Weekend Reading: Daniel P. Tompkins: What the Ancient Greeks Can Teach Us About Human Capital

Daniel P. Tompkins: What the Ancient Greeks Can Teach Us About Human Capital: “Unsupervised, cooperative Athenians developed an economy powerful enough to escape the Malthus trap

The Rise and Fall of Classical Greece by Josiah Ober, Princeton University Press, 464pp. “Must it not then be acknowledged by an attentive examiner of the histories of mankind, that in every age and in every State in which man has existed, or does now exist, That the increase of population is necessarily limited by the means of subsistence? That population does invariably increase when the means of subsistence increase? And, That the superior power of population it repressed, and the actual population kept equal to the means of subsistence, by misery and vice?”

Thomas Malthus posed this challenge in 1798, at the conclusion of Chapter 7 of his Essay on the Principle of Population, as if anticipating the massive changes in England that would end the ‘long Malthusian nightmare’ and shatter the ceiling imposed on productivity by population growth. In recent decades, historians have wrestled with the causes behind these changes, suggesting new institutions (property rights, legal changes, patent rights), demographic developments, and shifting norms in the workplace and in society. Escapes from the ‘Malthusian trap’ occurred, we are told, at various other places and times, including Qing China in the seventeenth century, late Medieval England, and the Netherlands in the 17th century. Many additional ‘escapes’ proved transient, the victims of population growth.
In The Rise and Fall of Classical Greece, Josiah Ober argues that ancient Greeks between 800 and 300 BCE anticipated later cultures that ‘broke through the low Malthusian ceiling.’ Ober takes his cue from New Institutional Economists (NIE below) Douglass North, Barry Weingast, and John Joseph Wallis, but moves the clock back, locating the ‘open access orders’ that enabled massive growth to the fifth and fourth centuries BCE. The Greece Ober portrays achieved surprising levels of prosperity and population growth, annulling Alfred Zimmern’s once-canonical judgment that:
the pioneers who created our European civilization were stricken with poverty all their days… it was the doom of Athens that Poverty and Impossibility dwelt in her midst from first to last.
Remarkably, Ober’s ‘wealthy Hellas’ inverts Zimmern’s image. Even more remarkably, the ‘wealth’ is directly related to his other major theme, Greek democracy. In Ober’s hands, ‘democratic Athens,’ a cliché for most of us, becomes potent and productive.
For nearly three decades, Ober has been a leader in heralding the achievements of democratic practice in ancient Athens. One of a distinguished group of ancient social and economic historians at Stanford University, he is noted for utilizing social science research in ancient history and for building ‘models’ of ancient behavior. Historians occasionally complain about model-building, but in competent hands it is rewarding and irreplaceable. Without a model, we are left with the notion of history as brick-collecting, and the illusion that if we heap up enough bricks, we’ll create a house.
Rise and Fall divides into two halves: five programmatic or theoretical chapters, followed by five chapters of ‘application’ that trace the history of Greece down to 334 BCE. The first half makes the most exciting new claims, rejecting at the outset the widespread conviction that economic development occurs mainly in authoritarian states. In an enchanting riff on Plato’s famous portrait of Mediterranean Greeks as ‘frogs and ants around a pond,’ Ober exposes both the common features of Greek settlements on three continents, with similar climate and crops (damp but not cold in winter, dry in summer; the ‘Mediterranean triad’ of grain, grapes and olives), and, more importantly, the aptness of those ants: introducing findings from a Stanford study of ants in the American southwest, Ober emphasizes that, though unsupervised, they collaborate purposively. Like Athenians, up to a point.
With this observation, the ‘frogs and ants’ simile, banal in most treatments of the Mediterranean, becomes vivacious and meaningful. Ober makes the formic formidable by asking, ‘What’s so special about ants?’ Hobbes and Mancur Olson, he notes, would have frowned, since both doubted the capacity of unsupervised humans to cooperate. Ober’s Athenians prove them wrong.

Unsupervised cooperation
Like his colleague Ian Morris, Ober shows that in Athens and in the wider Greek world, rich-poor differentiation was moderate, and that diet, language, religion, rituals, architecture, and city planning did not greatly vary from polis to polis. Ideology and culture, i.e. norms, promoted a ‘historically distinctive’ level of cooperation among ancient Greeks, different from other premodern cultures.
Building on his earlier investigations into Athenian democracy, Ober here concentrates on prosperity, surveying house sizes, consumption patterns, population growth and other indicators. Morris’ sample of 400 ancient Greek houses reveals growth and increased regularity in construction over 500 years, but comparatively few McMansions: Athenian dwellings clustered around a median house size. Consumption also increased. The Greek economy grew steadily as Greece became densely populated and urbanized, and perhaps less dependent upon agriculture than is often supposed, with Athenians participating in more than 170 different occupations, and up to half the labor force performing non-agricultural, urbanized and specialized, activities.
But how was Athenian growth achieved? One pleasure of this book is the intertwining of data and interpretation. Two interpretive sections, labeled ‘hypotheses,’ require special attention. First, Ober mentions ‘rule egalitarianism,’ which accorded adult males equal standing in public institutions. This drove economic growth by creating incentives for development of human capital, and by lowering transaction costs. Second, ‘economic growth was fostered by continuous innovation.’ The details are fascinating:

Rule egalitarianism, human capital, and transaction costs
Adult males in the Greek world enjoyed remarkable and growing equality compared to other premodern societies, and equality built ‘aggregate human capital’: the ‘stock of skills the labor force possesses.’ As Ober puts it, when skills and the overall store of knowledge increase, and human capital grows with access to law and property rights, education, and training, economic growth can result. Protected by the rule of law and secure from arbitrary expropriation, individuals build their human capital and become more productive. With specialization, ‘overall societal productivity increases,’ as workers produce better goods at lower costs.
The Athenian policy of providing pay for public service was one of several incentives to citizens to master skills that produced public goods as magistrates, assemblymen and jurors, with additional rewards for other forms of service. State institutions including grain price stabilization, welfare for invalids, and state education for war orphans insured citizens against catastrophe, enabling them to take on risks.
The state also sought to keep transaction costs low, by making information (laws) easy to access, keeping information about property rights and contracts clear, and standardizing weights and measures. Authoritarian and undemocratic states may limit such access, maintaining a sort of social stability at the cost of economic productivity. Athens, on the other hand, aided transactional clarity by allowing aliens, visitors and ’ probably even slaves … full legal standing’ to participate in commercial transactions.

Innovation, inter-community competition and learning
Ober highlights ‘institutional innovations … spurred by high levels of local inter-community competition and spread by inter-community learning’ and cooperation, all of which brought competitive advantages.
Athens and its neighbors seem to have been most successful from the beginning of the sixth century BCE, a notoriously murky period in which the lawgiver Solon made important reforms ‘respecifying property rights’ and reducing the power of elites. This was an important stage in Athenian economic take-off, transforming Attica into a land of ‘middling’ independent farmers.
Athens’ defeat in the Peloponnesian War in 403 BCE was a catastrophe, but the city recovered dramatically while victorious Sparta declined precipitously. In the fourth century, Athens remained economically stable even after losses to Philip of Macedon: confounding its critics, the democracy survived for longer than 180 years.
This is a striking set of changes, useful for today’s readers. Ober succeeds in presenting the similarities between ancient Athens and modern democracies, while also noticing differences. Athenians may have been even more intent than Americans on the need for shared values that bound the polity together.
Partly because his model is bold, Ober will meet challenges. That has been the fate of the great earlier model-builders, Max Weber and Moses Finley. Nearly every number he offers represents a filtered composite of findings. Other scholars, for instance, have estimated the Greek ‘Gini coefficient,’ or measure of economic inequality, differently from Ober, and we’re unlikely ever to see unanimity, given the nature of the underlying data. The vulnerability of ill-constructed mud huts might, for instance, also lead to undercounts of house sizes, though every archaeologist I’ve consulted confirms the general trend toward larger structures. The strength of the model, however, may lie in its combination of multiple archaeological findings, extensive study of Greek law and social practices, and impressive application of modern economic history, as evident in Ober’s more recent work on state financing and transaction costs.
Before the nineteenth century, very many states relied on slavery. Were slaves more populous at Athens than elsewhere? That is hard to determine, but the large slave population certainly provided labor for Athens’ famed silver mines. In the fifth century, too, Athens had an extensive empire. How ‘special’ were slavery, silver, and empire vis-à-vis other Greek democracies? Subject states not only paid tribute but furnished land for poorer Athenians, reducing social tensions in the city; the mines paid for ships and crews to govern the empire. At the same time, however, democratic Athens had a broader franchise than many other states, and the ‘social distribution’ of imperial income favored not the rich senatorial families (as in Rome) but broader state activities.
Ober once or twice allows himself to mention the ‘Greek miracle.’ But he’s careful to nail this down to actual practices, and it’s these practices that readers will remember: fair rules, investment in human capital, low transaction costs, continuous competitive innovation, and widespread cross-community learning. Individuals benefited from economic specialization and exchange, innovation, and competition.
Wealth has various sources. A New Institutional Economist may conclude that social change cannot be decreed from on high but is the ‘product of thousands of incremental changes’ throughout the social organism. Another sort of historian tells us that slavery ‘massively increased the aggregate input of labor,’ and yet another that in Rome, ‘empire [built on plunder, mass slavery, and forced tribute] turned out to be a much more forceful mechanism than the market to mobilize the economic resources of the Mediterranean.’ Alexander the Great’s seizure of the Persian gold supply arguably brought benefits for the next century. These are different models. To point this out is not to challenge Ober’s compelling analysis, but simply to note that Athens was not the only model for wealth-creation in antiquity.
Not the only model, indeed. But in Ober’s view, perhaps the most successful — especially since plunder, au fond, redistributes rather than creates wealth. A Greek world with aggregate growth of one per cent per annum for five centuries stands out. This growth occurred in a knowledge-based economy (see Ober’s Democracy and Knowledge [2008]), based in large part on human capital.
The italicized terms above have only recently become current (though they’ve long been latent) in American discourse. Knowledge-based economies are arguably reshaping the modern world (as Stephen Brooks argues in Producing Security [2005], countries with knowledge-based economies are less likely to invite military invasion than those rich in resources).
Lester Thurow insisted that the creation of human capital is ‘by its nature a social, and not an individual process.’ Robert Lucas, reflecting a generation’s work on this topic at the University of Chicago, said that:
“[T]he industrial revolution involved the emergence (or rapid expansion) of a class of educated people, thousands — now many millions — of people who spend entire careers exchanging ideas, solving work-related problems, generating new knowledge…. All knowledge resides in the head of some individual person, so that the knowledge of a firm, or economy, or any group of people is simply a list of the knowledge of its members. A main feature of the model will be the social or reciprocal character of intellectual activity: Each person gains from the knowledge of the people around him; his ideas in turn stimulate others.”
Thurow and Lucas in this sense confirm, from slightly different perspectives, the central NIE emphasis on the social aspect of human capital. Josiah Ober’s dynamic and persuasive argument that unsupervised, cooperative Athenians developed an economy powerful enough to escape the Malthus trap is essentially an argument about society and education in a society, and as such resonates well beyond the ancient world.

Originally published at www.bradford-delong.com.