The Roman Market Economy Book Review
The wealth and power of the Roman empire exceeded anything that the world had ever seen, or would see again for a thousand years. As stated by Kyle Harper in the Princeton History of the Ancient World “The making of Rome's Empire was not quite like anything that happened before. Suddenly, levels of wealth and development lunged toward modernity, surpassing anything previously witnessed in the existence of our species” (Harper, pp. 7, 2017). Peter Temin in his book the Roman market economy attempts to answer the question that has long perplexed academics and scholars: How did Rome become so developed? Temin crafts an argument through the use of ancient data on wheat prices and other goods to argue that much of the wealth and power of Rome came from its “market economy”. Temin argues that prices of goods, labor, land, and credit were relatively liberalized and were allowed to reflect market supply and demand. He develops these four aspects of a liberalized economy as the evidence for a Roman market economy. His logic then concludes that free markets lead to wealth and prosperity and that a great deal of the success and extremely high levels of development that Rome experienced can be attributed to its liberalized markets. Though there is a great deal of merit to his argument, he focuses too heavily on economics and does not spend enough time emphasizing the impact of Rome's strong political institutions on development. Had Temin taken this class and read the works of scholars such as Acemoglu and Robinson, DeSoto, and Ali he would have further emphasized the strength of Rome’s institutions such as property rights and strong state capacity as a leading cause of its development, not only its free market.
In order to understand the importance of Roman institutions' impact on development it is crucial to understand where these institutions came from. As we know from Mushtak Khan, institutions do not fall out of the sky. Strong institutions come from powerful interest groups that demand the creation of institutions to protect their assets, create order, and maintain political stability (Khan, 2009). An example of this can be seen in Botswana where cattle herders, a powerful interest group, demanded institutions to protect their property rights. Though Temin fails to demonstrate where the institutions that laid the foundation for Roman development came from, work by Michael Mann provides crucial insights. The Roman context is slightly more complex as Mann explains, there is no clear consensus for Roman dominance on the Italian Peninsula. However, “ [Rome] developed the authoritative power of class culture to the point where all conquered elites could be absorbed into the Roman ruling class” (Mann, 1986, 250). That is to say that as Rome grew the conquered elites became a part of the ruling class. Similar to Botswana the wealth of this interest group increased, as did the demand for protection of property. It is no surprise that as the empire grew and so did its wealth, interest groups, most likely wealthy elites, lobbied the Roman government for legal institutions, civil rights, and property rights. This allowed citizens to feel secure in their property, take out loans, and invest efficiently in the economy. Achieving this dynamic is difficult in poor countries.
In poor and underdeveloped countries there is a general inability to lend. Though there are many explanations for this, one advanced by DeSoto in The Mystery of Capital is that of formal titled property. DeSoto argues that in underdeveloped countries people own a great deal of wealth through their property. However, it is not formally titled, in other words it is not legally recognized by the state. This hampers the ability of banks and financial institutions to lend to underdeveloped areas. If the borrower is unable to pay back the loan there is no legal collateral that the bank can take ownership of to recoup its losses as the ownership of the property is informal. This is evidenced by DeSoto “Indeed, the problem is that ownership may be too secure. For land to be used as collateral, either for a loan or in support of a business transaction, the land must be subject to seizure by the bank. Where ownership is secured by informal means, such seizure is difficult'' (Woodruff, pp. 1216, 2001). The inability to facilitate lending in poor countries leads to a lack of investment and limited development. DeSoto argues “The lack of formal titling prevents them [citizens in underdeveloped countries] from using the land as collateral, and prevents the unlocking of capital from the asset” (Woodruff, pp. 1216, 2001). Though a formal titling process can cause conflict and disputes over land ownership it is still necessary if a country wants to unlock capital for its citizens and reap the benefits of greater investment in the economy. It is important to note however, there is no benefit to formal titling of property without strong institutions such as legitimate courts and police to enforce property rights.
With this understanding of formal property rights and titling we turn to the Roman example. As Temin states in his book “the market for land in the Roman Empire worked approximately like the land market today… records indicate a thriving land market, since land served as collateral for mortgage loans” (Temin, pp. 140, 2012). This indicates that not only were land rights respected and formal they were also used as collateral in loans. Temin goes on to note the importance of two terms used in the Roman land market “ dominium, ownership conveyed certain rights; namely the right to receive damages from a theft, and most importantly vindicatio, which was a legal action taken by the rightful owner of a piece of property to recover his property from the current possessor” (Temin, pp. 147). This quote provides us with evidence that Rome had overcome the problems of development illustrated by DeSoto. Rome had formal titling of property, the ability of lenders to seize collateral and strong institutions such as courts to settle disputes and enforce decisions (Temin, 2012). Had Temin taken this class he would have placed greater emphasis on the incredible strength of property rights and formal titling in the Roman economy, the basis of investment, economic growth, and development.
The work of Temin and that of Michael H. Crawford in his work in the Economic History review provides evidence that Rome had a strong entrepreneurial society with sophisticated labor, commodity, and credit markets that responded to changes in supply and demand (Crawford, 1977). Nonetheless, neither author explored in depth where these sophisticated aspects of a free market economy that brought huge amounts of development to Rome appeared to come from. An answer to the question comes from the work of Acemoglu, Daron, Simon Johnson, and James A. Robinson. In their study of the success of the country of Botswana they indicate that its economic success came from “Its institutions of private property.” Such institutions protect the property rights of actual and potential investors, provide political stability, and ensure that the political elites are constrained by the political system and the participation of a broad cross-section of the society” (Acemoglu, pp. 84, 2003). In Temin’s book he indicates that Rome had many aspects identified by Acemoglu that led to the economic success of Botswana. Rome had strong protection of private property, it also had strong institutions to protect the rights of investors. Roman companies functioned similar to that of joint stock companies. Investors would fund expeditions or projects and in return obtain a right to the future profits generated. Investment in Rome flourished not simply because Roman society was entrepreneurial or they had a free market economy, but rather Roman law put constraints on political leaders, making citizens feel secure in their assets. A strong court system enforced contracts, settled private disputes, and protected investors rights. As stated by Harper “Roman law helped to birth norms of governance, by which even masters of the empire might be held to account” (Harper, pp. 7, 2017).
These “Institutions of Private Property”, as described by Acemoglu, are the bedrock of development and given the great wealth and power obtained by Rome it is no surprise that they were interwoven into Roman society. These institutions aided development in three distinct ways. First, property rights were protected so citizens could borrow against their assets and invest in the economy. Secondly, investors rights were protected through strong courts and contract enforcement which allowed investors to feel secure in their investments. Finally, Roman law birthed new norms of governance that put limits on the power of leaders, something rarely seen throughout human history. These three things created a culture of trust and led to free markets and economic growth. However, it was not the fact that Roman people were superior to other civilizations, rather Rome’s strong state protected and enforced the institutions that fostered economic development.
A strong Roman state allowed strong institutions to develop and in turn free markets and economic development. Research done by Herbst demonstrates how strong state capacity is built. Herbst identifies an overall process for a state to develop strong capacity. The process follows as such. There must be high population density, this leads to competition for resources, which makes less land available, and finally the creation of states capable of asserting Infrastructural power, the power of the state to penetrate society and implement its will (Herbst, 2014). Infrastructural power is crucial in the development of institutions capable of enabling economic development as well as creating legitimacy for the state. Rome had a population at its height estimated around 1 million, thus creating the foundations for the development of strong state capacity as described by Herbst (Temin, 2012).
Research Ali reveals the importance of state capacity when it comes to development, specifically infrastructural power. In order for strong institutions to develop and economic growth to flourish the state must have both legitimacy and strong capacity. Based on research from Ali in Bangladesh “the popular legitimacy of the Bangladeshi state remains closely dependent on its policy performance, notably its ability to protect its millions of precarious and vulnerable citizens from the crises of subsistence and survival to which they are frequently exposed” (Ali, pp. 2, 2021). In other words the legitimacy of the state comes from how it intervenes in the economy and society to protect its citizens from crisis. In Rome this was common “The forms of these interventions—setting maximum prices, searching for more supplies, subsidizing purchasing—show that they were attempts to control a free market” (Temin, pp 101, 2012). Temin is describing how Rome's strong state would often intervene into the wheat market in order to address market failures and imbalances in supply and demand. He uses this evidence to show that a free market was present. Though this is important he misses a crucial point, Rome had a strong and legitimate state, capable of addressing market failures to protect its citizens from crisis and fostering development.
In his work Temin brilliantly analyzes 1000s year old data to provide evidence for a Roman Market Economy. He provides evidence for a market for land, labor, commodities, and credit whose prices fluctuated based on market factors such as supply and demand. He uses this as his hypothesis for why Rome accumulated such a profound amount of wealth and reached a level of development not seen before in human history. However, as a political scientist it was my responsibility to put the “Political” in the Political Economy of development. As we know markets alone do not foster development but rather institutions that protect markets. Temin concludes his reasoning without delving into why Rome had such a dynamic free market, he simply finds evidence that it existed and uses that as an explanation for Rome's wealth. It was not the free market that created Roman wealth but rather its rule of law, contract rights, protection of property, and strong state that created the environment for a dynamic and flourishing free market.
References:
Harper, K. (2017). The Fate of Rome: Climate, Disease, and the End of an Empire. In JSTOR (Vol. 2). Princeton University Press. https://www.jstor.org/stable/j.ctv9b2txr.6?seq=2
Crawford, M. H. (1977). Rome and the Greek World: Economic Relationships. The Economic History Review, 30(1), 42. https://doi.org/10.2307/2595497
Woodruff, C. (2001). Review of de Soto’s “The Mystery of Capital.” Journal of Economic Literature, 39(4), 1215–1223. https://www.jstor.org/stable/2698525?sid=primo&seq=2
Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2003. “An African Success Story:
Botswana.” In In Search of Prosperity: Analytic Narratives on Economic Growth, ed.
Dani Rodrik. Princeton University Press.
Herbst, J. (2014). States and Power in Africa: Comparative Lessons in Authority and Control. In ACLS Humanities EBook. Princeton University Press. https://www.fulcrum.org/concern/monographs/pk02cc280
Ali, T. O., Hassan, M., & Hossain, N. (2021). The moral and political economy of the pandemic
in Bangladesh: Weak states and strong societies during Covid-19. World Development,
137, 105216. https://doi.org/10.1016/j.worlddev.2020.105216
Temin, P. (2017). The Roman market economy. Princeton, Nj Oxfordshire Princeton University Press.
Professor Mushtaq Khan’s lecture on Governance Reform and Economic Growth. (2009, March 30). Governance in Africa Lecture Series. https://governanceinafrica.wordpress.com/2009/03/30/professor-mushtaq-khans-lecture-on-governance-reform-and-economic-growth/
Mann, M. (1986). The sources of social power 1, A history of power from the beginning to A.D.
1760 Mann. Cambridge University Press.
Credit to Professor Barry Driscoll, Grinnell College, for teaching this class, Political Economy of Development, and providing me with ideas and inspiration in writing this paper.
