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Economic Ideas: The Ancient Romans, Who Went from Rule of Law to Corrupting Inflation and Price Controls


The ancient Romans failed to leave any systematic body of thoughts on economics, just like the ancient Greeks had failed to. Indeed, many of whatever ideas the Romans expressed on such economic themes they took from the Greeks. The Romans were mostly concerned with “practical” matters, and have sometimes been referred to as “doers” rather than philosophers on these matters.

The area in which they did leave a body of thought, and one that has had lasting influence and significance for future generations, especially in the West up until our own time was in the area of law and contract.  Their main contribution has been seen to be the legal order upon which is founded part of the Western economic traditions of property and exchange.

Respecting the Local Laws of Diverse Peoples

As the Roman Empire expanded, it increasingly incorporated a growing number of peoples and cultures very different from Rome’s own culture and ideas. Indeed, at its maximum, the Roman Empire included much of Western, Central and Southern Europe, nearly all of the Middle East, and last portions of northern Africa including Egypt down the Nile River. It became important to develop conceptions and codes of law that could be broad and general enough to encompass the diversity of the empire, yet have a degree of uniformity for all its members.

Roman jurists and philosophers came to distinguish between the rules and laws for the citizens of Rome and the more general legal code for the empire as a whole.

The Roman citizen – the citizen of the city of Rome, the capital of the Empire – was under the jurisdiction of jus civile, the “civil law.”

This was a code of law that reflected the evolved traditions and customs of Rome, itself, concerning the rights, privileges, and duties of a Roman citizen before the law and his fellow city-members. Indeed, each part of the empire was recognized to have, and had respected by the Roman authorities, it’s own jus civile, or civil law, to which the inhabitants of that province or region were obligated to obey and which safe-guarded their rights in legal disputes in the respective localities.

 A Universal Law Reflecting Justice for All Men

In contrast to “civil law” was jus gentium, the general or “universal” law. This was meant to serve as the code that would apply to all members of the empire, irrespective of local custom or local law.  Since “universal law” was to transcend the particular traditions of the diverse peoples of the empire, it had to be based on concepts of justice and “rights” broader than any one set of customs, even Rome’s.

Out of the development of the “universal law” code emerged the idea of jus naturale, or the “natural law.”

The Romans distinguished between human law and a “higher” law of right and justice that reason could demonstrate to be right and proper among all men, regardless of to which individual or group it applied. And to which all reasonable men of good will could and would agree and accede.

For 2,000 years it has served as one of the basis upon which men have claimed to have certain inalienable rights that no government could tamper with or transgress without violating a code of conduct among men that no temporal authority has the power or right to abrogate.

As with all governments and empires, reality of such things often differs from the ideal. The Romans could be harsh imperial masters, little patient or tolerant of any serious rebellion or dissent. And they, like the ancient Greeks, were wedded to the institution of slavery, when meant those for whom such notions as “rights” fully applied were minorities. But, nonetheless, one of the important political-philosophical seeds was planted that had its influence on later development in the West.

Law, Property, and Commercial Prosperity

From the Roman conception of “universal law” developed an extremely comprehensive body of contract and property law that, unlike the Greeks, established a wide latitude and autonomy for the free individual in both his use and disposal of his person and property.

As a result, Roman law over a wide area of transactions came to respect market-determined prices as “just prices,” in that they represented the mutually agreed upon terms of trade. It also served as the basis of what became a vast network of empire-wide production, trade and commerce among all of the far-flung provinces and regions of the Roman Empire.

It fostered a system division of labor and market-based exchange that made the entire Mediterranean basin, a large part of Western and Central Europe, most of the Middle East, and parts of North Africa one vast economic unit. Given the means of transportation available by land and sea (and it should be remembered that parts of the road system built across Europe by the ancient Romans still exists) the result was a more or less free movement of goods, raw materials and people from the Atlantic Ocean to the Persian Gulf, and from the Baltic Sea to the head waters of the Nile.

Of course, the Romans practiced neither real free trade nor laissez-faire, and always the trade in a variety of commodities was overlaid with imperial regulations, and controls.

As the Austrian economist, Ludwig von Mises observed in his treatise on Human Action:

It may be left undecided whether or not it is correct to call the economic organization of the Roman Empire capitalism. At any rate it is certain that the Roman Empire is the second century, age of the Antonines, the ‘good’ emperors, had reached a high stage of the social system of division of labor and interregional commerce. Several metropolitan centers, a considerable number of middle-sized towns, and many small towns were the seats of a refined civilization.

The inhabitants of these urban agglomerates were supplied with food and raw materials not only from the neighboring rural districts, but also from distant provinces. A part of these provisions flowed into the cities as revenue of the wealthy residents who owned landed property. But a considerable part was bought in exchange for the rural population’s purchases of the products of the city-dwellers’ processing activities.

There was an extensive trade between the various regions of the vast empire. Not only in the processing industries, but also in agriculture there was a tendency toward more specialization. The various parts of the empire were no longer economically self-sufficient. They were interdependent.

Roman Philosophers and Anti-Commercialism

While Roman law was laying the foundation for a society of contract and exchange, Roman philosophers were following a different path. The most prominent of these thinkers were Cicero, Seneca, and Marcus Aurelius. In general, they disapproved of the wealth and luxury that the trade of the Empire fostered in Rome. They saw these as the cause of vice and a weakening of the moral spirit of the men of the time.

Their philosophy was tinged by what has sometimes been called “quietism,” that is, belief that one should adjust to the circumstances that one finds oneself in, and accepts it as good and inevitable during one’s life. In the words of Marcus Aurelius:

Be satisfied with your business, and learn to love what you were bred to do; and as to the remainder of your life, be entirely resigned, and let the gods do their pleasure with your body and soul.

Their view included the idea that happiness could only come by the overcoming and removal of oneself from desire, particularly outward or material desires and wants. Man’s happiness, they argued, could not come from the attempt to constantly increase one’s means so more and more ends could be satisfied. No, that was the path that had no end other than permanent frustration.

Instead, they say a different route to happiness. We find it expressed by the Roman philosopher, Epicurus: “If you wish to make a person wealthy, do not give him more money, but diminish his desire.”

In other words, do not attempt to increase the supply of those means that serve various human ends; rather, decrease the demand for them. By each individual, in himself, reducing his desires to those that are appropriate to a “wise” and “virtuous” life. The wise man, it was said, “follows nature.”

Cicero’s Criticisms of Markets and Moneymaking

In asking what following nature meant in terms of ways of living and earning a living, they tended to place the highest significance on the “naturalness” of agriculture, and the vice and corruptions of other trades and occupations. Cicero is an example, when he said:

Now in regard to trade and other means of livelihood, which ones are to be considered becoming of a gentleman and which ones are vulgar, we have been taught, in general as follows:

First those means of livelihood are rejected as undesirable which incur people’s ill-will, such as those of tax-gatherers and usurers [money-lenders].

Unbecoming to a gentleman, also, and vulgar, are the means of livelihood of all hired workmen whom we pay for mere manual labor, not for artistic skill; for in this case the very wages they receive is a pledge of their slavery.

Vulgar we must consider also those who buy from wholesale merchants to retail immediately; for they would get no profits without a great deal of downright lying; and verily there is no action that is meaner than misrepresentation.

And all mechanics are engaged in vulgar trades; for no workshop can have anything liberal about it. Least respectable of all are those trades that cater to sensual pleasures: Fishmongers, butchers, cooks, poulterers, and fishermen. Add to these if you please, the perfumers, dancers, and the whole corp. of ballet.

But the profession in which either a higher degree of intelligence is required or from which no small benefit to society is derived – medicine, and architecture, for example, and teaching – they are proper for those whose social position they become.

Trade, if it is on a small scale, is to be considered vulgar; but if wholesale and on a large scale, importing large quantities from all parts of the world and distributing to many without misrepresentation, it is not to be greatly disparaged.

Nay, it even seems to deserve the highest respect, if those who are engaged in it, are satisfied with they fortunes they have, and make their way from the port to the country estate, as they have often made it from the sea to the port.

But of all the occupations by which gain is secured, none is better than agriculture, none more profitable, none more delightful, and none more becoming to a freeman.

Rome’s Wrong Turn with Price Controls

Before leaving the Romans, it is worthwhile devoting some time to a brief account of their experiences with various economic policies, specifically debasement of the currency and price controls.

In 449 B.C., the Roman government passed the Law of the Twelve Tables, regulating a wide variety of commercial, social and family life. Some of them were reasonable and consistent with an economy of contract and commerce; other parts reflected gruesome punishments and cruel powers and privileges given to some. Other regulations fixed a maximum rate of interest on loans, approximately 8 percent. The Roman government also had the habit of periodically forgiving all interest owed in the society, that is, it legally freed private debtors from having to pay back interest due to private creditors.

The Roman government also set price controls on wheat. In the fourth century, B.C., the Roman government would buy grain during periods of shortages and they would sell it at a price fixed far below the market price. In 58 B.C., this was improved upon: the government gave grain away to the citizens of Rome at a zero price, that is, for free.

The result was inevitable: farmers left the land and flocked to Rome; this, of course, only made the problem worse, since with fewer farmers on the land in the territories surrounding Rome less grain than before was being grown and brought to the market. Also, masters were freeing their slaves and placing the financial burden for feeding them on the Roman government at that zero price.

In 45 B.C., Julius Caesar discovered that almost one-third of the Roman citizenry was receiving their grain supply for free from the State.

To deal with the financial cost of required expenditures to fulfill these supplies of wheat, the Roman government resorted to debasement of the currency, that is, inflation. Pricing-fixing of grain, shortages of supply, rising budgetary problems for the Roman government, monetary debasement and resulting worsening price inflation were a continual occurrence through long periods of Roman history.

Spending, Inflation and Economic Controls Under Diocletian

The most famous episode of price controls in Roman history was during the reign of Emperor Diocletian (A.D. 244-312). He assumed the throne in Rome in A.D. 284. Almost immediately, Diocletian began to undertake huge and financially expensive government spending projects.

There was a massive increase in the armed forces and military spending; a huge building project was started in the form of a planned new capital for the Roman Empire in Asia Minor (present-day Turkey) at the city of Nicomedia; he greatly expanded the Roman bureaucracy; and he instituted forced labor for completion of his public works projects.

To finance all of these government activities, Diocletian dramatically raised taxes on all segments of the Roman population. These resulted in the expected disincentives against work, production, savings, and investment that have long been seen as the consequences of high levels and rates of taxation. It resulted in a decline in commerce and trade, as well.

When taxation no longer generated enough revenue to finance all of these activities, Emperor Diocletian resorted to debasement of the currency. Gold and silver coinage would have their metal content reduced and reissued by the government with the claim that their metallic value was the same as before. The government passed legal tender laws requiring Roman citizens and subjects throughout the Empire to accept these debased coins at the higher value stamped on each of the coin’s face.

The result of this was inevitable, too. Since in terms of the actual gold and silver contained in them, these legal tender coins had a lower value, traders would only accept them at a discount. That is, they were soon devalued in the market place. People began to hoard all the gold and silver coins still actually containing the higher gold and silver content and using the debased coins in market trading.

This, of course, meant that each of the debased coins would only buy a smaller quantity of goods on the market than before; or expressed the other way around, more of these debased coins now had to be given in exchange for the same amount of commodities as before. The price inflation became worse and worse as the Emperor issued more and more of these increasingly worthless forms of money.

Diocletian also instituted a tax-in-kind, that is, the Roman government would not accept its own worthless, debased money as payment for taxes owed. Since the Roman taxpayers had to meet their tax bills in actual goods, this immobilized the entire population; many were now bound to the land or a given occupation, so as to assure that they had produced the products that the government demanded as due it at tax collection time.  An increasingly rigid economic structure, therefore, was imposed on the whole Roman economy.

Diocletian’s Edict Made Everything Worse

But the worst was still to come.  In A.D. 301, the famous Edict of Diocletian was passed. The Emperor fixed the prices of grain, beef, eggs, clothing, and other articles sold on the market; he also fixed the wages of those employed in the production of these goods. The penalty imposed for violation of these price and wage controls, that is, for any one caught selling any of these goods at higher than proscribed prices and wages, was death.

Realizing that once these controls were announced many farmers and manufacturers would loose all incentive to being their commodities to market at prices set far below what the traders would consider fair market values, Diocletian also proscribed in the Edict that all those who were found to be “hoarding” goods off the market would be severely punished; their goods would be confiscated and they would be put to death.

In the Greek parts of the Roman Empire, archeologists have found the price tables listing the government-mandated prices. They list over 1,000 individual prices and wages set by the law and what the permitted price and wage was to be for each of the commodities, goods, and labor services.

A Roman of this period named Lactanius wrote during this time that Diocletian “ . . . then set himself to regulate the prices of all vendible things. There was much blood shed upon very slight and trifling accounts; and the people brought no more provisions to    market, since they could not get a reasonable price for them and this increased the dearth [the scarcity] so much, that at last after many had died by it, the law was set aside.”

The Consequences and Lessons from Roman Economic Policy

Roland Kent, an economic historian of this period, has summarized the consequences of Diocletian’s Edict in the following way:

 . . . The price limits set in the Edict were not observed by the traders, in spite of the death penalty provided in the statute for it’s violation; would-be purchasers finding that the prices were above the legal limit, formed mobs and wrecked the offending traders’ establishments, incidentally killing the traders, though the goods were after all of trifling value; traders hoarded their goods against the day when the restrictions should be removed, and the resulting scarcity of wares actually offered for sale caused an even greater increase in prices, so that what trading went on was at illegal prices, therefore, performed clandestinely.

The economic effects were so disastrous to the Roman economy that four years after putting the Edict into law, Diocletian abducted claiming “poor health” – a euphemism throughout history that if the political leader does not step down from power, others will remove him, often through assassination.  And while the Edict was never formally repealed, it soon became a dead letter shortly after Diocletian left the throne.

Michael Ivanovich Rostovtzeff, a leading historian on the ancient Roman economy, offered this summary in hi, Social and Economic History of the Roman Empire (1926):

The same expedient [a system of price and wage controls] have often been tried before him [Diocletian] and was often tried after him. As a temporary measure in a critical time, it might be of some use. As a general measure intended to last, it was certain to do great harm and to cause terrible bloodshed, without bringing any relief. Diocletian shared the pernicious belief of the ancient world in the omnipotence of the state, a belief which many modern theorists continue to share with him and with it.

Finally, as, again, Ludwig von Mises concluded, the Roman Empire began to weaken and decay because it lacked the ideas and ideology that are necessary to build upon and safe-guard a free and prosperous society: a philosopher of individual rights and free markets. As Mises ended his own reflections on the civilizations of the ancient world:

The marvelous civilization of antiquity perished because it did not adjust its moral code and its legal system to the requirements of the market economy. A social order is doomed if the actions which its normal functioning requires are rejected by the standards of morality, are declared illegal by the laws of the country, and are prosecuted as criminal by the courts and the police. The Roman Empire crumbled to dust because it lacked the spirit of [classical] liberalism and free enterprise. The policy of interventionism and its political corollary, the Fuhrer principle, decomposed the might empire as they will by necessity always disintegrate and destroy any social entity.

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    Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).