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What Do Economists Think About the Roman Empire?
A new TikTok trend has people wondering why men think so frequently about the Roman Empire, but what do economists think about the Roman Empire?
You may have heard of a peculiar TikTok trend where people ask their partners how often they think about the Roman Empire. It might seem like an odd question, but it's given us a unique opportunity to connect the ancient world to modern economics. We're not here to discuss emperors or gladiators; we're here to uncover the economic lessons hidden within the rise and fall of this ancient civilization.
Comparative Economic Systems
Imagine a world where you have the freedom to choose your preferred economic system. Sounds like something out of a sci-fi movie, right? Well, the Roman Empire provides a unique lens through which we can explore different economic structures.
At various points in its history, the Roman Empire resembled a centrally planned economy, not unlike the former Soviet Union or present-day North Korea. In these systems, the government had significant control over resource allocation and production. It might remind you of the old Soviet days, when the state dictated what goods were produced, often leading to inefficiencies and shortages. For the 4th century Roman government, it meant buying grain during periods of shortages and selling it at a price fixed far below the market price.
On the flip side, during the Roman Republic and other periods of the Roman Empire, we see echoes of laissez-faire capitalism, akin to the United States or Western European nations. Here, individuals and private businesses dominated economic decision-making, competing in open markets to determine prices, quantities, and resource allocation.
These different systems come with trade-offs. Centrally planned economies might achieve wealth distribution but can stifle innovation and growth. Capitalist systems can foster dynamism but can lead to income inequality. So, the Roman experience opens a window into modern debates about capitalism, socialism, and mixed economies where we strive to find the right balance.
Currency Devaluation & Inflation
The Roman Empire didn't have dollars or euros, but they did have the denarius—a silver coin. Initially, it was pure, almost 100% silver. As the empire expanded and faced financial pressures, things changed. Over time, the silver content of the denarius dwindled to around 86%. This gradual debasement had consequences, and one of them was inflation. It's like a slow and steady rise in the prices of things we buy.
As the Roman government mixed the denarius with less valuable metals like copper, they essentially increased the total supply of currency. At the same time, each coin's intrinsic value decreased. Merchants noticed this and began raising their prices, compensating for the weakening purchasing power of the denarius. Consequently, prices for goods and services began to skyrocket.
Imagine a loaf of bread that once cost one denarius, now requiring several. Inflation eroded people's buying power and created economic instability. Citizens would have found it increasingly challenging to plan for the future, as the value of their savings dwindled, and the unpredictability of prices made long-term financial decisions uncertain. It's not unlike today's conversations about central banks and their actions affecting the prices we see on our grocery store shelves.
Infrastructure and Economic Growth
Imagine a world where an intricate network of roads and aqueducts connects distant regions, boosting trade and igniting economic growth. Ancient Rome's commitment to such infrastructure sets a powerful example of how public investment can stimulate an economy.
Think of infrastructure as the circulatory system of the economy, facilitating the movement of goods, people, and information. Roads, bridges, and communication networks act as the conduits for business transactions, job access, and consumer convenience. As the popular saying goes, all roads lead to Rome:
But why do governments invest in these projects instead of private companies? One reason is that infrastructure investments often generate spillover benefits for society as a whole. These benefits go beyond what private companies can capture as profits. Private can invest in infrastructure, but sometimes it makes more sense for the government to make the investment.
In Roman times, road construction reduced transaction costs, which are the expenses incurred during economic exchanges. Less time and resources were spent on travel, making trade more efficient. These roads opened new markets, boosted the exchange of goods and services, and even facilitated the spread of knowledge and culture across the vast Roman Empire.
And that's just like what we see today with debates about the economic benefits of modern technology platforms, transportation systems, and digital ecosystems that connect users worldwide.
Taxation, Fiscal Policy, & Welfare
Imagine a society where tax collectors bid for the right to collect taxes, creating a complex web of fiscal arrangements. This was the reality in the Roman Empire, and it offers a fascinating glimpse into the world of taxation and fiscal policy.
In ancient Rome, tax farming was a common practice. Private individuals or groups would bid for the privilege of collecting taxes in a specific region, aiming to profit from the difference between their bid and the actual tax collections. It's a bit like modern discussions about who gets the contract to collect tolls on a highway. The wealth acquired through taxes was used to fund the military, public works projects, and establish trade networks.
The Roman Empire had a pioneering welfare program known as the alimenta, which operated from around 98 AD to 272 AD. This program was likely introduced by Emperor Nerva and later expanded by Emperor Trajan in the second century AD.
The alimenta had a specific focus—it aimed to support orphans and underprivileged children, but primarily within Italy, and nowhere else in the vast empire. The program provided financial aid, food, and subsidized education to these children. It was essentially an Imperial gift, funded by the spoils of wars and estate taxes on landowners. Its exact purpose remains debated among scholars, but it did last for more than 150 years, making it a fascinating chapter in the economic history of the Roman Empire.
The trend may have initially appeared silly, but the rise and fall of ancient Rome offers profound lessons in economics. From comparative economic systems to currency devaluation, infrastructure investments to taxation and fiscal policy, the economic principles that shaped the Roman Empire continue to show up in discussions in our modern world. The Roman Empire may have crumbled, but its legacy endures as a timeless source of economic wisdom.
There have been 95 emperors of the (Western & Eastern) Roman Empire [Metropolitan Museum of Modern Art]
According to its census, the Roman Empire had approximately 4,937,000 inhabitants in 14 CE [World History Encyclopedia]
You can purchase a cryptocurrency known as Denarius for around $0.0526 [Crypto.com]
The Roman Empire reached the peak of its territorial expansion under Trajan spanning 5.0 million square kilometers (1.9 million square miles) [Social Science History]