particularly suited to such appraisals because of their knowledge of the prices regularly realised at market. No evidence has come to light, but they (or the agoranomoi) may have kept lists of current prices …
… Politically even more important was the constant and adequate supply of grain to Rome. The existence of grain distribution, for free after the lex Clodia (58 BC), was a major attempt to control the economy, as well as a major strain on state resources. Considering most of Roman history, the political reasons for this intervention speak for itself. The state’s default position appears to have been that it acquired most of its grain from Imperial estates and through taxation in kind, and bought additional grain from private suppliers at current prices. The state did not maintain large public grain fleets, with concomitant expenses and risks, preferring to offer private transporters citizenship, subsidies or immunities as an incentive. In general, it seems that the emperors trusted market forces to supplement and transport the public supply, and took incidental action through subsidies or maximum prices. …
Price-gouging and price-fixing by cartels or private individuals may or may not have been problematic. The avarice of profiteering and stockpiling merchants is a common literary topic, and the Flavian municipal law of Irni explicitly forbids such practices … In practice, though some stockpiling is necessary in any agrarian economy to cushion against crop failure, it seems likely that most farmers followed the annual production cycle, preferring certainty to speculation. The Roman state stockpiled grain for political reasons, so that Germanicus could lower prices in a time of need by opening the granaries, while Nero restored confidence during a panic by throwing spoiled grain into the Tiber, signalling that the state had stocked enough to waste a little.
Some private price-fixing was sanctioned by the state, since the regular way of pricing state contracts was to auction them for a set period of time to the highest (taxes, goods) or lowest (construction) bidding company. Tax collectors would become so inflamed with bidding frenzy, according to Paulus, that they should only be allowed the contract if they provided sufficient security. Other monopolies were lucrative as well. Pliny mentions red lead from Hispania and balsam oil from Judea, with prices fixed under the auction contract. The societas made its profit by adulterating the product and reselling it for over three times the amount paid to the state. One may wonder whether the publicity of the auction process always led to the best price. Caesar mentions that the Gaul Dumnorix won tax contracts for a low price because no one dared to bid against him, and the triumvirs used a similar strategy of intimidation after their victory in the Civil War. Yet the auctions were announced and transacted publicly, as the dossier of the Pompeian auctioneer Caecilius Iucundus shows, and they appear to have been a popular method of arriving at reasonably transparent and efficient prices.
The choice to auction state contracts was hardly influenced by such notions though, but rather by the fact that the Roman state initially had neither the manpower nor the inclination to oversee operations. This changed over the course of the Empire. The growth of an Imperial administrative service pushed out some forms of tax-farming, and as more and more economic power fell into the hands of Imperial agents, the state and the Imperial fiscus increasingly took an interventionist approach. This process was no doubt hastened from the outset of the Antonine plague by a succession of misfortunes that is loosely described as the crisis of the third century.
Under such circumstances, interventions by benevolent emperors came to be regarded as a positive stabilising influence. An example is a story told of Alexander Severus in the late-fourth-century Historia Augusta, which may carry an echo of Diocletian’s Price Edict.
When petitioned to lower the price of pork and beef, the child-emperor purportedly refused, but forbade the slaughter of sows, suckling pigs, cows and calves until so many had been born that oversupply corrected the issue.
In contrast, around 110 AD Trajan forbade Pliny to force unused state funds upon lenders unwilling to accept a 12 per cent interest rate because they could borrow privately on better terms, but insisted that Pliny should lower the interest rate until enough borrowers were found. Similarly, Hadrian stated that government leaseholders should not be forced to take up unprofitable contracts that remained unsold at auction. In all, barring exceptional cases of expropriation or the forced sale of maltreated slaves, the Roman state seldom intervened in the freedom to enter—or not to enter—into a contract for a certain price …
Section 5
Diocletian’s Interventions
The jurists left the question of unjust prices to the orators because, absent fraud, questions of commutative justice had little relevance to the validity of the contract. However, once the aedilician remedies were expanded to include contracts other than the sale of slaves and cattle, what constituted fraud became increasingly important. It is perhaps in this context that Diocletian’s chancellery issued the famous constitution on iustum pretium of 285 AD, containing two innovations, about which, countless words have been written since the reception of Roman law. First, the seller of land (and only he!) could ask for additional payment (or rescission) in case of grave disadvantage; second, the constitution established a standard of proof for unjust prices, which were presumed to start at less than half the “true” price.
Since it threatened all buyers of land for less than this minimum with an obligation to pay the remainder, the constitution forms an attempt to nudge the price of land by influencing private negotiations. Perhaps such indirect control was possible in 285 AD, when “true” prices could still be ascertained and inflation stood at roughly 5 per cent. But only a few years later, inflation levels had spiralled to 23 per cent per year for the period 293–301 AD, owing to a poisonous mix of monetary reform and lavish government spending. Under these circumstances, minimum “just” prices made no sense and other measures were in order.
The result was an ambitious (but less influential) effort to put an immediate stop to inflation by fixing maximum prices through public law. The edictum de pretiis rerum venalium of 301 AD constitutes an attempt to restructure all of economic life by decree, by providing a list of close to 1,500 things which carry a maximum price varying from 2 to 150,000 denarii.
Of course, it failed. No complete copy survives, but both Latin and Greek fragments have been recovered from forty-five different sites in the Eastern half of the Empire, allowing for near-complete reconstruction. The lengthy edict was posted in public places, sometimes with an accompanying proclamation by the provincial governor, as in Aezani; non-compliance with its provisions was punishable as a capital crime. There is no direct evidence for promulgation in the West, but absence of proof is certainly not proof of absence, and a section on transportation prices to maritime destinations in the West seems to assume a broader validity. In any case, the price lists have attracted considerable attention from economic historians [see Dominic Rathbone], although much remains unclear about how the prices were established or their internal relation.
Lactantius described the consequences of the edict: the collapse of markets, the scarcity of goods, violence and bloodshed. Even allowing for the exaggerations of a Christian partisan, it is clear that the edict failed spectacularly and was rescinded no later than 305 AD. According to the preamble, the edict was issued to protect the purchasing power of the military from profiteers, but from the variety of affected services and goods it is evident that its scope was broader. In fact, the edict was probably intended to curb inflation and restore the buying power of gold, working in conjunction with a monetary reform edict found at Aphrodisias that was prepared simultaneously. It was a drastic break with the favour that Diocletian and other emperors had shown to party autonomy; but nevertheless it was not the first attempt to intervene by way of price ceilings. Earlier emperors had imposed ceilings on various goods as an emergency measure, or had regulated the prices of eunuchs, lawyers’ fees and gladiatorial games for political reasons. Sometimes such enactments were enforced, more often not. What they have in common is their intent to signal an Imperial policy to combat excesses, rather than any attempt to permanently control particular prices. … In this regard and in spite of its draconic punishments, Diocletian’s edict appears as a conservative measure that, by its increase in scale, turned into a revolutionary overhaul of the entire economy.
Section 6
Conclusion
Everything in Rome had its price, and this price was regularly formed by the operation of free market forces in a process of negotiation. Awareness of (the causes of) price fluctuations was more widespread than is often granted. The freedom to enter or refuse a contract was enshrined in the Roman legal system, reflecting its “core features of economic liberalism” [see Zimmermann 1990].
Market prices influenced valuations for legal purposes, but they were not the only standard of value, since more refined tools were often required. The Roman jurists showed great finesse in developing such tools, particularly in their discussions of the value of future or conditional goods under the lex Falcidia.
Interventions mostly occurred in times of perceived market failure and crisis, but the Roman state generally left price formation to the forces of supply and demand. In any case, most interventions were not intended to have any permanence, but rather served to signal the involvement of an active and principled government.
The economic policy of the Roman state, if these words are not too strong, consisted of attempts to influence supply and demand, through government spending and monetary controls as well as selective taxation and production incentives, while accepting the resulting prices as a necessary outcome. In all, price setting was largely absent from the Roman economy: not because the mechanism was unheard of, but because it went against a deeply ingrained belief in the primacy of party autonomy.
[That is the end of this chapter.]
The Source has been:
Egbert Koops*, ‘Price Setting and Other Attempts to Control the Economy’, in The Oxford Handbook of Roman Law and Society, edited by Paul Plessis, Clifford Ando**, Kaius Tuori, Oxford University Press 2016
*Social Science Files subscriber since December 2022
**Social Science Files subscriber since August 2022
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