Enthusiasts of Ancient Roman history have long been struck by a peculiar absence. As David Hume wrote, ‘I do not remember a passage in any ancient author, where the growth of a city is ascribed to the establishment of a manufacture.’
Yes, there was much trade in the ancient world. There were markets. But the power of the Roman state and the paucity of evidence for industry, manufacture, and integrated markets has led many historians to conclude, as the great Moses Finley did, that ‘ancient society did not have an economic system which was an ancient conglomeration of markets.’
Peter Temin’s The Roman Market Economy is a clever, extended attempt to demonstrate otherwise.
Temin, an emeritus professor at MIT, is one of the world’s most prominent economic historians. He’s written studies on the Great Depression, the economics of slavery, and industrialisation in the United States. One book also published this year by Temin and a co-author, Hans-Joachim Voth, concerns early goldsmith banking in eighteenth century Britain.
In The Roman Market Economy, Temin’s goal is to apply the standard techniques and theories of modern economics to the ancient world.
Of course such standard techniques and theories are broadly Keynesian. Their application is usually rewarding, but, as we shall see, occasionally problematic.
Temin offers some tests to determine how much of a market economy Ancient Rome really was. Were the level of prices determined by supply and demand, suggesting that trade dominates the economy? Was there an integrated market—in other words, did a price change in one region effect a price change in another region? And was anonymous exchange common? It’s easy to make trades with people we know personally. But were contracts and law—formal and informal—developed enough to facilitate trade among people outside a group of trusted friends?
The questions are hard to answer. Certainly there are no data sets of the sort that economists are used to handling.
The first question is whether Rome was an integrated market, rather than a collection of local markets connected only by politics. We have a small sample of wheat prices from around the Mediterranean region. Some of those prices survived in the writings of Cicero and Polybius, others from scattered inscriptions. It’s a very small sample, in fact—there are just six of them. But they appear to be random. We can compare those regional prices with prices in the city of Rome.
Temin uses a regression analysis to demonstrate that the prices in Rome and the rest of the empire track each other nicely, once transport costs are accounted for. This suggests a unified Roman market. There’s no reason to believe prices would follow each other if markets were small and isolated.
From this Temin fills out our understanding of the market for grain, drawing on a large secondary literature. Roman contract law was highly evolved, which was essential in ensuring the reliability of suppliers and agents. Commercial partners sued each other when relations went sour. Merchants developed mechanisms to prevent cheating. Reputation mattered.
One confounding factor in determining how much of a true market the grain trade was in Rome is the substantial state intervention. The state provided wheat to a certain proportion of the inhabitants of the city of Rome—the annona. This is the bread in bread and circuses. It’s not clear how many citizens received grain; Temin suggests between fifteen and fifty per cent, leaning towards the lower figure.
Whatever the relative size, this was a significant distortion of the agricultural market. However, in keeping with general Roman political economy, the annona was contracted out—private merchants brought the wheat into the city on government contracts. Another intervention was periodic grain handouts in times of hardship, as well as occasional price controls. As Temin points out, the fact the emperors sometimes chose to impose price controls suggests the market was fairly dynamic and responsive to supply and demand. Otherwise why bother?
Merchants needed finance. Ancient Rome had a relatively sophisticated banking system. One of our best sources is the Sulpicii, a collection of financial tablets discovered in Pompeii in the late 1950s. These suggest that the Sulpicii took deposits, lent to third parties, acted as brokers for their clients, transferred funds between accounts, and changed money; remarkably similar to modern banking. We know there were a wide range of services and institutions providing financial services in the ancient world. Temin compares the degree of financial sophistication to that of eighteenth century London—in other words, extraordinary.
Agriculture was one big market in the ancient world. Labour was another. But Rome was a slave society—intuitively, there can be no meaningful ‘labour’ market where forced labour dominates. Temin here is provocative and interesting. Not all slave societies are the same. We tend to think of slavery monolithically, projecting our cultural understanding of slavery in the American south onto all societies with slaves. Slaves in Ancient Rome were more connected to the broader labour market than they were in South Carolina in 1860.
Of course Roman slavery was cruel and brutal, particularly for those who worked in certain industries. Slaves were captured in war, or born into the condition. But for some, slavery was closer to what we would describe as indentured servitude.
People need incentives to work, and slaves were subject to positive and negative incentives. The evidence suggests that positive incentives were more common in Ancient Rome than elsewhere. Slaves could earn wages. They could be highly skilled, educated, and take managerial roles. They could act as agents for the masters.
Most importantly, they could buy their freedom. Manumission—the act of freeing a slave—was more prevalent than in any other slave society. One scholar estimates that ten per cent of slaves were freed every five years. In the American South that figure was 0.2 per cent. Ex-slaves, at least in the cities, tended to have been educated in bondage. Once free, they filled the ranks of merchants and administrators. Slaves and ex-slaves operated in the same labour market as free individuals.
Temin is understandably on less sure footing when he moves from microeconomics to the macroeconomy. The standard account of long term growth—most recently and compellingly detailed by the University of California’s Gregory Clark in Farewell to Alms— classifies growth into the pre- and post-Industrial Revolution. Before industrialisation, the world was stuck in a Malthusian Trap. Innovation and discovery only led to population growth, not a growth in income and living standards. After the industrialisation, income and living standards shoot up.
Temin is constrained by theoretical orthodoxy to apply this model to the Roman economy. It doesn’t fit very well. There was technological development in the Roman empire, and there was income growth as well. He concludes that the Malthusian dynamic operates over a period of centuries, rather than in the short term.
But if a society can enjoy economic growth for hundreds of years—a growth only interrupted by military invasion and political collapse—how can it be described as Malthusian? If the Malthusian model can turn itself off for centuries and entire civilisations at a time, it’s not clear how useful the model is. Temin’s final trick is to calculate Roman GDP. Such a figure is only meaningful if markets are broad and sophisticated, which he has demonstrated. He concludes that per capita GDP was around $1000— roughly the same as enjoyed by Europeans in 1700. This is obviously tentative and speculative and relies on too many assumptions to list, but paints a fascinating picture if even half true.
Macroeconomics aside, Temin is very convincing. Rome had market economy. What lessons should we take from that?
First of all, Roman living standards were high. Extraordinarily high, compared to living standards centuries after. One strand of ancient historiography in the last half century has been to downplay the significance of the fall of Rome; suggesting that the Empire melted away, rather than experienced the catastrophic collapse of our cultural memory. In a 2005 book The Fall of Rome and the End of Civilization, the archaeologist Bryan Ward-Perkins establishes a sudden drop in material well-being that occurred alongside the barbarian invasions and the fall of the West. Temin’s evidence illustrates just what was lost.
Temin’s argument has implications for political economy more generally.
Karl Polanyi made an influential argument in the 1940s that there was nothing ‘natural’ about the market economy. In his view, the market economy was imposed by the state during the eighteenth and nineteenth century. Capitalism was a political project: ‘laissez-faire was planned’.
For Polanyi, the pre-market world was one where goods and services were primarily distributed by the principles of reciprocity (the gift economy) or redistribution (state control). Trade was a minor element of these economies. When it occurred it was dependent on personal relationships. Anonymous exchange was rare.
This argument underpins the often heard claims by far left academics and activists that capitalism is inflicted on societies by those with power, rather than the spontaneous result of any innate human desire to trade.
Polanyi’s thesis has not held up well. Temin’s book offers one illustration why. Markets and trade were certainly not ‘imposed’ on Ancient Rome. There’s no evidence that the Roman state wanted to upset an earlier gift economy and create markets; no reason to believe Roman politicians sought to break the chains of communal reciprocity and replace them with self-interest.
Yet Rome was a market economy nonetheless. In the absence of better evidence, we can only conclude that it was such an economy because participants in that economy desired it to be so. Those who produced, bought, sold, transported, invested, lent, and innovated in Rome’s integrated economy were not different to us. Ancient Romans wanted to improve their living standards and pursue their own goals. The market economy allowed them to do so.