Mandate and the Management of Business in the Roman Empire

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.

Roman Business Associations

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.

Incomplete Organizations

This chapter analyzes ancient Rome’s law of business entities from the perspective of asset partitioning, the delimiting of creditor collection rights based on the distinction between business assets and personal assets. Asset partitioning, which is an essential legal attribute of modern business forms such as the partnership and the business corporation, reduces borrowing costs by simplifying credit-risk assessment and expediting insolvency proceedings. The chapter finds that ancient Roman business arrangements, such as the societas and the slave-run business endowed by the slaveowner with a peculium, did not give business creditors the first claim to business assets, making these forms of organization non-entities according to the criterion of asset partitioning. It appears that the only true legal entity used to form profit-seeking firms was the societas publicanorum, which roughly resembled the modern limited partnership. But use of that form was generally confined to firms that provided public services under contract with the state. Moreover, the societas publicanorum was essentially a creature of the Republic, and was largely abandoned during the Empire. Although Rome had a complex economy and sophisticated commercial law, and was familiar with most of the types of asset partitioning seen in modern legal systems, it ultimately failed to develop legal entities for general use in commerce. Apparent reasons include the Roman aristocracy’s disparagement of commerce, the emperors’ wariness of strong organizations outside the state, and the society’s continuing reliance on the family—a durable and complex legal entity in its own right—to handle many commercial needs.

The Constitution of the Roman Republic

The constitution of the Roman Republic featured a system of checks and balances that would eventually influence the American founders, yet it was very different from the system of separation of powers that the founders created. The Roman senate gave advice but did not legislate; the people voted directly on bills and appointments in popular assemblies; and a group of magistrates, led by a pair of consuls, proposed bills, brought prosecutions, served as judges, led military forces, and performed other governmental functions. This chapter analyzes the Roman constitution from the perspective of agency theory, and argues that the extensive checks and balances, which were intended to prevent the recurrence of monarchy, may have gone too far. Suitable for an earlier period in which the population was small and the political class was homogenous, the constitution proved unworkable when Rome acquired a vast, diverse empire. The lessons of Roman constitutionalism for the American constitution are also discussed.

What Can the Endogenous Institutions Literature Tell Us About Ancient Rome?

A large and growing literature on “endogenous” institutions seeks to understand the circumstances under which institutions of particular types arise. One of the literature’s guiding principles is that, because institutions structure the incentives that members of a society face, if institutions are not well matched to a society’s circumstances—that is to say, not designed to inspire productive activities, broadly defined—the society will not thrive. We will discuss how this approach can help modern scholars understand the institutions of the Roman Empire, a society that clearly did thrive. The focus of this paper will be on the Roman imperial government’s policies that promoted the private ownership of land. These policies were crucial to the efforts of the Roman imperial government to create a class of landowners in the cities across the empire who would share in the burdens of ruling the empire. However, the extent to which landowners could dispose of their properties freely was limited by the overall constraints of an ancient agrarian economy and the fiscal requirements of the Roman state.

Statistics in Ancient History

This chapter uses new data to extend the argument that there was an integrated wheat market in the late Roman Republic and early Roman Empire. I explore the meaning of randomness when data are scarce, and I investigate how we recreate the nature of ancient societies by asking new questions that stimulate the discovery of more information. The case for a prosperous Roman society extending the length of the Mediterranean Sea is strong. This chapter draws on and extends work reported in my book: The Roman Market Economy (2013).

Agency Problems and Organizational Costs in Slave-Run Businesses

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.

Rome and the Economics of Ancient Law I

This chapter serves as an introduction to the essays in this collection by exploring the ways in which contemporary economic theory can be used to ask new questions about the law and economies of ancient societies. The chapter begins with a review of the importance of Roman law as an academic discipline to legal historians. It then introduces the overall theme of the collection by reviewing the ways in which historians of the ancient economy and of ancient law have made use of economic theory to understand better the relationship between law and the economy in the Roman world. The chapter then goes on to discuss the individual chapters in this volume. It focuses in particular on the ways in which economic theory informs the approaches that the authors, both legal and economic historians, take in their essays. The chapter will thus set the individual chapters in a broader scholarly perspective and will seek to explain why economic methods are a fruitful way to understand Roman Law and Roman economic history.

Setting the Rules of the Game

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.

Law-Making and Economic Change during the Republic and Early Empire

When the Law of the Twelve Tables was promulgated, the Roman economy was overwhelmingly agricultural. As social and economic conditions became more complicated, the formalistic law of early republican times no longer sufficed. The rise of the ius honorarium can be seen as a response to these new circumstances. While scholars have tended to assign all important developments to the praetors of the second and first centuries BC, at least some important changes in the law took place earlier. The bigger picture that emerges is that, contrary to the tenets of institutionalism, Roman law developed pari passu with the economy. Roman law functioned as an autonomous discipline, governed by its own rules and principles. Law-making magistrates and jurists certainly responded to new juridical challenges created by the emergence of an increasingly sophisticated economy, but their principal aim was not to create legal rules that were conducive to economic development or growth but to find practical solutions to juridical problems created by economic developments. Finally, the Principate, to which a large proportion of the surviving evidence belongs, saw far fewer legal innovations than the last centuries of the Republic. The explanation must be that there was less need for legal innovation because most of the economic developments creating a need for new legal remedies had already taken place. Ironically, the period in which the pace of legal change had slowed down has produced most of the surviving evidence.