What Can Ancient Rome Teach Us About Economics?
They had markets, merchant bankers, poets, and potters. So why didn’t it lead to an industrial revolution?
Like everyone who was made to read a few chapters of Edward Gibbon’s The Decline and Fall of the Roman Empire, I have long been fascinated about what held the empire back.
Why didn’t it industrialize? Why did it stop growing and decline and fall?
Enter: Peter Temin’s The Roman Market Economy.
Temin is not an ancient historian. He’s actually an ancient economist. That’s a little mean — he’s in his late 70s and an emeritus professor at MIT, but what he’s interested in is bringing modern economic concepts to the study of the ancient world.
Temin shows us a very sophisticated economy, limited by finite resources. Population is tied to the calories provided by agriculture. The odd technology advance raises the bar but essentially birth rates go up, living standards come down, and then you get either famine or postponed marriage until the death rate falls into line and the system stabilizes.
The surpluses allow urbanization — with feasts, baths, chariot races, and aqueducts, but also laws, law courts, money and taxes.
But is that simple? Some economists don’t think so. In what follows, a round-up of their thinking.
Here’s Victoria Bateman:
Modern day economists argue that the reason why economies were poor in the past was that absolutist monarchs undermined property rights (reneging on debt and forcibly extracting wealth from minority groups), and that the state too heavily regulated the economy, including granting monopoly privileges to guilds and international trading companies, all of which limited the incentives and ability of people to buy and sell goods freely. The result was that people lacked the incentive to produce, invest and invent — economic growth was thereby hampered.
We see a bit of this in Rome. This review of Peter Bang’s book The Roman Bazaar paints a picture of Rome as more like the Mogul empire:
Bang illustrates with credible examples the exorbitant amount of local duties and imperial taxes, which likely tripled the prices of goods in long-distance trade at their ultimate destination. This discussion not only sheds more light on the high degree of tax extraction by the governing elites and the resulting incentive alignment between those elites and abusive tax collectors; it also suggests that the link between the increase of trade since the late Roman Republic and the supposedly more favorable political environment (pax Romana) might be more tenuous than we thought. More likely, the dominant cause for the increase in trade was simply the increase in demand and purchasing power by wealthy elites in Rome.
Mark Koyama:
In seeking to better understand the Roman economy, many historians have asked whether it was comparable to that of Europe in the period 1500–1700. Bang persuasively argues that early modern Europe is not a good analogy for the Roman economy, at least in terms of its institutions. He notes that early modern Europe was fundamentally different from the Roman Empire because it was characterized by intense interstate competition. This competition led to states seeking more and more financial resources, as their tax revenues could not keep pace with their spending needs. To obtain these financial resources, they needed to make alliances with merchants, bankers, and urban economic elites.
Selection of group characters, including culture and technology, takes place by migration and war. Since living standards rise with the relative productivity of surplus, migrants and invaders are attracted from places relatively rich in subsistence to those relatively rich in surplus. They spread the culture and technology of their subsistence-rich hometown to the surplus-rich destination — the bias of migration favors the spread of subsistence over that of surplus. Even if surplus cultures and technologies develop faster than subsistence in a local environment, the offsetting force of the biased migration balances the two sectors on a global scale. This explains the constancy of living standards.
Entertaining Malthus: Bread, Circuses and Economic Growth:
Improvements in bread technology will largely result in population growth while improvements in circus technology will largely result in growth in per capita GDP.
Diane Coyle reviewing Joel Mokyr’s A Culture of Growth:
Mokyr writes: “Technological advance in the period of the Industrial Revolution was a minority affair; most entrepreneurs and industrialists of the time were not like Matthew Boulton or Josiah Wedgwood and had little knowledge of or interest in science or even innovation … But the dynamics of competition in a market economy are such that in the long run, the few drag along the many.”
The debate about the causes of the Industrial Revolution has been revived by contemporary anxieties over stagnation. Given the flatlining of productivity in OECD countries for nearly a decade, has the west gone ex-growth? There is no shortage of brilliant new science, so technologists find it hard to understand why many economists are gloomy about the prospects for rising living standards. In this book Mokyr points us towards wider cultural questions. What are the forces sending the idea of progress into retreat? Is the ultimate source of secular stagnation the deterioration of the public sphere? If so, given how hard it is to change the cultural environment, the pessimists may be right.
