(Ancient) Law and its Role for Financial and Economic Development (Or: Business Corporations in the Roman Republic)
Ulrike Malmendier, Professor
Economics
Applications for Fall 2024 are closed for this project.
One of the most exciting areas of research in economics is “Law and Economics/Finance." This research starts from a central question in economics: What are the causes of financial development and economic growth? Why do some countries flourish while others do not? The “Law and Finance” literature suggests that there is causal effect of countries’ legal systems on economic development. If, for example, market participants are protected against expropriation and legal rules keep transaction costs low, it will be easier to make economic progress than otherwise. The “counter-research” of the “Law and Politics” literature claims that this line of argument confounds cause and correlation. Economic development might be correlated with having a good legal system, but legal system and economic development are both outcomes of the political environment and the dominant political interests in a country.
One reason why this debate is so fierce is that definitive empirical evidence for either of those approaches is hard to come by. In order to cleanly distinguish the causal impact of law and of politics one would need to observe an exogenous “shock” to the system, i.e., some kind of perfect natural experiment that changes either legal or political circumstances in a country without the influence of other fundamental changes in the country. Given the scarcity of such natural experiments, careful and detailed analyses of individual historical cases have become a valuable part of the literature, even if they stop short of proving causality. In fact, much of the literature revolves around specific historical examples, mostly taken from the last two centuries.
In my research, I am expanding the current body of evidence to ancient Rome. I focus on a specific cornerstone of financial and economic development: the emergence of the business corporation. Contrary to widespread belief, the earliest predecessor of the modern business corporation was not the English East India Company but the Roman societas publicanorum, i.e. the “society of government leaseholders.” I use the Roman case to shed light on the “law and finance” versus “politics and finance” debate. It illustrates the limitations of the existing law and finance theories. In this case, legal restrictions (or the lack of legal development) per se appear to matter little as long as the law as practiced is flexible and adapts to economic needs. In fact, one of the most important periods of legal development, “classical Roman law,” appears to be negatively correlated with financial and economic development. I also show that ‘the law as practiced’ reflects prevalent political interests.
Role: This line of research builds on previous research I have conducted on the societas publicanorum (published as a book) and in the area of Law and Finance (published in an economics book chapter and a refereed journal article). The involvement of the URAP student(s) would consist of several steps:
Introduction:
1. Get to know the “Law and Finance” research (i.e., reading a few recent research articles in economics, which I will provide).
2. Get to know the relevant research in Roman Law, especially on the societas publicanorum (i.e., read some overview articles).
Research:
1. Help write brief overview articles on “societas” and “publicani."
2. Help (for a book project) linking the findings on the societas publicanorum to the modern law-and-finance debate.
3. Help finishing up the book project.
Qualifications: This project is suitable for students in Ancient History or Classics (ideally with some interest in law and/or economics) or students in Economics or Legal Studies with a very strong background in Ancient History, Latin, and ideally Ancient Greek. I am particularly keen to hire someone able to read ancient Greek, even just a little, and Latin.
Hours: 6-8 hrs
Social Sciences