Roman Colosseum. Photo courtesy of Adobe Stock.
I’ll have two posts describing how bad decisions by Roman Emperors contributed to the economic deterioration in the Empire by their intentional decisions.
First, check out Richard Ebeling on 10/5/16 at Foundation for Economic Freedom – How Roman Central Planners Destroyed Their Economy.
In 58 B.C. (yes, I know that was shortly before the move from a republic to an empire), the Roman government started giving wheat to citizens of Rome for free. As expected, this resulted in masters letting their slaves go free so the government was responsible for their subsistence. In 45 B.C. Julius Caesar figured out that one-third of Roman citizens were getting their food from the government.
Farmers fled to the city to get food for free instead of breaking their back all year long in order to barely have enough to eat. Slave owners turned their slaves free so the central government could feed them instead.
Move forward a few hundred years to see the destruction from debasing the currency along with price controls.
Emperor Diocletian, living from 244-312 A.D. becoming Emperor in 284 A.D.
Diocletian also started massive building projects which required lots of money which he initially funded with increased taxes. That created major disincentives for work, investment, and production, which slowed the economy and slowed tax collection.
To compensate for less taxes than expected, Diocletian started debasing the currency. That, as expected, drove out of circulation the older currency with higher precious metal content and led to increased inflation.
To prevent people from paying their taxes in debased coins, the Roman government imposed tax-in-kind, taking goods instead of less valuable coins.
To compensate for the inflation, he imposed the Edict of Diocletian in 301 A.D. This law imposed rigid wage and price controls with death the penalty for violating the laws on pricing. Also as expected, lots of merchants ignored the rules or hoarded supplies. As further expected, goods became scare and grew very expensive on the black market.
The law faded in operation when it was ineffective.
Diocletian resigned four years later because of the damage he created to the Roman economy. He cited “poor health.” Article says that is the reason cited in ancient times when a ruler realized if he didn’t abdicate his then good health would shortly become zero health as a result of assassination.
Article closes with the lessons that ought to be obvious:
Wage and price controls don’t work. They didn’t work before Diocletian, didn’t work for him, and haven’t work since.
Government rules, especially overriding market pricing mechanisms, disrupt the economy and make life worse for the populace.
If laws are seriously in conflict with the moral code and basic economics, the economy can collapse, perhaps taking the government down the drain too.
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