Comments (23)

• Tim Kern

  EXCELLENT work!

  One other consequence of price-fixing that the overlords never seem to grasp is that fixed prices act as price floors as well as price ceilings, preserving obsolete industries beyond their economical lives. This opportunity cost is incalculable.

  Perhaps that's why no one pays attention to it.

  Published: February 27, 2009 9:46 AM

• Miklos Hollender

  Quite amazing article. A question: I started to track back the ideas that made the Western Civilization and everywhere I found the Ancient Greeks. Pretty much every idea we value now came from there...

  Why were they so exceptional people, to have invented so many great ideas?

  Was their economy, at least, somewhat less regulated than that of the others?

  Published: February 27, 2009 12:23 PM

• Colin Patrick Barth

  I had just begun to read this interesting article when I balked at this:

  >

  What is the definition of "civilization" in this case? Does this sentence not accept a dangerous conflation of civilization among society with hierarchical rule of society?

  Also, accounting for the neglected subjects of Indus valley and Minoan economies would improve this history, which focuses on the more bureaucratic, regimented and centralized of the ancient "civilizations."

  Final note: I love to see articles on ancient economies here on Mises.org... IMO we can learn a lot about alternatives to replace modern statism by looking at the experiments of different cultures which predated modern preconceptions about the way things should/must be— some of those interesting case studies are unfortunately pre-historical.

  Published: February 27, 2009 1:02 PM

• pbergn

  Excellent article - one of the well-researched, consistent, easy to read and understand works on this site...

  But here is what I don't understand:

  Nobody, and I mean - NOBODY disputes the fact that the price control will be detrimental to commerce in most of the cases due to its negative effect on the incentives of the producers - the supply side. Plus all the bureaucracy and corruption that comes with any kind of regulation... That is NOT the question.

  The reason why ancient civilizations and their modern counterparts were and are regulating the commerce is solely due to political reasons - to exercise control on all of the aspects of life of their subjects... Of course they did understand the detrimental effect the government control had on the trade, but they could care less - they were control freaks. If they allowed emergence of wealthy merchant class, then those would soon contend to replace their feudal overlords, and conversely, if they pressed too hard on the merchants they would face popular uprising due to shortages and hunger spreading across the land... These truths are eternal and are as old as the man himself...

  I am surprised that many economist completely disregard the political aspect of the economy, and do not understand that the rulers are primarily motivated by fear of losing the control over their subjects, rather than by concern for prosperity or well-being of thereof...

  As I said before on this site - the problem always arises when the broker entity, such as the government, designed to moderate the differences between various socio-economic groups of a certain geo-political locale oversteps its designated boundaries (which almost always the case), and becomes the controlling force in its own right, rather than continuing to serve to reconcile the differences... So the problem is eternal - how to keep the broker honest. Some may say to get rid of the broker completely. But I don't think that this is a practicable approach, since throughout the history the humans were forming hierarchical societal structures, and they usually tend to wildly differ in their opinions, therefore necessitating the existence of either a neutral moderator or of a consolidating coercive force...

  Published: February 27, 2009 1:50 PM

• Colin Patrick Barth

  In many cases, and certainly in all the fully military-hierarchical states which took over since the second millennium BC, you aren't starting with the institution of a broker, but with a conqueror or dominator. The government then proceeds to justify itself by playing the "essential" broker. Ultimately, central, monopolized government goes back to conquest or domination if you trace it far enough.

  The mafia comparison works pretty well here; mediating differences among different interests serves to keep them in line within a larger mob organization, which also wishes to appear just, charitable and protective to those living under its grasp.

  It's the difference between the means of gaining rule and the means of holding on to it; the latter tends to require civil compliance.

  Published: February 27, 2009 2:15 PM

• Markatilius

  This article made my day. I can't wait to tell anyone who will listen.

  The man that's whipped easiest is whipped most often
  -Fredrick Douglass.

  Published: February 27, 2009 2:44 PM

• Abhilash Nambiar

  What a breathe of fresh air this article is. Makes me wonder though. The people of the ancient had their ignorance as an excuse. But what about the statesmen of today? This website is only a click away. Or do heads of state not have internet access?

  I am talking not just about Barrack Obama but also the likes of Hugo Chavez and Fidel Castro and let us not forget dear Robert Mugabe.

  Published: February 27, 2009 2:56 PM

• freeman

  Interesting essay.

  The author at one point quotes a historian regarding the Sumerian word amargi:

  "...it is in this document that we find the word "freedom" used for the first time in man's recorded history; the word is amargi, which … means literally "return to the mother" … we still do not know why this figure of speech came to be used for "freedom."

  I just read an essay by anthropologist David Graeber on the history of debt where he perhaps sheds some light on this figure of speech:

  "The habit of money at interest also originates in Sumer – it remained unknown, for example, in Egypt. Interest rates, fixed at 20 percent, remained stable for 2 thousand years. (This was not a sign of government control of the market: at this stage, institutions like this were what made markets possible.) This however, led to some serious social problems. In years with bad harvests especially, peasants would start becoming hopelessly indebted to the rich, and would have to surrender their farms and, ultimately, family members, in debt bondage. Gradually, this condition seems to have come to a social crisis – not so much leading to popular uprisings, but to common people abandoning the cities and settling territory entirely and becoming semi-nomadic ‘bandits’ and raiders. It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or ‘freedom’, so that all bonded labourers could return to their families. (It is significant here that the first word for ‘freedom’ known in any human language, the Sumerian amarga, literally means ‘return to mother.’)"

  Published: February 27, 2009 3:39 PM

• freeman

  Oh, and here's a link to that Graeber essay:

  http://www.metamute.org/en/content/debt_the_first_five_thousand_years

  Published: February 27, 2009 3:42 PM

• bill greene

  Colin Barth's post above approves of "looking at the experiments of different cultures which predated modern preconceptions about the way things should/must be." Those experiments and the results are clearly a better compass for action than the abstract theories put forth by the philosphers and economists of the past few hundred years.

  Mr. Barth refers to "case studies" from the past which is the method I have used in tracing the evolution of economic freedom from 2,000 BC to the present. Past actions reveal actual results, while modern theories are mostly conjecture. This post illustrates this fact clearly by showing how centralized controls have snuffed out prosperous enterprise consistently for four millennia!

  Some of these comments above express wonder over how and why the central planners keep persisting in their failed agenda. My case study analysis shows that new emerging societies have often in their early years been immune from the ills of such elite planners. It was only after centuries of growth in such societies that affluence allowed a new class of intelligentsias to take over and begin the process of big government and ensuing Decline.

  For example, Greece developed for over five centuries in relatively free cities before the so-called "Golden Age" of Pericles. Victor Davis Hanson tells in "The Other Greeks" of the independent hoplite farmers that first elevated Greece during the 8th Century BC. Hesiod's "Works and Days" lists those farmer's tasks and obligations, urging hard work and moral precepts that built prosperity for a new middle class. This group created something new in the Mediterranaean world-- an ennobled and free middle class owning their farms and enjoying economic freedom. Greece did well for 500 years on that platform until the philosophers and politicians undermined the foundations of Greece in the 4th century BC.

  Thus, one must look at the time chart of societies. Rome was strong for centuries as a Republic until eventually she was done in by the big government, price controls, etc. Phoenicia, isolated on the Lebanon coast, with no aristocracy or landed gentry to hold them back, prospered as a free economy for a thousand years. Venice, Florence, Holland all started as outposts on unwanted real estate, passed over by the big surrounding powers, and built prosperity by means of open and free economies.

  The same progression was evident in America. For 300 years after the 1620 settling, the nation prospered with little government, no income tax, few regulations, etc. It is only during the last 100 years that big government has taken over--and it has not accelerated growth, but is gradually slowing down growth and enterprise. Thus, case studies from the past show that the rise and fall of nations has been caused not by natural resources, climate, chance, or pollution, but by the rare occurence of economic freedom, and that once such nations "mature" and accumulate a parasitic layer of new elites at the top,
  their decline becomes inevitable

  Published: February 27, 2009 10:43 PM

• pbergn

  TO: bill greene

  Bravo! Thank you, sir.

  Finally someone is not afraid to tell the truth as it is...

  I loved your post!

  Published: February 27, 2009 11:33 PM

• Gil

  "For 300 years after the 1620 settling, the nation prospered with little government, no income tax, few regulations, etc. It is only during the last 100 years that big government has taken over--and it has not accelerated growth, but is gradually slowing down growth and enterprise." - bill greene

  Strange, another article would condemn anyone wanting to return of the 'good old days' of the 1800s. Never enough food, never enough money, high infant mortality rates, short life expectancy, etc. Strange how the last 50 years has had the highest standard of living and technology yet. If modern society goes the way of the rest and we go the way of the Amish and we're all back on the farms with all trapping of the 'good old days' then to flip-flop and paraphrase Rothbard's quote - the average person enjoyed a brief holiday before returning to normalcy.

  Published: February 27, 2009 11:41 PM

• ehmoran

  pbergn and bill greene,

  No, what happened since the 1790's is that Gov't intervened in a trial run of a true Free Market, then gradually moved to a socialist welfare state until the early 1930's when the U.S. Gov't and the elites (Oligarchs)from England decided it was time to completely convert to Socialism. That was the beginning of the mess we're in now and we'll finish with the inevitable downfall of all social systems in the World.

  Socialism has never worked and never will. Again there has never been in the history of the World any Society with a true Free Market, a true Free Market meaning NO Gov't intervention at ALL. So, you have no reference point to compare a purely Free Market Society to any other Society.

  Published: February 27, 2009 11:47 PM

• pbergn

  TO: ehmoran

  I completely agree with you, sir - we never had an absolute Free Market system. And I agree that we can only extrapolate... But since we are all well familiar with human nature and the desire of some to control, it is not difficult to see that if we let our guard down, the most cunning and conniving of the successful capitalists will have the opportunity to subvert the system by imposing some form of Socialism on the rest...

  All I am advocating for is eternal vigilance, as Thomas Jefferson once said - it is the price of freedom... One cannot trust any political system in its entirety, and not question anything, even if it is the Free Market Capitalism system itself...

  Published: February 28, 2009 3:42 AM

• pbergn

  TO: Gil

  Gil, you are right about difficult times in the US in 17th - 18th centuries...

  The reason why the nation has prospered in 20th century is largely due to technological innovations, but we could have gone much further if the government did not start being more controlling and restrictive.

  What Bill Green was referring to was probably to much higher degree of freedom the early settlers enjoyed in 17th - 18th centuries in exercising their labor without yoke of excessive taxation and over-regulations. They could practically keep most of what they produced, and they had all incentives to work well and to innovate, since they were their own masters. But lack of technology, of course, makes this time period to seem very destitute and full of hardship, and rightfully so (but who knows, maybe those early Quakers and Amish were much happier lot unlike the present-day cocaine addicts and coolaid drinkers...)

  Published: February 28, 2009 4:06 AM

• fundamentalist

  Gil: "Strange, another article would condemn anyone wanting to return of the 'good old days' of the 1800s. Never enough food, never enough money, high infant mortality rates, short life expectancy, etc."

  I hear similar charges a lot. Very often people claim that the socialism introduced in the last century made our higher standard of living possible. After all, we grew wealthier as we grew more socialist, didn't we?

  But that argument is similar to attributing the rising of the sun each morning to the call of the rooster. Events that happen at the same time don't indicate causality. In general, causality is more credible if the cause precedes the effect, not if they are simultaneous.

  The honest way to compare the 1800's with the 1900's is to compare growth rates, not living standards, because the living standards of each generation depend mostly on the accumulation of wealth of the previous generation. And if you compare growth rates, you'll find that they were significantly greater in the 1800's, especially the last quarter of that century. If Higgs is right, then we never matched the growth rate of the last quarter of the 1800's in the 1900's.

  Published: February 28, 2009 9:53 AM

• fundamentalist

  ehmoran: "Again there has never been in the history of the World any Society with a true Free Market, a true Free Market meaning NO Gov't intervention at ALL."

  Actually, there have been, most recently in Somalia. Such societies often end with the criminals taking over and stealing everything. That's what happened in Russia after the fall of communism.

  When most of us refer to free markets, we mean markets where the institutions of the rule of law, honest courts and law enforement, and the protection of private property exist. The state intervenes only to protect property. Without being perfect, that type of free market began with the Dutch Republic in the 1500's and spread to much of Europe, England and the US. The US retained that style of free market until roughly 1912 with the creation of the Fed.

  Published: February 28, 2009 10:01 AM

• David Ch

  oNe of the sad ironies of this is that people unthinkingly look back with admiration at the 'legacies' left by ancient regimes, which are admired today as marvellous evidence of civilisation. But there is a direct proiportion between the size and longevity of the archaeological evidence, and the brutality and oppression of the states that left them behind.

  seems to me that wherever free market trade and capital formation finds sufficient space to progress unimpeded, civilisation breaks out and mushrooms out, up and wealth is built and accumulated. then rentseeking coercive power moves in and annexes some of it by force, and then begins the slow and relentless throttling of the co-operative forces that generated the wealth in the first place, until th ecivilisation sinks back into the mud.

  
  which is why when I regard the pyramids, in Egypt and SOuth America alike, and those terracotta warriors, and the great cathedrals of Europe, I do not see them as marvellous pinnacles of ancient civilisation. I see them as evidence of the means of its destrucution. for when great public works emerge whose utility is to aggrandise the people who commissioned them rather than serve the people who made them possible, we are watching civilisation eating itself from th einside out.

  verily, the ancient pyramids are the historical equivalent of London's Millennium Dome.

  Published: February 28, 2009 10:33 AM

• David Ch

  oNe of the sad ironies of this is that people unthinkingly look back with admiration at the 'legacies' left by ancient regimes, which are admired today as marvellous evidence of civilisation. But there is a direct proiportion between the size and longevity of the archaeological evidence, and the brutality and oppression of the states that left them behind.

  seems to me that wherever free market trade and capital formation finds sufficient space to progress unimpeded, civilisation breaks out and mushrooms out, up and wealth is built and accumulated. then rentseeking coercive power moves in and annexes some of it by force, and then begins the slow and relentless throttling of the co-operative forces that generated the wealth in the first place, until th ecivilisation sinks back into the mud.

  
  which is why when I regard the pyramids, in Egypt and SOuth America alike, and those terracotta warriors, and the great cathedrals of Europe, I do not see them as marvellous pinnacles of ancient civilisation. I see them as evidence of the means of its destrucution. for when great public works emerge whose utility is to aggrandise the people who commissioned them rather than serve the people who made them possible, we are watching civilisation eating itself from th einside out.

  verily, the ancient pyramids are the historical equivalent of London's Millennium Dome.

  Published: February 28, 2009 10:37 AM

• Franklin

  David, I respectfully edited your sentence just to correct some of the typographical errors. Nevertheless, it was quite beautifully stated, and I often have felt the same, sitting on a tour bus someplace, being encouraged to marvel at, and "worship," the gargantuan monuments of old. Thus, I repost your wonderful comment below.

  "...when I regard the pyramids, in Egypt and South America alike, and those terracotta warriors, and the great cathedrals of Europe, I do not see them as marvelous pinnacles of ancient civilization. I see them as evidence of the means of its destruction. For when great public works emerge, whose utility is to aggrandize the people who commissioned them rather than serve the people who made them possible, we are watching civilization eating itself from the inside out."

  Published: February 28, 2009 2:23 PM

• bill greene

  Those who favor socialism and central controls like to twist the meaning of "free markets" and "pure capitalism" to make them pejoratives. I prefer to advocate "an open and free economy," the type of environment developed originally in Phoenicia, early Greece, Venice, 16th C. Holland, and in the United States.

  Those advantageous sytems were never totally unregulated, the capitalism was never "pure," nor the markets totally free. As Fundamantalist points out, an enabling government is necessary to provide security, a level playing field, and conditions that allow as many citizens as possible the equal opportunity to enter the market place.

  Those were roughly the conditions in America from 1620-1920. Sure, there were errors of omission and commission, but compared to every other society on earth, there was more upward mobility in that America, and even today's, than anywhere else. And it is the provision of upward mobility for individuals living in free economies that most justifies their existence, although the accompanying national affluence is a fringe benefit.

  Advocating a free and open economy is not a call to go backwards. Accusing such advocates of wanting to go back "to the good old days" is a rather childish and irrelevant taunt that totally misses the mark. The electric age, the motor age, and now the internet age have all come from the efforts of free motivated individuals operating in free economies since the mid-1800's. Actually, It was the communal and socialist systems of the Soviet bloc that returned people to the "good old peasant days" of Medieval Europe.

  There still is forward economic and social momentum in America, and progress continues into the 21st century, in spite of growing governmental interference. It takes centuries to destroy a sound nation and a vibrant economy. But the original post above, Scheuttinger and Butler's study, does document the historical fact that eventually successful societies are undone by expanding centralization of authority--the type of social engineering and governmental regulation that chokes off the creative enterprise of its citizenry.

  If there are any out there who want to dispute that fact--that clear lesson of history-- let them attack the study itself and its findings. They do not win the argument by quibbling over the meaning of the free market, critiquing the straw horse of "pure capitalism," or asserting opponents of expanding welfare states want to return to the horse and buggies of our grandparents!

  Published: February 28, 2009 8:21 PM

• AV

  "The electric age, the motor age, and now the internet age have all come from the efforts of free motivated individuals operating in free economies."
  Quite true. Wasn't the internet invented by Al Gore?
  I never minded him taking credit for it, so long as he also takes credit for "inventing" global warming.
  

  Published: March 1, 2009 9:19 AM

• David Ch

  To Franklin.

  Thank you - kind words indeed.

  Re-reading the entire post (knocked up in a hurry, I plead as a small mitigant), I can only say 'How embarrassing!'. My apologies to all readers for the appalling proofreading and the double post.

  D

  Published: March 2, 2009 5:49 AM