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The chapter analyzes the basis of the market economy in classical Rome, from the perspective of personal vs impersonal exchange and focusing on the role of the state in providing market-enabling institutions. It starts by reviewing the central conflict in all exchanges between those holding and those acquiring property rights, and how solving it requires reducing information asymmetry without endangering the security of property. Relying on a model of the social choice of institutions, the chapter identifies the demand and supply factors driving the institutional choices made by the Romans, and examines the economic circumstances that influenced these factors in the classical period of Roman law. Comparing the predictions of the model with the main solutions used by Roman law in the areas of property, business exchange, and the enforcement of personal obligations allows the chapter to propose alternative interpretations for some salient institutions that have been subject to controversy in the literature, and to conclude with an overall positive assessment of the market-enabling role of the Roman state.

In modern literature the Roman law of real security is often regarded as ineffective, to which it is usually added that this did not seriously hamper the granting of credit, as in classical Rome personal security was far more important than real security. In this contribution it will be argued that this view is not correct. The sophistication of the Roman law of real security suggests that it must have played a significant role in credit transactions. Moreover, it will be argued that the Roman law of real security satisfied nearly all the requirements for an effective law of secured transactions. Its main weakness was its lack of publicity for security created over real estate and its lack of protection of bona fide third parties in respect of movable assets. It seems, however, that for a long time social norms (infamia) and transactional practices, and later criminal liability (stellionatus), provided sufficient safeguards against a malfunctioning law of real security.

Ancient Rome was an expansive and wealthy empire that created a trading network that relied on common language(s), law, money, and a system of measurement. An important component of this network was the rectangular system (RS) of land demarcation known as centuriation, which was the forerunner of similar systems adopted in the United States and Canada and in other parts of the British Empire in the eighteenth and nineteenth centuries. This purposefully implemented demarcation system persists to the present and can be found in the landscape throughout the territories of the former Empire, especially in Italy and North Africa. It was typical as Rome expanded its territories to implement the RS system before new lands were settled by Romans. There was considerable variation in land demarcation patterns across the Empire. This chapter examines the determinants of centuriation by describing a model in which the state chooses between adopting RS to demarcate new lands or to utilize existing demarcation. The chapter examines data on centuriated areas and accounts from archeologists and classics scholars to examine the economic structure of Roman centuriation. The chapter generally finds that centuriation was adopted in flatter, more fertile lands, and later in time as survey techniques improved and administrative structures were expanded. The chapter also finds that alignment tended to be perpendicular to rivers and streams in order to minimize demarcation costs and to facilitate a network of canals for drainage. Finally, the chapter provides conjectures about the impact on centuriation on development and growth within the Empire.

This chapter argues that the Roman law system of a staged system of pleadings, which emerged in the mature formulary system and then was eventually carried over into the common law, offers a superior way to understand and classify legal doctrine in ways that lead to overall economic efficiency. The arguments here stress the conceptual formation of classical Roman law on matters that retain their full salience today. It does not deal with the details of the historical evolution of Roman procedure. Indeed, its main purpose is to contrast the genius of the staged system of Roman law pleading with a flaw in the modern conception of civil procedure, which funnels all disputes through a reasonableness inquiry. In dealing with practical legal disputes it is virtually impossible to generate some major rule that leads to optimal results in a wide range of cases. The pleading system takes the reverse tack and seeks to achieve optimality through a system of successive approximations, starting with the prima facie case, working through defenses, and most critically, replies and further pleadings, finishing with joinder of issue to incorporate all the elements that are traditionally thought relevant to systems of tortious (as the civil side of delict) and contractual responsibility. These elements include identifying those obligations that should be strict, those that are governed by negligence principles, and those as intentional harms on both the tort and contract side of the line. The approach should be understood as an explicit rejection of the dominant modern approach that removes all the hard-edge distinctions and uses a generalized conception of reasonableness as an umbrella conception that encourages decline of doctrine and the ad hoc resolution of particular disputes.

Not much is known about the organization of the trade between Egypt and India in Roman times. Roman law is obviously well documented in surviving texts of various sorts. Trade practices in the Indian Ocean routes are sporadically known from surviving manuscripts. Actual organizational documents are practically unavailable with the rare exception of the Muziris Papyrus. The Papyrus, dated from the mid-second century CE, known also as the Vienna Papyrus, was first published in 1985. It deals with the finance and organization of trade on the route between Alexandria and Muziris in India. It adds a new dimension to our knowledge of the organizational practices of Eurasia trade in antiquity and is in fact the best source available up until the era of the Cairo Geniza, almost a millennium later. There is an ongoing debate about its nature in the papyrology literature. I will provide my own analysis of the papyrus based on legal history, economic analysis of law, and institutional economics theory. I will evaluate its nature as a loan or agency contract, as a standard form template, and as a forerunner of the sea loan and the commenda.

Roman businessmen eager to launch a joint business venture could choose among three legal forms: the societas, the societas publicanorum, and the peculium of a commonly held slave. None of these forms led to large capital associations, let alone business corporations with publicly traded shares. The high level of instability is one of the key explanations: under Roman law, it was virtually impossible to commit capital for the long term and finance capital-intensive enterprises. The societas was inevitably liquidated following numerous dissolution events; its members could withdraw their money at any time; and private creditors were not barred from seizing common assets. The peculium was even more unstable: In addition to the dissolution events of the societas, the joint venture came to an end and all peculium items reverted back to the masters when the commonly held slave died. While the societas publicanorum developed into a more stable institution over time, during the same period, its business almost disappeared as state authorities stopped putting capital-intensive projects out to tender. How can a modern reader make sense of the picture that emerges from the sources? The present chapter suggests that reservations in the social and political setting, rather than economic factors or oddities of Roman legal doctrine, caused business associations to remain small. This is an important lesson from history, both for the theory of the firm and for the role that law plays in it.

This chapter examines the role that the contract of mandate (mandatum) and the related institution of “unauthorized administration” (negotia gesta) played in Roman economic life. Mandate represented a major form of agency in Roman society, but it presents problems of incentives because it was uncompensated: the agent might carry out significant tasks for the principal, or mandator; these tasks might involve considerable expense and even financial risk on the part of the agent, but the agent was not to profit from his service. On the basis of juridical evidence from the Digest and the Code of Justinian, I examine how mandate transformed a relationship that had its roots in upper-class Roman notions of friendship and reciprocity into a contractual form that remained useful as it provided property owners advantages with high-valued financial transactions, such as the purchase of property. In addition, it provided a useful way for Roman businesspeople to overcome problems of information in the credit market.

The concept of collective responsibility, or group punishment, for crimes or other harmful acts, was a pervasive feature of ancient societies, as exemplified by the Roman Senatus Consultum Silanianum, a resolution by the Roman senate in 10 CE, and the Greek notion of “pollution.” This chapter briefly surveys historical examples of collective responsibility, which have largely given way to the modern concept of individual responsibility, though vestiges of collective responsibility remain in modern culture and law (notably in the form of vicarious liability). The chapter then lays out a theoretical analysis of the choice between collective and individual responsibility that highlights those circumstances in which each is preferred as a law enforcement strategy.

This chapter analyses the mainly juridical evidence (from the Digest and the late antique Codes, as well as Cassiodorus’ Variae) on the working of the market in the Roman Empire and the role played by the imperial authority in regulating it, in the light of the conceptualizations of the new institutional economics. This evidence seems to suggest undeniably not only that the economy of the Roman Empire, from its very beginning in the late Republic to late antiquity, was characterized by the free market, but also that maintaining competitive markets was the consistent and deliberate policy of the Roman authority throughout the whole of Roman history.

Ancient laws addressed all types of wrongdoing with a single set of remedies that over time pursued a changing mix of retaliatory, punitive, and compensatory objectives. In this paper, we consider the historical transition from retaliatory to punitive justice, and the subsequent transition from punitive to compensatory justice. This paper shows how the optimal level of enforcement varies under the three corrective regimes. Crimes that create a larger net social loss require lower levels of enforcement under retaliatory regimes. The optimal level of enforcement is instead independent of the degree of inefficiency of the crime when punitive and compensatory remedies are utilized. The paper provides several historical illustrations and sheds light on some of the legal paradoxes of ancient law.

This chapter examines the internal economic organization of the peculium servi communis—that is, of separate business assets assigned to a slave—and its (external) relationships with creditors. Literary, legal, and epigraphic evidence points predominantly to businesses of small or medium size, suggesting that there must have been some constraints to growth. We identify both agency problems arising within the business organization (governance problems) and agency problems arising between the business organization and its creditors (limited access to credit). We suggest that, although the praetorian remedies had a remarkable mitigating effect, agency problems operated as a constraint to the expansion of these business organizations, both in terms of the number of individuals involved and in terms of the amount of capital invested.

Many legal systems show evidence of having evolved out of a decentralized system of privately enforced law. Our very imperfect information on early Roman law, in particular the surviving texts from the law of the Twelve Tables, suggests that that was the case for it as well. Punishments for what we would consider crimes largely consisted of damage payments, while enforcement of court verdicts seems to have been largely the responsibility of the plaintiff, as was compelling the defendant to come to court. The earliest procedure for trial (legis actio sacramento) took the form of a bet on which side’s claim was true, with the money deposited by the losing party forfeiting to the state. Arguably its function, like that of a trial in a feud system such as that of saga-period Iceland, was to establish for third parties which of the two litigants was in the right and so entitled to use force if the losing litigant refused to obey the judgment. There was, however, an exception to that pattern for offenses against religion or directly against the state. Privately enforced systems, most notably early Irish law, make use of sureties to enforce contracts and judgments. The same was true of Roman law throughout its history, although with many detailed differences from the Irish. Over time, responsibility for prosecution and enforcement shifted from the plaintiff to state actors. But even in its final form as codified by Justinian, prosecution of both civil and criminal offenses was primarily the responsibility of private citizens.

The Roman law remedies for failure to disclose in sales contracts were developed by two different institutions: that of the aediles, with jurisdiction on market transactions effected through auctions, and that of the praetor, with general jurisdiction including private transactions. The aedilician remedies—the actiones redhibitoria and quanti minoris—allowed for rapid transactions and inexpensive litigation but generated some allocative losses ex post, as they did not incentivize the parties to exchange information about idiosyncratic characteristics of the goods for sale. In contrast, the remedy developed by the praetor—the actio ex empto—implied lengthier transactions and more expensive litigation but eliminated the ex post allocative loss, as it fully protected the buyers’ idiosyncratic interests. The analysis reveals that these Roman law remedies maximized the value of the underlying contracts and sheds new light on how differences in the lawmaking institutions affect the law produced by them.