Legal Evolution and Economic Growth

When we look at the Roman law of real security, is it possible to establish correlations, or even causations, between economic growth and contraction and the emergence, adaptation, or decline of legal institutions? Was the growth of the Roman economy from 200 bc to 200 ad accompanied by an increasing complexity of the Roman law of security? Can the emergence in the third century ad of antichresis and of conditional sales of pledged property be seen in the context of credit crises or periods of strong inflation; could legal institutions like this have contributed to economic recovery? Also, did the emergence of general pledges arising by operation of law in order to secure fiscal debts undermine the effectiveness of the Roman law of security? Did these fiscal pledges contribute to the decline of the Roman economy in the third century ad? Many of these questions can be answered affirmatively, some decidedly and others more hesitantly; in respect of fiscal pledges the most plausible answers are negative.

The epigraphic and other sources do not provide sufficient data (e.g., on economic growth, size of credit markets, and interest rates) to support a quantitative analysis.^[1389] Therefore, although it is plausible that there was a correlation between economic growth and contraction and the emergence of certain variants of pignus and hypotheca, it is impossible to prove ‘strong causal links?^[1390] Nevertheless, given that: (i) transactional practices usually reflect the economic needs of the parties?^[1391] (ii) many of these practices were accommodated by the jurists and the imperial chancery into the Roman legal system;99 and (iii) this resulted in a well- adapted legal framework for secured transactions,¹⁰⁰ it is a plausible inference that the Roman law of real security did adapt to economic needs and contributed to economic growth.

Economic growth and decline and legal evolution

The relatively widely accepted view is that there was major economic (per capita) growth in the second to first century bc, limited growth in the Principate, stagnation or decline after 200 ad, followed by recovery after 300 ad.“” In recent studies, the period of decline appears to start earlier than 200 ad, with the Antonine crisis of 165-180 ad, which was followed by a period of economic recovery.^[1392] ^{^[1393] ^[1394] ^[1395] ^[1396] ^[1397] There are various indices which reflect the levels of production, consumption, and economic performance in the Roman empire: shipwrecks, public buildings, housing stock, and ore smelting.™³ The following chart, which is based on levels of lead pollution (caused by emissions from lead-silver mining and smelting) in Greenland icecaps, to a large extent corresponds with what economic historians say about the expansion and decline of the Roman economy."¹⁴}

The chart does support the view that the Antonine crisis was to end a long period of sustained economic growth.™⁵ During the crisis, imperial silver mining suddenly collapsed, causing a debasement of silver coinage from 164-165 ad and a complete cessation of silver coinage from Alexandria, Palestine, and Syria."¹⁶ Nominal prices for a range of commodities (including

Year BC/AD

Figure 12.1 ‘Rome's secular cycles traced by lead pollution in Greenland ice’¹'’'"

wheat) doubled. Real land prices (expressed in wheat) plummeted because demand for land had sharply contracted.^[1398] Under the reign of Commodus (176-192 ad) the ‘sudden burst of inflation' must have hurt creditors seriously.10^[1399] ^{^[1400] ^[1401]}

Not controversial is that, particularly in the third quarter of the third century ad, events occurred which had negative impact on the economy of the whole empire: plague, barbarian invasions, and civil wars led to a significant fall of production and exchanges.

The result was a real crisis: desertion of farms, decline of cultivated land, and the paralysis of financial and banking practices caused by heavy inflation.¹"' Inflation, although it did not affect ordinary commercial exchanges too seriously, did have a devastating effect on banking activities, lending by private individuals, and on commercial activities dependent upon credit?“ It even seems that in the second half of the third century ad, professional bankers completely disappear from the scene: about 260 ad argentarii disappear from the sources, and after 300 ad nummularii as well.“^[1402] It may not be a coincidence that their disappearance coincides with the period of strongest inflation, and their reemergence in the second half of the fourth century ad, with a period in which imperial monetary and economic policies had curbed inflation.“^[1403] Following monetary and other reforms by Diocletian and Constantine, the first half of the third century ad appears to have been a period of economic recovery. The financial sector was revived: the evidence for banking and finance in this period exceeds that for any other period in Roman history.“^[1404]

Economic growth and legal evolution

Alan Watson, like many other important Romanists (e.g., Savigny, Schulz), observes: ‘There are no breaks in Roman legal history, only gradual evolution.'“⁵ The same gradualism is endorsed by mainstream biological Darwinism: natura non facit saltum.¹¹⁶ The evolutionary concept of ‘punctuated equilibrium', however, entails that sometimes evolutionary processes dramatically accelerate, causing sudden and radical changes in a system.“⁷ This also happens in social and legal evolution.^[1405] There are two periods in which evolutionary accelerations occurred in the Roman law of real security. The first period is the second half of the first century вс, in which almost all the remedies for pignus originated: interdictum de migrando, interdictum Salvianum, actio pigneratica directa, and (most importantly) the actio Serviana. The practice of pledging invecta et illata for farm leases originated in a period in which investment farming became prominent.

Likewise, the blooming urban rental markets (in Rome and other cities) for both living accommodation and commercial real estate will have stimulated the evolution of the law on urban rental agreements (including tenant's pledges).“^[1406] There is compelling evidence that in the last one hundred and fifty years of the Republic an economic revolution took place, in which not only agricultural patterns dramatically changed but also trade and financed^[1407] The increased inflows of bullion combined with the expansion of available credit produced a large increase in monetary liquidity. In its turn this resulted in ‘a major upward inflection in Roman economic activity and the creation both of a more complex system of production and distribution and of an enormous material culture that was to reach its height under the Principate'.^[1408] ^{^[1409] ^[1410] ^[1411] In this process, finance played an important role. Kay observes that ‘finance in general seems to be viewed by some modern Roman historians more as an arcane offshoot of the Eleusian Mysteries than as a dynamic service industry that can increase the prospects of wealth creation by helping economic agents, such as merchants and farmers, to obtain resources that will allow them to implement ideas for increased production'.i22 If (as I think) the actio Serviana already originated as a general pledge remedy in the first century вс,“³ this could then be regarded as an adaptation to the growing importance of credit in a commercializing economy. The second ‘punctuated equilibrium' took place in the Nerva-Antonine age, beginning with Hadrian's codification of the praetorian edict.“⁴ In this period most of the variants of pledge we know today emerged: the hypotheca contracted nuda conventione (Julian), the multiple pledge (Gaius, Marcellus), the pledge of claims (Pomponius), the floating charge of merchandise in tabernae (Scaevola), and the general pledge (Gaius, Scaevola, Papinian).
These are all adaptions of the legal system to its economic environment, which in their turn may have fostered further economic growth. These responses did, however, not take place immediately. If the levels of lead pollution do reflect economic growth and contraction in the Principate, the juristic evidence of the emergence of most variants of pledge must be located in a period of economic decline. However, the origins of these variants may very well lie in transactional practices from the preceding period, which was characterized by economic growth. The law often takes time to respond to economic change. Moreover, Roman law of the first century ad already had many of the features for an effective law of secured credit, albeit not always in a fully evolved shape. There were forms of non-possessory security (e.g., tenant's pledges and warehouse pledges) and generic pledges (invecta et illata), the products of pledged assets could be pledged, secured creditors could auction (or otherwise sell) the charged assets without court permission, and secured creditors had preferential rights of recourse. The main ‘deficiencies' of the Roman law of real security of the first century AD were the absence of multiple pledges and of general pledges. Crisis
When after the Antonine crisis (or perhaps several decades later) the long period of economic growth was followed by periods of economic contractions and rampant inflation, the law of real security seems to have responded more quickly, by allowing conditional sales and antichresis. They are typically forms of security for a subsistence economy and not for a monetized economy. However, where the monetary system itself malfunctions (heavy inflation), creditors may again be more interested in the physical assets or their products themselves than in realizing their monetary value. This could also work for the benefit of debtors, whose lack of cash flow prevented them from paying principal and interest in coin. For instance, the Historia Augusta mentions that in order to enable more Romans of small financial means (pauperibus) to purchase farmland, Alexander Severus offered interest-free loans which were to be repaid from the fruits of the land.^[1412] At the same time debtors run the risk of being exploited by their creditors, where the surplus value of the pledged property ends up in the pockets of the creditor (e.g., conditional sales for the amount of the secured debt), or where the value of fruits of the pledged property exceeds the statutory maximum interest rate.
In jurists' opinions (e.g., Marci. D. 20.1.16.9) and imperial constitutions of the third century (e.g., Alex. C. 4.24.3) we see, on the one hand, that conditional sales and antichretic pledges are allowed and, on the other hand, that debtors are protected. The popularity of general pledges may also have increased in times characterized by economic crises. It would be a mistake, however, to associate the law developed in the third century ad by Roman jurisprudence and the imperial chancery exclusively with economic decline. The jurists continued to elaborate and refine the existing body of rules for pignus and hypotheca. Even after the well of classical jurisprudence had dried up, the classical law of pledge was preserved in the constitutions of third-century emperors and their successors (in particular Diocletian, Gordian, Constantine and Justinian). Constantine's constitution on the lex commissoria in pledge agreements even decisively shaped the laws of execution for real security of the European ius commune and the modern codifications.^[1413]}

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Source: Verhagen Hendrik L.. Security and Credit in Roman Law: The Historical Evolution of Pignus and Hypotheca. Oxford University Press,2022. — 448 p.. 2022

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