Journal of Institutional Economics: page 1 of 24
C Millennium Economics Ltd 2018 doi:10.1017/S1744137418000188
The failure of ancient Greek growth:
institutions, culture and energy cost
GEORGE TRIDIMAS
∗
Ulster University Business School, Department of Accounting, Finance and Economics, Shore Road, Newtownabbey,
BT37 0QB, United Kingdom
Abstract. Along with introducing democracy, advancing philosophy and excelling
at the arts, during the period 800–300 BCE ancient Greece achieved substantial
economic prosperity. Recent literature attributes the efﬂorescence to the
institutions and culture of democratic city-states. However, the city-states failed
to initiate sustained growth. Technological progress remained slow and the
economic efﬂorescence ended after the prevalence of Macedon and the subsequent
Roman conquest. The present study scrutinises the roles of city-state institutions
and culture. It shows that ultimately ancient Greece could not sustain long-run
growth because a multitude of independent small city-states prevented the
exploitation of economies of scale and stoked continual wars that exhausted them
ﬁnancially and militarily, and because of a culture valuing landholding,
self-sufﬁciency and collectivist attitudes.
1 Introduction
Recent research has documented that over the period 800–300 BCE, in addition
to democracy and great intellectual and artistic accomplishments, ancient Greece
experienced signiﬁcant population growth and substantial improvement in the
standard of living. However, this ‘efﬂorescence’ did not last. Economic prosperity
relied on expanding trade rather than industrial development and the economy
failed to sustain growth. After the 322 victory of Macedon over Athens
and the Greek city-states, democracy declined and the efﬂorescence gradually
unravelled.1
In 146, the Roman conquest of mainland Greece ended any prospect
that the city-states would ignite lasting development. Thence, ancient Greek
economic performance displays an inverse U-shape. Scholars have focused on
the upward part of this proﬁle. Applying modern theories of institutions and
culture as the fundamental causes of the Industrial Revolution, they attribute
the growth of the ancient Greek economy to institutional innovation, especially
the establishment of city-state democracy, and an accompanying ‘robust civic
∗Email: g.tridimas@ulster.ac.uk
1 The year 322 is a standard cut-off date. In the period 323–146 BCE (from the death of Alexander
the Great to the Roman occupation), democracy continued in the city-states of the Aetolian and Achaean
Leagues and even Athens managed to regain a modicum of independence from Macedon.
1
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2 GEORGE TRIDIMAS
culture’ that guided social norms. Institutions are ‘the rules of the game’ that
constrain behaviour, regulate conﬂict, govern exchanges and determine wealth
accumulation. Culture is the set of customary beliefs and values governing
how nature and society work and the norms of behaviour derived from those
beliefs that are transmitted from generation to generation. According to Morris
(1994: 365) ‘economics, politics, and culture turned together in a tight circle,
transforming all aspects of Greek life’. The present paper focuses on the
downward part of the proﬁle and enquires whether the same fundamental factors
contained unfavourable elements that may explain the failure to sustain growth.
In addition, it explores how far geographical factors were in any way responsible
for the economic regression.
Section 2 surveys the current state of knowledge about a range of economic
variables in ancient Greece. Section 3 summarises modern scholarship that
ascribes the ancient Greek efﬂorescence to democratic institutions and prevailing
culture. Section 4 searches for ﬂaws in ancient Greek city-state institutions that
worked against development focusing on three elements: small scale economy,
ﬁercely competitive democratic setup and incessant wars. Section 5 focuses on
cultural traits that might have impeded development and especially attitudes
towards work, wealth accumulation and individual rights. Motivated by theories
of growth that emphasise the importance of deep-seated geographical factors,
Section 6 examines the cost of energy from animate sources relative to labour as
an obstacle to growth. Section 7 concludes.
2 The performance of the ancient Greek economy
Scholars have long debated whether the nature of the ancient Greek economy
was primitive or substantive, that is, embedded in politics and religion, or
modernist/formalist, operating as an independent area of interest (Engen, 2004,
offers an informative survey). According to the former, and Max Weber in
particular, ancient Greece (and Rome) lacked an ideology with an interest in
enterprise and growth, thereby failing to start a capitalist transformation. The
elites were a parasitic class engaging in politics instead of productive investment.
Exchanges aimed to satisfy basic human needs and were based on reciprocity
and state redistribution rather than market forces. The ancient economy was
embedded in the political and religious spheres, and people were interested
in status, ‘an admirably vague word with considerable psychological element’
(Finley, 1973: 51), rather than proﬁt maximisation. It remained small scale,
focused on household production, and pursued the ideal of self-sufﬁciency at the
household and the city-state level (see also Millet, 2000; Sallares, 1991). Living
off rents was ‘morally superior’ to market pursuits and neither private nor state
actors managed their economic affairs rationally. As only opening up new lands
could generate growth, the city-states could never escape the Malthusian trap.
On the other hand, in the modernist/formalist account the ancient economy
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The failure of ancient Greek growth 3
was market-based with interconnected markets, independent of social relations,
and ran according to commercial principles (Burke, 1992; Cohen, 1992; Harris,
2002).
Over the last few years, a number of studies have shown that the ancient
Greek economy experienced considerable growth and prosperity, including
the development of complex market transactions, sophisticated contracts and
expanding international trade in basic commodities and luxuries. Davies (2007:
361) detects a ‘strong hint of a Protestant ethic’ in the pursuit of proﬁts. Foxhall
(2007) rejects binary labels, arguing that both the modern and the ancient
economies are embedded, as they are products of cultural and social systems.
Most recently, Harris and Lewis (2015), and Bresson (2016) argue that the
‘New Institutional Economics’ approach and the emphasis on transaction costs
offers indispensable insights for understanding the choices and rationality of
the ancient economic agents. Scouring through the extant sources, they amass
evidence showing that contrary to the primitive view, farmers ran their business
with the aim of improving yields and proﬁts, and far from being ‘consumer’ or
‘parasite cities’, city-states were undoubtedly manufacturing sites. For example,
Halkos and Kyriazis (2010) calculate that in Athens the combined shares of the
manufacturing and service sectors in employment and output exceeded that of
agriculture.
Using archaeological and forensic evidence (the ancients did not collect ﬁgures
on any economic variables), scholars conclude that during the Archaic times,
800–500, and Classical period, 500–300, the city-states of ancient Greece were
prosperous and none more so than democratic Athens, especially during the latter
part of the 4th century. Over the 500 years between 800 and 300, the population
grew tenfold. It is a measure of the success of the ancient economy that in the later
4th century BCE the population of mainland Greece (the Peloponnese, Continental
Greece, Thessaly and the Aegean and Ionian Sea islands) was between 2.75 and
3.5 million people, while in 1890 CE it stood at 2.3 million. Most remarkably,
real per capita consumption rose by an annual rate of 0.18%, greater than the
0.10% of the Early Roman Empire, 30 BCE–284 CE, and not far-off the 0.20%
of 1580–1820 pre-industrial Holland (Ober 2015). During the Classical period,
about a third of the population of mainland Greece imported its food, and about
a third of the wider Greek world lived in urban areas (ibid.).
Other indicators show a signiﬁcant improvement in living standards. Median
house surface expanded from 80 square metres in around 800 BCE to 360 square
metres in 300 BCE (Morris, 2004). Wealth and income inequalities were present,
but were comparable to contemporary capitalist economies. Regarding Athens,
Patriquin (2015: 40) writes that ‘close to three-quarters of the citizens had some
access to land – their own means of production which enabled them to avoid
exploitation (that is, they were not required as part of coercive social relations
to hand over part of their produce to members of another social class)’. For late
4th
-century Athens, Kron (2011) calculates a Gini coefﬁcient of 0.71 comparing
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4 GEORGE TRIDIMAS
favourably to 0.79 in 1427 Florence, 0.95 in 1911 England and 0.93 in 1912
USA. For the same period, and for the income distribution of the entire Athenian
population (citizens, free aliens or metics, and slaves), Ober (2015) estimates a
Gini coefﬁcient between 0.40 and 0.45. In comparison, the Roman Empire Gini
was also in the range 0.42–0.44, but the middle-range frequency (between the
richest and the poorest) was substantially larger in the case of Athens (ibid.:
90–91). Similarly, Scheidel (2010) shows that average wages for an artisan
in Classical Athens were several times the subsistence cost, implying a robust
non-elite consumer demand. This rather populous ‘middling’ class of citizens
living above subsistence established direct democracy and took control of policy
making from the elite. Growing per capita income meant that the size of the
market was increasing fuelling demand, generating trade and paying for imported
luxuries.2
From the Archaic period onwards, important technical innovations, a
proximate cause of productivity growth, took place including the invention
of the alphabet, minting of coinage, hoplite warfare, war machines and
shipbuilding, using levers, wedges, screws, ratchets, pulleys and gears. However,
unlike the mechanical inventions, neither the alphabet nor coinage directly
increased manufacturing productivity. Surveying technological progress from
archaic Greece to the Roman Empire, Schneider (2007) uncovers signiﬁcant
developments in the grain mill, oil and wine presses, ceramics and glass,
architecture and building techniques, sea and land transport and water lifting.
However, ‘technological change remained in many cases spasmodic and
dependent on speciﬁc contexts’ (p. 167).3
As a result, ancient Greek growth,
as in other growth episodes before the Industrial Revolution, was propelled
by a ‘commercial expansion’ driven by institutional change and institutional
innovation, and realised through open trade rather than technological progress,
which was slow. Learning how to farm, or to do metal or building work was a
slow process based on experience acquired over time; reliance on such empirical
knowledge rather than scientiﬁc education implied slow productivity growth.
2 ‘The market of Athens was so extensive that it had to be subdivided into parts taking their names
from the predominant activity in each part, e.g. tanneries part, stonemasons, etc.’ (Halkos and Kyriazis,
2010: 269).
3 Some eye-catching technological innovations included the inventions of Archimedes (287–212 BCE)
using levers, screws, a heat-ray from parabolic mirrors, and the giant Syracusan ship (Bresson, 2016: 88).
In the 4th century, Archytas of Taras, a mathematician, politician and philosopher, had reputedly built
‘a form of a wooden dove, which was connected to a pulley and counterweight and “ﬂew” up from a
lower perch to a higher one, when set in motion by a puff of air’ (Stamford Encyclopedia of Philosophy,
available at https://plato.stanford.edu/entries/archytas/, accessed 17 May 2018). Towards the end of the
Hellenistic period, the introduction of the rotary mill and subsequently the watermill cut the energy
and time costs of grain grinding. More strikingly, Heron of Alexandria, a 1st-century BCE engineer, had
understood the properties of air, the void, and the behaviour of liquids under the inﬂuence of gravity, and
built a crude steam engine (Bresson, 2016: 76–79). However, such inventions came when the city-state
economy had already declined.
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The failure of ancient Greek growth 5
3 Institutions and culture as causes of the ancient Greek efﬂorescence
The fundamental causes of growth
Per capita output grows when the quantities of the factors of production, land,
labour and capital, expand and when the productivity of those factors increases,
chieﬂy because of improvements in technology and organisation. Micro- and
macroeconomic policies may also buttress the growth process. But sizes of factors
of production, technological progress, organisation, and government policies
are endogenously determined, and constitute proximate causes of growth.
The fundamental causes of growth determine the incentives of individuals to
produce and trade, and of governments to choose policies that assist market
trades.4
Acemoglu et al. (2005) distinguish between three fundamental causes:
institutions, culture and geography.
The supremacy of institutions thesis argues that the power structure in society
is the main determinant of income growth. Political and economic institutions,
which protect investors against predatory taxation, hold the government to
account, secure property rights, offer equal access to resources, and protect
freedom of contracts and the rule of law encourage investment in human capital
and spur technological innovation. In this account, the landmark event was the
1688 Glorious Revolution when the English parliament won against King James
II (Acemoglu et al., 2005; North et al., 2009). However, even though the king
became more dependent on the parliament than before, recent research shows
a number of weaknesses in the role of institutions on economic growth (Ogilvi
and Carus, 2014, offer a survey). For example, Hodgson (2017) demonstrates
that the Industrial Revolution followed a post-1688 ﬁnancial transformation
precipitated by Britain’s expanding trade and the need to ﬁnance its war efforts.
Cultural causes of development and especially the Industrial Revolution
propose a number of disparate mechanisms. Clark (2007) focused on the
transmission of cultural values by a biological–demographic chain, where in
16th
- and 17th
-century England, the economically successful sired more children
than the less successful, forming a social environment dominated by middleclass
values. Mokyr (2010) argued that an ‘industrial Enlightenment’ took
place, a scientiﬁc revolution, which placed observation and experimentation as
the bases of knowledge and changed attitudes in politics, including tolerance
for intellectual innovation. McCloskey (2010), emphasised ‘talk and ideas’,
especially liberty and equality, resulting in public acceptance of the rise of market
traders and manufacturers, previously despised as vulgar by the landed elite.5
4 It is of course possible that random events, which affect adversely the proximate factors of growth,
may feed back into the fundamental factors and precipitate the adoption of growth – preventing policies
and attitudes that decrease capital and productivity growth.
5 Weingast (2016) argues that ideas are probably necessary for economic change but they can only
have an impact if they are implemented, which requires the presence of the appropriate institutions to
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6 GEORGE TRIDIMAS
Geography shapes agricultural and mineral production; it inﬂuences the
quality of human capital as it determines the climate, natural resources, the
disease environment and transport costs, and by determining physical barriers,
the ability of a country to defend itself against foreign invaders. Geographical
factors may affect productivity and income per capita directly, and indirectly
by the choice of economic policies (Gallup et al., 1999). Geographical and
biological conditions also explain why in Neolithic times agricultural societies
settled earlier in some locations than others. Such early sedentary societies were
able to develop a critical level of technology, human capital and organisational
structures breaking out of the Malthusian trap ahead of the rest, which explains
their current level of development (Olsson and Hibbs, 2005). Further, according
to the uniﬁed growth theory (Galor, 2011) bio-geographical factors changed
the size and composition of the population, which then drove human capital
formation and growth. The transition from stagnation to growth became an
inevitable by-product of the process of development.6
In this view, changes in
institutions are neither necessary nor sufﬁcient to explain sustained growth after
the Industrial Revolution.
The fundamental causes of ancient Greek efﬂorescence
The scholarship on ancient Greek growth offers institutions and culture as the
fundamental drivers of the efﬂorescence. Geography, natural resources and the
Mediterranean climate, are set aside because they are the same before and after
the onset of growth (Ober, 2008: 12–13). The ‘polis’ or city-state as a distinct
geographical, political and economic unit was the standard form of political
organisation in the Archaic and Classical periods. In truth, geography and
military technology explain the emergence of the multitude of city-states, 1,100
of them according to Ober (2015). Mountains, a highly indented coastline and
islands fragment the landscape of southern Greece providing natural barriers
to small territories that are easily defended by their people. Further, with iron
more abundant than copper, the invention of cheaper iron weapons facilitated
the emergence of a large class of free farmers who were rich enough to own their
armour. They comprised the principal defence force ﬁghting on foot in tight
formation. Akin to a part-time militia rather than professional soldiers, their
military importance translated into political power and underpinned the
emergence of democracy (Lyttkens, 2013). Unlike the Eastern Empires or
Rome, the Greek city-states did not consolidate into a single centralised state;
they developed a variety of governance structures from democratic Athens
enforce them. See also the exchanges between Grief and Mokyr (2016), McCloskey (2016) and Tabellini
(2016).
6 An endogenous dynamic process connects technological development and capital formation: starting
from simple technologies, small advances necessitate learning, which increases human capital; greater
human capital leads to more technological inventions, and so on until a steady state is achieved.
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The failure of ancient Greek growth 7
to oligarchic Sparta and included aristocratic Corinth and the kingdom of
Macedon.
How did the institutions and culture of the polis become the engines of
growth? Morris (2004) considers citizenship as the most important institutional
development. Citizenship comprised the recognition that within a polis all locally
born free men had equal rights, regardless of birth or wealth, and rejected the
divine right of rulers prevalent in the Eastern empires. Citizenship deﬁned and
secured property rights from the predation of autocrats. Economou and Kyriazis
(2017) trace a gradual development of the deﬁnition and enforcement of property
rights from the Archaic period onwards through the emergence of a powerful
middle class of landowners and the concurrent establishment of functioning
courts to resolve property disputes. Secure property rights lowered transaction
costs encouraging large-scale international trade. Bitros and Karayiannis (2010:
71) attribute the success of Athens to ‘an environment where, the state guaranteed
that property rights would not be expropriated ... and in turn individuals
exercised responsibility in their pursuits by balancing their own interests with
those of the community in which they lived’. On the contrary, Sparta with an
oligarchic government and lacking clear deﬁnition and protection of private
property discouraged both political and economic innovation. Examining the
social norms and legal provisions in forensic speeches, Karayiannis and Hatzis
(2012: 635) write ‘[4th
-century] Athenian laws were mainly geared towards
the enforcement of contracts and the limitation to the arbitrary economic and
political power held by the elites ... They offered the institutional framework
that was conducive to the economic and social development of Athens’. In a
similar vein, Engen (2005) offers the law of Nikophon (375/4) on money purity
and circulation of silver coins as proof of rules deliberately designed to facilitate
market transactions and promote Athenian exports.
For Ober (2015: 16):
The political institutions and the culture put specialization and innovation on
overdrive because those institutions and that culture encouraged individuals
to take more risks and to develop more distinct skills. They did so by
protecting individuals against the theft by the powerful of the fruits of
risk-taking and self-investment.
He suggests two principal causes of Greek growth. First, the establishment of fair
rules where many people in the society have an equal standing with respect to
personal security and property law. Second, much like politically fragmented
Europe in the sixteenth century, the intense competition among individuals
and city-states, which led to further institutional and technological innovation
and motivated welfare-improving cooperation between rational actors. Further,
instead of uniquely modern notions of GDP growth, liberal democracy and a
centralised government, Carugati et al. (2015) deﬁne development ‘as the ability
of a state to provide security, stability, and predictability via the establishment of
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8 GEORGE TRIDIMAS
reasonably fair rules, and their consistent application and enforcement’ (p. 28).
Accordingly, by establishing the rule of law for elite and masses alike, and control
over the sources of violence through impersonal and perpetual democratic
institutions, ancient Athens transited away from the unproductive ‘limited access’
equilibrium of the natural state towards a stable, open access order that secured
a high standard of living.7
Bergh and Lyttkens (2014) examine the quality of the economic institutions
of Athens in the 340s (a period sufﬁciently covered in the sources) by applying
the Economic Freedom Index.8
Athens scores an impressive 8.8 out of 10 in the
2013 international league, second to Hong Kong with a score of 9.02 (while
modern Greece, with a score of 6.87, was in the 68th
position). Although, as the
authors acknowledge, this type of comparison has limits, it indicates a strong
link between the institutional quality of Athens and its material success.
Bresson (2016: 95) adds that ‘institutional and technological innovations went
hand in hand ... both ... are a fundamental factor in the process of growth in the
Mediterranean area from the Archaic to Hellenistic period’.
However, the ancient Greek economy was unable to start a ‘grand transition’
to sustained long-run growth. Even though precise quantitative ﬁgures are not
available, it is clear that ancient Greek growth displays a humped shape. In
Hellenistic times (322–331 CE, following the 322 victory of the kingdom of
Macedon against Athens), the polis efﬂorescence entered a phase of long-term
decay. After 250 BCE population in the Aegean fell. Greek political independence
and prosperity ﬁnished with the Roman conquest of Macedon (168), the last
remnants of the Greek city-states (146) and Asia Minor (129). Bresson (2016)
argues that a fragmented Greek world was no match for Rome. However, war
defeat is neither necessary nor sufﬁcient to explain the development failure
of ancient Greece. The city-states had been able to stand against the Persian
Empire and fought against each other almost incessantly before and during
the efﬂorescence period.9
Importantly, they did not rebound after the defeat
7 North et al. (2009) deﬁne a limited access or natural state as one ‘where personal relationships
form the basis of social organization’ (p. 13), and ‘dispersed control over violence leads to the formation
of a dominant coalition that manipulates access in the economy and the society to sustain political
arrangements within the coalition’ (p. 121). On the other hand, in an open-access order, ‘impersonal
categories of individuals, interact over a wide area of social behaviour with no need to be cognizant of
the individual identity of their partners’ (p. 2), and ‘in open access societies, access to organizations is an
impersonal right that all citizens possess’ (p. 6). A natural state links to an economy embedded in social
relationships, while an open-access society supports a market, disembedded, economy.
8 The Index (available at www.fraserinstitute.org/economic-freedom) consists of ﬁve dimensions: (1)
size of government – expenditures, taxes, and enterprises; (2) legal structure and security of property
rights; (3) access to sound money; (4) freedom to trade internationally; and (5) regulation of credit,
labour and business.
9 Similarly, before and during the early stage of the Industrial Revolution (conventionally starting in
1760), Britain engaged in several wars without adversely affecting the transition to industrialisation.
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The failure of ancient Greek growth 9
by Macedon. We proceed by examining whether the fundamental factors of
institutions and culture also contained seeds of economic regression.
4 Limitations of ancient Greek institutions
The independent city-states were small in both population and geographical
size; only Athens, Sparta and Syracuse had an area of more than 2,000 square
kilometres and estimated populations of 150,000 or more.10
Modern scholarship
enquires how smallness may affect economic outcomes (Armstrong and Read,
2003). Several negative inﬂuences are identiﬁed. A small internal market and
labour force may reduce the potential for competition (only a small number
of ﬁrms are viable), and be unable to exploit economies of scale or diversify
risks. Indivisibilities result in a high per capita cost for public goods. A small
geographical size may also imply limited and undiversiﬁed natural resources.
Small landlocked and island states are likely to incur higher transport costs. As
a result, the prosperity of small economies relies on openness and international
trade, but this makes them vulnerable to external shocks. On the other hand,
there are certain advantages associated with a small-sized state. A small labour
force implies that growth will rely on higher value-added activities using human
capital intensively, which necessitates investment in education and skills. A small
population is likely to be homogeneous and cohesive, and government structure
is less likely to be complex, increasing political participation and transparency.
However, with frequent contact between politicians and their constituents,
inefﬁcient rent seeking may be more prevalent in small societies.
The predictions that contemporary small states suffer low income and slow
growth are not borne empirically. Easterly and Kraay (2000) ﬁnd that on average
small states have higher income and productivity levels than large states and
their growth rates are more volatile because of exposure to international trade
ﬂuctuations, but on balance greater openness is still a positive factor in their
growth. Examining the effect of small size on institutional quality, Congdon
Fors (2014) ﬁnds that small countries and island states score stronger on a
rule of law index than larger states, and that being an island has a positive
effect on democracy. Going back in history, late medieval and early modern
European autonomous cities with prerogatives regarding defence, taxation and
judicial matters thrived by relying on extended sea-borne trade. De Long and
Shleifer (1993) examine pre-industrial Netherlands and Britain, which ﬂourished
under constitutional government. Similarly, the city-states of northern Italy, the
Low Countries and Burgundy prospered during the late Middle Age and the
10 Alesina and Spolaore (1997) consider that country size is endogenous depending on the trade-off
between the cost savings of a large political jurisdiction and the reduced beneﬁts from lumping together
heterogeneous communities. They argue that democratisation leads to an inefﬁciently large number of
countries and economic integration increases the equilibrium number of countries.
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10 GEORGE TRIDIMAS
Renaissance, but stagnated after they fell under autocratic Habsburg control
in the sixteenth century. They ﬁnd that absolutist governments were associated
with low economic growth (as measured by city population growth) for 800 years
prior to the Industrial Revolution. In the same vein, comparing the Islamic world
to Europe in the period 800–1800, Bosker et al. (2013) ﬁnd that urban growth
is positively related to cities with good access to important transport links, but
European cities with strong local participative governments and representation
in state policy making eventually grew larger than other cities.
Yet Stasavage (2014) presents evidence that although initially autonomous
European city-states grew, over time the ruling merchant and craft guilds erected
barriers to entry into markets and professions holding back innovation and
trade, leading to their eventual decline. Ogilvi and Carus (2014) warn that
what matters for growth is the broader underlying institutional framework
of the society (property rights, contracting institutions, structure of power)
which determines how people become wealth holders and the policies sought
through political action, rather than a single institution in isolation (like the
parliament). Similarly, Boix (2015) argues that income growth in autonomous
city-states tends to be low because of limited economies of scale, diverging
individual economic fortunes (which by disturbing the existing distribution of
wealth jeopardise the social peace), and defeat by monarchies that are militarily
more powerful. In his view, parliamentary institutions dominated by wealthy
merchants in autonomous European urban centres were a consequence of their
economic strength rather than a cause, and no lasting growth was achievable
‘when producers form a closed oligarchy, imposing barriers to innovation and
to the entry of new ideas and entrepreneurs’ (p. 201).
Ancient polis economy
Economic activity in the ancient polis was organised around the household
(oikos), comprising the house as a building, its equipment, associated land
holdings, the persons living in the house and their belongings. The Athenian
legal system did not recognise businesses as autonomous entities for juridical
purposes. Business activity was part of the oikos.11
This does not imply that all
economic activity was household-scale; forensic speeches attest to the existence
of proﬁtable large farms and manufacturing units. For the vast majority of
Greek males, ownership of land and related capital installations remained
the most critical economic resource for generating income and the basis of
citizenship and political rights. However, the combination of poor soil (with
a few exceptions like Thessaly and Laconia, which never developed democratic
11 The Athenians did not develop the notion of corporation because they did not distinguish clearly
between the activities of the oikos and those of the workshop (Harris, 2002), while legal disputes about
an oikos related to the ownership of the whole oikos, not about items under its ownership (MacDowell,
1989).
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The failure of ancient Greek growth 11
politics), and Mediterranean climate of warm dry summers followed by wet and
mildly cold winters, constrained the types of agricultural activity undertaken
and made the risk of harvest failure endemic. Farmers had few options but to
diversify into a variety of crops grown in different patches of land of unequal
agricultural productivity, and hoard surpluses. This resulted in small fragmented
landholdings. Rich households too held diversiﬁed assets including houses, farms
in different territories, animal stocks, workshops and money deposits. Partible
inheritance, where sons receive equal shares of property, not only satisﬁed
horizontal equality but also by dividing property over different locations it
served as insurance against harvest failure. Consequently, the economies of the
city-states were small and unable to exploit economies of scale, and unit costs of
production remained high.
Furthermore, uncertain agricultural yields and the risk of harvest failure led
city-states to impose strict regulations on exporting commodities that were vital
necessities for the population, distorting prices and the allocation of production
activities (Bresson, 2016). Additionally, trading costs were high because of the
different taxes imposed by the city-states and the different currencies used.
Since citizenship conferred important political, legal and economic rights,
city-states guarded it jealously.12
As a result, it was impossible to develop
business organisations that would cover the Greek world and overcome the
small size problem. Different city-states achieved different levels of economic
and legal sophistication, while traditional friendships and rivalries between
them further complicated the possibility of establishing a common economic
space. The multitude of city-states, and the strict land ownership criteria that
was used to deﬁne citizenship, restricted labour mobility; mercenaries were
probably the most mobile part of the labour force. Even though Harris and
Lewis (2015) paint a picture of mobile labour, especially skilled workers for
construction and physicians, leaving one’s birthplace to ﬁnd work in a different
polis was tantamount to disenfranchisement and giving up on owning land.13
Moreover, although property rights were well deﬁned and secure and contracts
were enforced, the ancient Greek city-states lacked fully inclusive economic
12 Most famously, Pericles’ law of 451 restricted Athenian citizenship only to those born from two
Athenian parents. Similarly, it was indicative of rigidity that membership of an Athenian demes was
hereditary instead of depending on residence, an arrangement that originated in the 508/7 reforms of
Cleisthenes, which established the Athenian democracy.
13 Labour mobility was higher in the Aetolian and Achaean Leagues, proto-federations of city-states,
of the Hellenistic period, which promoted economic and political integration. The citizens of each member
state enjoyed equal rights to vote and be elected to the decision bodies of the league, freedom of movement
and the right to buy and sell property inside the league, irrespective of their polis of origin (Economou
et al., 2015, and references therein). Nevertheless, the experience of the Roman Empire shows that an
integrated economic space was insufﬁcient for sustained development. During the long period of Pax
Romana (31 BCE–192 CE), order prevailed and trade thrived, but there was no permanent economic
transformation, not least because of failure to rein in the extractive behaviour of the ruling classes.
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12 GEORGE TRIDIMAS
institutions (considered as essential by Acemoglu and Robinson, 2012) because
women, metics and slaves had fewer rights and economic opportunities.
Intra-polis tension
Inside the city-state, maintaining strict democratic egalitarianism ultimately leads
to rejection of ‘creative destruction’, the hallmark of capitalist development.
Income equality and income growth are incompatible with each other, for the
former requires extensive ex-post redistribution that may destroy investment
incentives. Even in a society starting with complete equality, some talented
or lucky individuals may innovate and grow richer than their peers. Total
output increases but is no longer distributed equally. Such income divisions
raise the risk that the poor may revolt and conﬁscate the assets of the
economically successful. Similarly, growth may be at risk not only from the
poor going against the rich, but by existing elites resisting their loss of privileges
when new successful entrepreneurs emerge, and/or opposing redistribution for
egalitarian purposes. Over time, successful groups may transform into rentseeking
distributional coalitions, setting barriers against new entrants. Resistance
to social change and realignment accompanying growth eventually precipitate
economic decline. At the extreme, the rich elite unwilling to pay the taxes required
for redistribution may decide to overthrow the democracy and repress the
majority. Arming for civil conﬂict and ﬁghting diverts productive capacity and
destroys resources reducing the growth potential. ‘Destructive’ envy discourages
potential entrepreneurs from searching for new products, markets and cost
savings (Gersham, 2014).
Athens bears witness to such tensions. During the 5th century, Athenian adult
males numbered 60,000 (Hansen, 1999). Two factors relieved tensions from
population pressure, employment of the poor as rowers in the Athenian navy,
and the establishment of cleruchies, land allotments, in territories controlled
by Athens. Nevertheless, the Athenian democracy was overthrown twice. In
411 BCE, a coup installed an oligarchic dispensation with only 5,000 Athenians
retaining full citizenship rights, but the navy restored the democracy four months
later in 410. In 404 after losing the Peloponnesian War, a cruel oligarchic
commission known as the ‘Thirty Tyrants’ governed Athens. The demos however
re-established control in 403 following a civil war. In the 4th century, because
of casualties in the Peloponnesian War, the plague that struck Athens in 430–
426 and the famine during the Spartan siege of 405/404, the number of adult
males fell to 30,000. The implied increase in the average land per citizen explains
why land redistribution ‘is never heard as a problem at Athens’ (ibid.: 54). In
the 4th century, increased trade and commercialisation created a new class of
rich Athenians, whose wealth was not exclusively based on land holdings. As
noted, opposing the redistribution necessary to preserve egalitarianism may lead
the rich to stasis, a violent attempt to bring down the democratic constitution.
Indeed, the oligarchic regime established after the 322 defeat by Macedon and
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The failure of ancient Greek growth 13
overthrow of the Athenian democracy restricted the franchise by introducing a
tight property qualiﬁcation, and rolled back the ﬁscal obligations of the rich.
However, conﬂicts over income distribution have been ubiquitous without
preventing modern societies from developing; they cannot be a sufﬁcient reason
for the failure of the ancient Greek city-states. Tridimas (2015) suggests that
the direct democracy of Athens was vulnerable to attacks from anti-democrats
because immobile land was the main component of wealth, and it lacked the
protection that political party competition offers in contemporary representative
democracies. Speciﬁcally, dissatisﬁed voters vote the incumbent party out of
ofﬁce but keep the system of democratic governance; thus, party competition
stabilises the regime. However, in the direct democracy the losers from the
policy decisions of the demos had few alternatives but to act against the rule
of the demos. Thus, egalitarianism, which underpinned the direct participatory
democracy of the polis, may have undermined its long-run growth.
Inter-polis conﬂict
A multiplicity of ﬁercely independent and competitive city-states fought almost
incessantly against each other as well as external enemies like Persia, Scythia and
Rome. After the success against the invading Persians (490–480), in a 141-year
span (479–338), classical Athens had no more than ten consecutive years of peace
and was at war for two out of three years on average. War and the threat of war
not only bring the destruction of existing assets but also discourage investment
in human and non-human capital.14
Since invaders may loot or destroy physical
assets, a high risk of war deters capital owners from investing in physical assets,
especially those characterised by large sunk costs. This leads to a smaller capital–
labour ratio than otherwise, tending to make labour cheap and diminish the
incentive to introduce capital-intensive techniques. In addition to destruction,
continuous wars diverted resources from productive activities towards military
spending and exhausted the public treasuries weakening the city-states against
later stronger enemies. Although war is inefﬁcient (because of the diversion
and destruction of resources), rational actors may choose war when it is more
proﬁtable to seize assets than to produce them. Analytically, while the outcome
of violent ﬁghting is uncertain, the expected payoff may be higher than that of
peace because the conquest of new agricultural lands and mines offers material
wealth and glory (Boix, 2015; Tridimas, 2015).
Since the economy underpins military might, the fundamental cause of
the defeat of the city-states and their subjugation to monarchical powers is
the relative economic rise of powers in the period preceding the military
confrontation, and the political and economic factors driving their relative
performance. Speciﬁcally, the Athenian economy performed well during the 4th
century, but the Macedonian economy performed even better. Macedon proved
14 See Serrati (2013) for the nature, scale and ﬁnance of ancient Greek warfare.
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14 GEORGE TRIDIMAS
to be a superior power possessing fertile lands, gold mines and advanced military
techniques. It imitated, learned and adapted the military knowledge and public
ﬁnance expertise ﬁrst developed by the city-states to surpass them eventually.
Examining the rise of Macedon during the reign of King Philip, 359–336, Ober
(2015: 289) writes:
Philip was a socio-political innovator in that he created a vastly expanded
coalition that included tens of thousands of ordinary (non-elite) men ...
Philip’s military reforms incentivized a great many more individuals to
undertake service in the armed forces and enabled them to see themselves as
primary stakeholders in the outcomes of state-directed military operations.
The hoplites, part-time soldiers, of the city-states could not match the
professional and better-resourced Macedonian army.
After the 322 defeat of Athens democracy faded and the independence
of the city-states gradually disappeared. The end was not a linear process.
Macedon did not fully subjugate the Greek city-states, which retained some
aspects of democratic self-governance (Ober, 2015). Athens became a bone
of contention between different Macedonian generals; it was able to ﬁght the
Chreamonidean war (267–261) and even win independence in 229, but was
no longer able to play any signiﬁcant role in Greece or the conﬂicts between
Macedon and Rome. In a late ﬂourish in the middle of the 3rd
century, the
Achaean League brought together up to 50 city-states from the northern and
central Peloponnese, becoming a signiﬁcant political and military power in
Greek affairs. The neighbouring Aetolian League in all probability also consisted
of a number of cities comparable to the Achaean League. Nevertheless, the
fragmented Hellenistic poleis and kingdoms eventually succumbed to the more
populous, prosperous and militarily superior Rome.
We may then conclude that city-state institutions framed political and
economic transactions. They were suitable to initiate growth, but they changed
and adapted only slowly, so effectively they were the ‘ﬁxed factor of production’.
As a result, development based on the city-state format reached diminishing
returns.
5 Limitations of ancient Greek culture
How far were the cultural traits of ancient Greece conducive to growth? Three
issues are examined here, the ideal of self-sufﬁciency, attitudes towards wealth
accumulation and work, and the position of the individual vis-`a-vis the collective
group. Nevertheless, it should be borne in mind that information about ancient
values and attitudes comes from the writings of authors who belonged to the
elites, and often members of the latter held different views. There is therefore
some ambiguity regarding how far the population shared their views. It is partly
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The failure of ancient Greek growth 15
for this reason that modern scholars arrive at different conclusions from the
same ancient authors.
The ideal of self-sufﬁciency
As already mentioned, Finley (1973) claimed that households and communities
aimed at self-sufﬁciency instead of relying on markets. Autarkeia had also moral
overtones implying independence from others and freedom (Sallares, 1991). An
ideology of self-sufﬁciency inhibited growth. However, recent scholarship rejects,
at least partly, such sbstantivist views. Foxhall (2007) suggests that, while poor
households were subsistence farmers, wealthy households strived to generate
surpluses for buying luxuries to enhance their status. As already said, the ancient
Greeks were able to innovate by improving existing products and inventing new
technologies, while urban areas were also manufacturing centres for metallurgy,
ceramics, leather, textiles and luxury items. Bitros and Karayiannis (2008)
conclude that the Athenians honoured successful entrepreneurs and espoused
the values of economic freedom, fairness in exchange, obedience to laws and
hard work, which encouraged entrepreneurship. Harris and Lewis (2015), and
Bresson (2016) also debunk the view that the ideal was self-sufﬁciency; the
average citizen was neither oblivious to proﬁt-making opportunities nor detached
from the market.
Attitudes towards work and wealth accumulation
For the majority of the population agriculture was the main occupation and
source of wealth. Millet (2000) surmises that in the Aegean world, perhaps
half the total population depended directly on farming for its livelihood. A
landholding elite scorned wealth from commercial and industrial activities and
disdained dependent work. ‘The condition of the free man is that he not live
under the constraint of another’ (Aristotle Rhetoric 1367a3215
). According to
Cohen (2002), Athenian men espoused an ideal of masculinity (andreia), whose
fundamental element was to maintain self-employment and not to work in the
paid employment of others.
Self-employed, free Athenian artisans and traders offered their services as
independent operators rather than employees for limited tasks and times, and
for different clients. Artisans who earned their living from manual labour
were held in low social esteem, because they performed vulgar or brutal
(banausic) work.16
However, Bitros and Karayiannis (2010) maintain that the
15 Available at www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%3A1999.01.0060%
3Abekker+page%3D1367a (accessed 4 June 2018).
16 ‘Labour with one’s own hands on lowly tasks gives witness, in the toil thus expended on useless
things, to one’s own indifference to higher things. No generous youth, from seeing the Zeus at Olympia
or the Hera at Argos, longs to be Pheidias or Polycleitus; nor to be Anacreon or Philetas or Archilochus
out of pleasure in their poems. For it does not of necessity follow that, if the work delights you with
its grace, the one who wrought it is worthy of your esteem’ (Plutarch. Pericles. 2.1–2.3 available at
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16 GEORGE TRIDIMAS
ancient Greeks disdained working for another man, rather than manual work,
because it circumcised one’s freedom. Bresson (2016) contends that rejection of
salaried work probably prevented men from obtaining business skills and work
experience outside those offered by the family occupation. Slaves and women
ﬁlled the ensuing gap. As a result, many slaves owning their own tools (and
sometimes their own slaves) and operating their own business were able to
prosper. Idealisation of land ownership and agriculture as the noblest economic
activity meant that there was little social approval for enrichment through
artisanship and trade.17
However, Burke (1992) argued that with the onset of commercialism of the
4th century, ordinary Athenian citizens as well as some members of the elite,
approved and participated in the commercial and ﬁnancial ventures:
The onset of the disembedding of the Athenian economy was made possible
by the erosion of an ethic bound to status, by the experience gained from
economic exigency, and by the circumstances of an imposed peace, and was
occasioned by the impulse to satisfy a habit that had become embedded over
time. (p. 225)
Wealth accumulation is a necessary condition for economic growth. On the
other hand, ‘conspicuous consumption’ to enhance one’s prestige may not serve
any productive purpose, while it may sharpen social tensions. Ancient thinkers
considered material wealth as freeing man from deprivation and providing the
means to pursue freedom of action. However, they saw it as a means rather than
an objective. Seeking to acquire ‘man’s goods’ without developing a ‘good man’
was denounced as vanity (eloquently presented in Sisyphus’ tale) that would lead
to the creation of artiﬁcial needs and conspicuous consumption.18
Nevertheless,
‘enjoyment of luxuries was part and parcel of the ideology of democracy in
Athens’ (Millet, 2000: 40).
Another anti-development cultural trait was the prevailing ideology of
reciprocal assistance between citizens in the sense of gift exchange, emphasised by
www.perseus.tufts.edu/hopper/collection?collection=Perseus:collection:Greco-Roman, accessed 17 May
2018).
17 ‘Among [occupations] precedence is given to the one which cultivates the land; those like mining,
which extract wealth from it, take the second place. Agriculture is the most honest of all such occupations;
seeing that the wealth it brings is not derived from other men. Herein it is distinguished from trade and
the wage-earning employments, which acquire wealth from others by their consent; and from war,
which wrings it from them perforce’ (Aristotle 1343a.1, ‘Economics’, treatise written most probably by a
student of Aristotle; available at www.perseus.tufts.edu/hopper/text?doc=Aristot.%20Econ, accessed 17
May 2018).
18 Socrates encapsulated this view: ‘You seem, Antiphon, to imagine that happiness consists in luxury
and extravagance. But my belief is that to have no wants is divine; to have as few as possible comes next
to the divine; and as that which is divine is supreme, so that which approaches nearest to its nature
is nearest to the supreme’ (Xenophon Memorabilia, 1.6.10, available at www.perseus.tufts.edu/hopper/
collection?collection=Perseus:collection:Greco-Roman, accessed 18 May 2018).
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The failure of ancient Greek growth 17
Finley (1973) and Millet (2000), and most interestingly in the so-called eranos
loans. An individual in need of funds borrowed small or large sums free of
interest from family and friends to ﬁnance, for example, a liturgy (public service)
or a daughter’s dowry. The loan was secured on property, and was repaid
when practical. Reciprocity meant that as a matter of gratitude lenders expected
to receive an equivalent favour when the need arose. Nevertheless, such loans
coexisted with commercial loans for ﬁnancing investment in farms or mines as
well as sea-borne international trade, and they could carry interest and lead to
litigation like other types of lending in the market (Cohen, 1992).
Attitudes to individual rights and obligations to the collectivity
Liberal ideas that humans are self-interested individuals with inviolable rights
and that the individual takes precedence over the state were absent. In the ancient
Greek polis, a citizen’s rights and obligations followed from being a member of
the citizenry; they were public rights and duties (Cartledge, 2016; Held, 2006):
Citizenship was no inalienable birth right; it was a legal and political
creation. It could be redeﬁned in a revolution to give citizen rights to large
numbers of new citizens, or to remove citizens, or to reduce the access to
political inﬂuence of large numbers ... It could be lost for other reasons,
treason and impiety being the most serious. (Thomas, 2000: 58–59)
In this sense, the notion of protecting the individual against the might of the
state did not exist. To put it another way, there was no liberal Lockean ‘social
contract’, where men free, equal and independent in the state of nature unite
into community to live peacefully and pursue the enjoyment of their properties.
The idea of freedom related to ‘the political freedom for a community to run
itself, rather than the freedom of individuals to act as they wished in private
life’ (Thomas, 2000: 70) and ‘the citizens were subordinated to the common
good of the community’ (ibid.: 72); ‘the peculiar division between a narrow
public and a broad private realm characteristic of bourgeois regimes was alien
to the Greek experience. The claim of the civic community was ... total’ (Rahe,
1984: 269). Further, in judging a defendant the Athenian jury often considered
whether a verdict of guilt or innocence was good for Athens, rather than for the
individual.19
The trial of Socrates for ‘corrupting the youth’ and ‘not believing
in the gods’ and his subsequent condemnation to death in 399 is probably the
most famous example of the state’s command over the individual. An additional
illiberal practice was ostracism – voting to banish a political leader for a period
of ten years but without additional sanctions – but it was sparingly used (see
Tridimas, 2016, and the literature therein). The dominance of the ancient state
stands in sharp contrast to the liberal ideology of the 19th century, which
19 ‘Penalties were set not in accordance with the graveness of the crime but to its antisocial character
and immoral nature.’ (Karayiannis and Hatzis, 2012: 635)
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18 GEORGE TRIDIMAS
accepted bourgeois values (including an active economic role for the state to
bring in market-expanding reforms, public education and infrastructure), and
contributed to both democratisation and industrialisation.
A distinct line of the modern economics literature on culture focuses on the
effect of individualism versus collectivism on economic growth (Gorodnichenko
and Roland, 2017 and the references therein). Individualism underlines
personal freedom and achievement, and confers social status on personal
achievements including innovations and actions that make an individual stand
out. Collectivism emphasises the embeddedness of individuals in a larger group;
it promotes conformity and loyalty to the group and respect for one’s superiors,
and discourages individuals from dissenting and standing out.20
Individualism
rewards innovation, which can lead to higher growth. Collectivism encourages
cooperation leading to greater coordination in society. Therefore, individualism
has a comparative dynamic advantage, while collectivism has a comparative
static advantage, which may run into diminishing returns. Gorodnichenko
and Roland (ibid.) present evidence in support of the hypothesis that more
individualistic countries are more afﬂuent. If the ancient Greek culture had
embraced collectivism, as the embedded economy view argues, neither an
industrial revolution nor sustained growth could have taken place.
Against the above anti-development slant stands the inquisitive attitude of
the ancient Greeks. Ober (2008) emphasises their civic culture of developing
innovative solutions for aggregating, organising and distributing the knowledge
required to run successfully complex political decision-making. Further, Ober
(2015) attributes the success of the polis to democratic institutions along with a
public discourse culture of ‘making good policy (innovative, but not excessively
risky) and reducing the level of discord and dissonance between elites ... and
the masses of ordinary citizens’ (p. 236). Finally, Bresson (2016: 218) writes,
‘In fact, ancient Greece saw the beginning of an “enlightened” culture’. He
argues that ancient Greece espoused a culture that associated systematic enquiry
with technological progress to improve economic outcomes. He submits that
ancient Greece set in motion the process of accepting beliefs associated with
the Enlightenment, which then drove the Industrial Revolution, but Rome
interrupted it:
A larger population, a greater distance from bureaucratic kingdoms, and
especially the egalitarian model of their city-states allowed the Greeks to
seize a decisive advantage ... [But] the Roman uniﬁcation completed the
dissolution of the egalitarian legal framework that had held the basis of the
Greek city-states’ success. (Bresson (2016: 221)
20 According to Hofstede, who developed such measures of cultural dimensions, ‘Individualism is the
extent to which people feel independent, as opposed to being interdependent as members of larger wholes’;
see https://geerthofstede.com/culture-geert-hofstede-gert-jan-hofstede/6d-model-of-national-culture/ (accessed
4 June 2018).
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The failure of ancient Greek growth 19
6 The cost of energy relative to labour
Allen (2009) explains the onset of the Industrial Revolution in Britain by the
low cost of energy relative to high wage labour owing to abundant coal,
a geographical factor, which then stimulated investment into labour-saving
technologies (for similar arguments see also O’Brien, 2017; Wrigley, 2010).
Thus, a systematic explanation of the failure of the ancient economy to sustain
development must also assess the role of the relative cost of energy.
Producing and transporting goods and warming and lighting houses require
energy. Natural phenomena, wind, water and sun, and animate sources, wood,
oxen, horses and human labour, can generate energy, but they are unreliable
and challenging to harness. Wind along with human muscle powered the ships.
Animate sources depend on the availability of the land and suitability of the
soil. Human labour was used extensively in agricultural activity, craft works
and transporting heavy merchandise. Animals were used in agriculture and
transport. However, as energy generated by humans and animals cannot be
stored, producing energy could not be separated from using it, which restricted
severely the productivity gains in generating energy. Charcoal was the main fuel
for heating and metalwork, but its opportunity cost is high: Forests take land out
of food production and they are depleted if not exploited at a sustainable rate,
while of the trees cut down for conversion to charcoal a good deal is needed
as ﬁrewood. Since the quality of woodland differed across regions, transport
costs added to the cost of fuel from wood. Nor can charcoal generate the
intense heat required for making steel, a key material of the industrial era.
With inadequate forests in most of Aegean Greece, fuel supplies were limited
restricting metallurgical outputs. Similarly, raising horses for pulling power in
hilly terrain is expensive; it made better sense to use such terrains for growing
food. Thus, energy was expensive in ancient Greece a factor that undoubtedly
slowed down development (a view also expressed in Bresson, 2016).
Reliance on animate sources of energy also meant that transport costs
remained high. Transport costs, which depend on the unit value of the good
transported and the distance travelled, determine trade networks. Heavy goods
whose value per volume unit is high are expensive to transport and may not
be proﬁtable to trade over long distances. As Bresson (2016) observes, tiles
(easily manufactured at the local level) can at most be traded over short regional
networks, while the opposite is true of perfumes. Overland trade was proﬁtable
only for high-value products whose transport costs were low. Heavy goods
could be transported proﬁtably only by maritime trade,21
which depended on
21 ‘A wagon load of wheat would double in value with a land journey of only 480 kilometres, a camel
load in 600 kilometres ... Ship transport, while risky and seasonally restricted, was much more economical
... the only goods that could proﬁtably be transported long distances were those of high relative value –
i.e. luxury goods. The bulk of the population, existing on their own agricultural production, could not
afford such goods’ (Tainter, 1988: 133).
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20 GEORGE TRIDIMAS
weather conditions. High transport costs are one of the main reasons for an
economy to remain agricultural. Further, costly land transport forced city-states
worried about famine to rely on domestic production closing opportunities
for specialisation. High transport costs also implied that the beneﬁts from
technological improvements that reduced ‘upstream’ or ‘downstream’ costs in the
vertical chain of production could not decrease the price of goods that eventually
reached consumers. For example, use of the watermill saved labour time and
decreased the cost of grinding grain but did not reduce the cost of baking, which
still depended on charcoal. When manufacturing and transport can no longer
increase their energy inputs, output reaches its limit and growth stops. Further,
the limited adoption of technological inventions and lack of proﬁts from capitalintensive
production techniques, implied that a class of industrial capital owners
with the motive to increase production and proﬁts, and the ability to pay high
wages to ﬁnance demand for higher production failed to emerge; as a result, land
remained the dominant asset.
Production could expand by buying more land and more slaves. Indeed, the
large estates of Hellenistic times using slave labour to produce wine and olive
oil were highly proﬁtable. Finley (1973) argued that ancient Greece (and Rome)
lacked technological progress because of the use of slave labour. The availability
of cheap slave labour reduced incentives to seek capital-intensive technologies
that reduce labour costs.22
However, the present discussion indicates that
use of slaves was an endogenous rather than an exogenous factor retarding
technological progress. Analytically, as Rogowski (2013) shows, the decision
whether to employ slave or free labour is endogenous and production will switch
from the former to the latter when technology advances and workers become
highly endowed with capital (which increases the marginal product of labour).
On this account, slavery was not a cause of slow growth but a symptom of
technological backwardness. Nor is free labour on its own sufﬁcient to start an
industrial revolution; feudal serfdom had been abolished a long time before the
Industrial Revolution.
7 Conclusion
If classical Greece is an icon of democracy, philosophy and ﬁne art, it is also an
enigma of failure of growth. At ﬁrst blush, ancient Greece, and especially Athens,
had the institutions and culture, which according to modern views regarding the
fundamental causes of the Industrial Revolution and the development of the
‘West’, are essential for sustained long-run growth. A democratic, urbanised,
literate and market-oriented society experienced a period of signiﬁcant growth.
However, the efﬂorescence ended failing to start an Industrial Revolution. The
22 Slaves lack incentives to innovate when their masters expropriate the returns of their labour, and
so do free citizens living off state handouts instead of work, as in imperial Rome.
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The failure of ancient Greek growth 21
development of the ancient Greek economy displayed an inverse U shape, whose
downward phase has not attracted systematic attention.
The paper argues that the reasons for the failure to sustain growth were
that city-state institutions acted as ﬁxed factors and eventually constrained
development, which ran to diminishing returns because the city-state format
could not overcome the limits of small economic size, internal strife and
external conﬂicts. Arguably, there were also aspects of culture that discouraged
accumulation of capital and business skills. A ﬁnal cause, which has received
less attention in the literature, was the lack of cheap inanimate energy resources,
which rendered manufacturing and transportation costly and constrained output.
This work offers a ﬁrst attempt towards constructing an explanation of the failure
to sustain growth. At the very least, it alludes to a more nuanced contribution of
the institutions and culture of the ancient city-states to the Greek efﬂorescence.
Acknowledgements
Earlier versions of this paper were presented in the annual meeting of the
European Public Choice Society in Budapest, April 2017, the Departmental
Seminar of the Department of Economics of the University of Lund, December
2017, and the European Social Sciences History Conference in Belfast, April
2018. I wish to thank Anna Kochanova, Manfred Holler, Carl Hampus Lyttkens,
Roland Oetjen and three anonymous referees for insightful comments and
suggestions in discussing the paper. The usual disclaimer applies.
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