Legal Institutions and the Management
of Businesses in the Roman Economy

Dennis P. Kehoe (Tulane University)

In recent years, the performance of the Roman economy has been the subject of a lively debate among ancient historians, who have focused primarily on population and technology as the crucial factors in determining the possibilities for economic growth. But within the constraints imposed by population and technology, law and legal institutions are likely to have played an important but complex role in shaping the Roman economy. In previous CAMWS papers, I have sought to show how the methodologies in the current debate among economists and legal historians, particularly in the fields of Law and Economics and the New Institutional Economics, can be used to understand better the fundamental relationships shaping the agrarian economy of the Roman empire. In this paper, I would like to draw on these same methodologies to address another vital aspect of the Roman imperial economy, namely, the ways in which wealthy Romans managed their often diverse and far-flung business interests.

The organization of businesses in the Roman world is a topic of particular scholarly focus. Most notably, Jean-Jacques Aubert’s study of the management of businesses through agents, or institores (Business Managers in Ancient Rome: A Social and Economic Study of Institores, 200 B.C. – A.D. 250 [Leiden, 1994] has brought to light many details of how a wide variety of businesses in the Roman world were organized, Other studies have focused on the so-called actions adiecticiae qualitatis, which provided a legal mechanism to hold liable a property owner for contracts entered into by agents, who were often slaves or sons in power. I propose to approach to organization of business from a different perspective, by examining how Roman property owners dealt with the major issues that economists have identified as affecting the performance of modern business enterprises, namely the ability of the principal (i.e., the owners of a modern firm, or the property owner in the Roman world) to establish the proper incentive system to induce their agents (employees in modern firms) to manage the business in such a way as to promote his or her interests. One of the chief problems is the asymmetries of information that existed between principals and agents: the agent in managing a business has a great deal more knowledge about day to day affairs and will be in a position to make profits for himself without necessarily benefiting his employer. This could be a particular problem in the Roman world, where many wealthy Romans had business interests all over the Mediterranean but communications were poor. I will argue that the frequent reliance of Roman property owners on agents, such as slaves or freedmen, over whom they exercise social control provided important advantages that helped to overcome some of problems in monitoring business agents resulting from the poor state of communications in the Roman world. At the same time, this type of organization helped to create incentives for the agents to engage in business in such a way as to benefit the Roman aristocratic property owner.