Elio Lo Cascio, Setting the Rules of the Game
[Part 1 of 2] The Market and Its Working in the Roman Empire, a close look at the evidence..
In his chapter titled ‘Setting the Rules of the Game: The Market and Its Working in the Roman Empire’, published in 2020,
Elio Lo Cascio wrote:
Chapter 5
Setting the Rules of the Game
The Market and Its Working in the Roman Empire
Section 1
INTRODUCTION
… The fundamental questions that arise are, first, whether the political and institutional developments that led to the conquest and the unification of the Mediterranean under the aegis of Rome caused market integration and a reduction of transaction costs, and if so, whether this reduction can explain the economic expansion, in the Italian peninsula of the conquerors and then in the provinces, better than other possible factors, such as the innovation and dissemination of technologies, especially in agriculture. The second question concerns the extent to which the threat of dissolution of a unitary political organization in the third century and then the actual dissolution in the fifth determined what I would define as economic decline.
Section 2
CONTRASTING VIEWS ON THE ROLE OF INSTITUTIONS IN PROVOKING GROWTH AND ECONOMIC DECLINE
Nobody disputes the growth of real income experienced by Rome and Italy in the last two centuries of the Republic, and nobody doubts that this growth was the consequence of the conquest and therefore of the unification of the Mediterranean under Roman rule. But there is a lively debate over the factors producing this growth and its limits.
[First] Was the increase in total income just the effect of war plunder, of a brutal removal of resources from the progressively conquered regions … in a [predatory] zero-sum game? …
[Second] Was it instead the result of genuine growth, the effect of the dissemination of more efficient productive processes and an enhanced market exchange?
That is to say, what was the crucial factor in spurring this growth, the conquest itself or the political unification of the Mediterranean, which translated into a process of economic integration? Two opposing views of the general development of the Roman economy and of the role of the state in it have recently been proposed, one that can be labeled pessimistic, the other optimistic.
According to the [first] perspective, defended most recently by Peter Bang [SEE his book, The Roman Bazaar 2008], the formation of a tributary empire is the key. Predation went on after the conquest in the form of a regular levy of tribute from the conquered regions by the state and the collection of rents by the imperial elite. … The increase in total income, which had been initially achieved at the expense of the conquered territories, later widened to the subject regions themselves: the imposition of tax had paradoxically positive effects on the economic growth of the provinces, thanks to the triggering of the mechanism of “taxes and trade”, according to a model that Walter Scheidel has recently labeled as “Keynesian”.
According to the [second] perspective, the changes set in motion by the unification of the Mediterranean space were ultimately responsible for a growth that also affected, from the very beginning, the provincial areas: a process of rationalization in production, with a regional and local specialization, with the enlargement of the cultivated area, and with the increase in the variety and quantity of manufactured goods. The integration of the local economies within the Mediterranean space produced a “Smithian growth”. …
[The] political unification of the Mediterranean world under Roman rule and, even more, the establishment of lasting peaceful conditions with the advent of the Principate, in so far as they produced a drastic reduction of transaction costs, are deemed to have been at the root of the various developments that brought about both economic growth and intensification of trade: these were the suppression of piracy and the resulting increased safety of the seaborne commerce, a better circulation of information, which could mitigate the asymmetric positions of the individual economic actors, the spread of common metrological systems, the creation of a single monetary area, and the diffusion of common legal rules in what we can call commercial law.
All this certainly made the definition, protection, and exchange of property rights within the Empire much more secure and therefore less expensive than in the fragmented Mediterranean world of the previous centuries. The ways in which the Roman imperial state was able to secure its survival, drawing as tax a rather small proportion of the surplus and spending it chiefly on providing law and order, and on defense against external threats, were in fact conducive to growth.
The existence of a single political entity embracing the whole of Mediterranean promoted the integration of the economy, through the establishment of long-distance trading webs for the exchange of staples: this network was not simply a thin veneer which covered an economy still overwhelmingly based on subsistence. Moreover, urban centers, especially the larger ones, played a major role in promoting trade within the Mediterranean and the integration of the economy.
To this undeniably consistent general picture of the developments of the Mediterranean world under Roman rule several objections have been addressed on different levels.
First of all, the periodization of growth and decline has been questioned. On the one hand, the general reevaluation of late antiquity, which has characterized scholarship in recent decades, has extended itself also to the economy of the later Empire, especially of its eastern regions. In addition, it has been noted [by Peter Bang in “A Forum onTrade” in Walter Scheidel’s Cambridge Companion] that the expansion of trade relations within the Mediterranean comes before the political unification, and is not the result of it.
Secondly, the legitimacy of the comparison, often proposed by the so-called “optimists”, with the more advanced economies of early modern Europe, is questioned: these economies, it is claimed, developed the institutional innovations in trading activities leading to the emergence of capitalism precisely because they were unable to create an imperial hegemony that extended to the whole of Europe.
The comparison would be more relevant and compelling with the great tributary empires like the Ottoman or the Mughal empire, in which the market would take the form of the bazaar: admittedly a complex market, but irregular in its working and fragmented, characterized by strong imbalances and asymmetries in information and high transaction costs.
In such markets the merchants must adopt specific strategies and rely on family connections and personal relations, rather than on impersonal exchange. Prices would be volatile and they would not be formed in the way they are formed in a truly competitive market.
Finally, the vitality and the sheer size of the seaborne trade indicated by the material evidence would be ultimately the product of a huge redistributive activity by the state, with the annona civica and militaris—the complex organization for supplying the basic foodstuffs to Rome and the army—and not an indication of an integrated market economy.
Section 3
TRIBUTARY EMPIRES, MARKETS, AND REDISTRIBUTION
It seems to me that a careful consideration of the available evidence allows us, first, to question the proposition that the size of the seaborne commerce may be explained exclusively as a product of redistribution by the state: it must be doubted that tax and public spending were so high as to account for such a level of redistribution.
The share of the state in the GDP was on the contrary comparatively low, as shown by the estimates that have been proposed recently both of the GDP and of the budget of the state. Moreover, it must be underlined that the redistributive mechanisms still operated in a market scenario.
Indeed the state aimed to control the working of the market, as shown by the texts I am going to analyze.
And the control of the market, which did not translate into a fixing of prices, but into the implementation of mechanisms for ensuring competitiveness, makes Roman markets very different from the model of the bazaar.
If tax and public spending were low in relation with GDP … we have to stress the different role of the new administrative structure that was built around the emperor compared to the republican magistrates, for instance in the realm of taxation. The disappearance of [predation] must be taken into account. This can be seen most clearly in the sharp discontinuity between the late Republic and the Augustan age from this specific point of view: the primacy of Italy in the new Augustan fabric is undeniable, but the most extreme forms of predation disappear.
The one who sets the rules of the game now is the emperor, but the nature of the new order and the ambivalent role of the princeps make him a player as well, and this obviously affects the way in which the rules of the game are set.
The emperor is a player among the other players, since he acts with his patrimony like the other private players. His position is different not because he behaves in a different way, but because he is the most prominent player.
And that means that the free market scenario that characterizes late republican Rome is still typical of the imperial age and even, as we will see, of the late Empire.
It is then perfectly understandable why the market, and not reciprocity or redistribution, goes on to be the transactional mode: given this scenario, the defense of a competitive market by the imperial authority seems to be a conscious choice, and a successful one, that fosters growth.
In other words, one can say that growth and integration were not merely the unintended and unexpected result of the unification of the Mediterranean under Roman rule, but also the product of the role that the political organization of Rome purposely undertook in regulating market transactions, by guaranteeing the rights of all parties involved—producers, merchants, and consumers—and by curtailing opportunistic behavior, which could alter the working of the market and the formation of prices in it.
Section 4
SETTING THE RULES OF THE GAME
What seems to me undeniable in any case is that the rules directed to restrain or to punish speculative behavior would produce the effect of “lubricating” exchanges and of drastically reducing transaction costs, thus allowing the working of a free and competitive market.
Boudewijn Sirks, who has defended the thesis of an active and considered promotion of market exchange as early as the late Republic, has appropriately pointed out, in reference to the control of markets at Rome, that the [quote] “overseeing magistrates, the aediles, did not regulate prices” [end quote] [see Jean-Jacques Aubert and Boudewijn Sirks, editors of Speculum iuris: Roman Law as a Reflection of Social and Economic Life in Antiquity, published in 2002].
It seems to me that the evidence I am going to analyze in detail shows two things:
[1] that there was a strict regulation of the market and
[2] that this regulation did not normally result in regulating or even fixing prices, but rather aimed at guaranteeing that the price in the forum rerum venalium (the “market” in the physical and concrete sense, but also, as we will see, the market in the abstract meaning of economics) would always be the market price, formed through the encounter between supply and demand: a market price conceived as a “fair price”.
Moreover, the imperial state could define and enforce the fundamental “rules of the game”, in particular, exclusive property rights, not only in that extension of Rome that was Italy, but also in the provinces, thanks to the spread of the Roman notion (and practice) of private property, fostered by the increase in the number of urban communities with Roman or Latin status.
During the Empire, therefore, the princeps set the rules of the game first of all at the level of the central and provincial administration, but his actions extended, in various ways, to the level of the thousands of towns. Provincial governors and city governments were both called upon to oversee the enforcement of these rules.
I leave aside most of the manifold imperial interventions that had an impact on the economic relations between private people to focus on what seems to have been a constant policy of the imperial authority: precisely the control of the market in order to avoid opportunistic and speculative behavior. This control was implemented at the town’s level by local authorities and sometimes with the intervention of the representative of the center, the governor.
Section 4.1
Pretium iustum, pretium aequum
Perhaps the first explicit evidence for control of the market with the aim of curtailing speculative behavior is to be found in the lex Flavia, the municipal charter issued by Domitian for the communities of Spain on which Vespasian had bestowed the ius Latii (a sort of half-way status between the full Roman citizenship and the condition of peregrini, foreigners).
In chapter 75 there is a rule that sanctions speculative hoarding of goods and cartel agreements to raise the prices: [Quote] “no one is to buy or hoard anything or join with another or agree or enter into a partnership in order that something may be sold too dearly or not be sold or not be sold in sufficient quantity” [end quote] … The rule aims to safeguard the interests of consumers, by forbidding agreements to distort the correct working of the market.
The chapter must be considered in connection with the preceding one, chapter 74, which forbids illegal meetings and associations. Obviously, the rule would have primarily affected the essential foodstuffs, but apparently not just them: such a limitation seems to be excluded by the [quote] “anything” in the [above] text. It is certainly possible that the fundamental aim of the provision was to guarantee the food supply of the town and no more than that.
But even accepting such a conclusion, the point about the rule remains completely valid, mainly because the instrument through which it was expected to attain this result consisted precisely in the safeguarding of the unimpeded working of the market. In fact, the [quote] “fair price” appears already in the lex Flavia as the market price.
The prohibition is to sell ‘carius’ [i.e. more dear] than a price that cannot be other than the price which is formed in the market: this is the only possible explanation. There is no interference of the political organization (the Empire or the individual community) in the functioning of the market, but on the contrary there is an intervention that guarantees the correct working of the market: as [some authors] have put it, [quote] “the chapter merely bans speculation and does not underwrite price control in general” [end quote].
That the provincial governors were also involved in the suppression of speculative behavior is shown by a well-known fragment of the eighth book of the De officio proconsulis (Duties of Proconsul) of Ulpian, included in the title de extraordinariis criminibus (extraordinary crimes) of the Digest. This is the fragment in which the criminal behavior of the so-called dardanarii is discussed:
[Quote] “In particular, forestallers and regraters, speculators generally, interfere with and disturb the corn supply, and a check is put upon their avarice both by imperial instructions and by enactments. By imperial instruction it is provided: ‘You must further ensure that forestallers and regraters, speculators generally, indulge in no commerce and that the corn supply is not incommoded either by those who hold back what they have bought or by the more affluent who do not wish to sell their wares at a fair price because they anticipate that the next harvest will be less fruitful.’ The penalties for such persons are varied; for, generally, if they be merchants, they are only banned from trading or, in some cases, relegated to an island, while those of the lower orders are condemned to forced labor. … The price of corn is also affected by false measures, concerning which the deified Trajan issued an edict whereby he imposed upon those who used them the penalty of the lex Cornelia, just as if, under the statute on wills, a person were condemned because he wrote, sealed or read aloud a will which was false.” [end quote]
… [The] term dardanarii apparently refers to people engaging in abusive actions that were quite varied in scope: on the one hand, speculation consisting in [quote] “interfere with and disturb the corn supply” [end quote] … by holding back what they have bought, or by refusing to sell the fructus of one’s property; on the other hand, speculation consisting in counterfeiting the mensurae and more specifically the staterae (measuring scales), as emerges from the other fragment of the Digest … in which the obscure dardanarii are mentioned: [Quote] “It is agreed that commodity hoarders may be punished extra ordinem according to the degree of their crime because of the false size of their measures; this is for the benefit of the people’s corn dole” [end quote] …
… It seems interesting to me that the crimes of dardanarii (translated as [quote] “forestallers” and “regraters” … do not seem to encompass only the crimes of the negotiatores and the mercatores, but also of the richest landowners, who do not sell the fructus “aequis pretiis” and instead hoard them because they expect that the future harvest will be less abundant and therefore that prices will rise. I think it significant that the name or at least the identification of a similar criminal behavior brings together landowners and merchants, as the state seeks once again to defend consumers, and, in so doing, singles out, quite explicitly this time, the notion of the aequum pretium, the [quote] “fair price”, as the price that is formed on the market, when speculative behavior is absent. …
[Social Science Files informs the reader and listener that some examples and some passages, above and below, have not been included in our exhibit.]
… Again what is significant is, first, that the governor intervenes by obliging people hoarding their grain to make it available for selling, and second, that the maximum price is conceived as being twice the normal market price, an oscillation which is deemed to be acceptable, provided that it does not depend on speculation.
The texts examined so far show a specific interest by the authorities for consumers. But there are other texts that show, first, that merchants and producers were also protected, and second, that the [quote] “fair price”, conceived as the market price, was thought not only to benefit consumers. …
… The fragment shows the will to guarantee the defense of the interests of negotiatores and mercatores, and specifically of the retailers, who are envisioned as fulfilling an important social and economic function. This view can be considered a significant departure from the traditional contempt towards them expressed, most clearly, in [a] famous passage in Cicero’s De officiis.
The idea that a fair price is fair precisely because it is the market one, and that only speculative behavior can alter it, is found in a series of fragments of the Digest that refer to the role that the decurions (the members of the local senate) must play in order to ensure the regular supply of foodstuffs to their city. What is interesting in these fragments is that they seem to aim at defending the interests not only of the consumers and the traders, but also, in a sense, of the producers. …
… The constitution of Marcus and Verus quoted in the fragment of Papirius Iustus aims at defending the interests of the decurions, who could be obliged by popular pressure to sell below the market price.
In a period of crisis the emperors felt themselves obliged to defend the local senates from intolerable pressures. (I would add that the ruling of Marcus and Verus would be perfectly understandable in a phase of probable general disruption of the urban supplies, following the spread of the Antonine plague, in the sixties of the second century CE.)
However these texts are interpreted, a conclusion seems to emerge: that imperial intervention was certainly aimed at “regulating” the market, in order to avoid speculative behavior, but that an additional preoccupation, and one which was suggested by a feeling of equity, was to avoid an artificial lowering of prices.
The “comparative advantage in violence” [to quote Douglass North, writing in 1979], which gives the state the authority to set and the concrete possibility to enforce the “rules of the game” in market transactions between private economic actors, could therefore add considerably to the efficiency of contracting, by protecting the interests of all the parties involved.
It might be significant that the imperial interventions quoted in the various texts that have been examined in detail—both those that reveal the attention of the imperial power towards the interests of consumers and those which witness a similar attention towards negotiatores and locupletes—all fall within the decades ranging from the divi fratres (Marcus and Verus) to the Severans. These are the decades in which, in consequence of the wars and above all of the plague spreading all over the regions under Roman rule since the mid-160s, the Empire was entering a phase of crisis. This crisis had its obvious outcome in the financial crisis of the state and of the towns. …
… I think in any case that a result of the crisis cannot have been a shift towards a “dirigiste” policy, which would anticipate the economic scenario of late antiquity: a more decided tendency towards the pervasiveness of the so-called “administered trade”.
[You have now reached the end of this Social Science Files exhibit. Part 2 beginning with ‘A Different Scenario in Late Antiquity’ will follow shortly.]
The Source has been:
Elio Lo Cascio, ‘Setting the Rules of the Game: The Market and Its Working in the Roman Empire’, in Roman Law and Economics: Institutions and Organizations, Volume I, edited by Giuseppe Dari-Mattiacci and Dennis P. Kehoe, Oxford University Press 2020
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