Roman Empire More Equal than the United States

by on December 17, 2011 at 1:02 pm in Data Source, Economics, History | Permalink

In The Size of the Economy and the Distribution of Income in the Roman Empire, a careful paper published in the Journal of Roman Studies in 2009, Walter Scheidel and Steven Friesen estimate the size and distribution of the Roman economy at its demographic peak around the middle of the 2nd century c.e.

We conclude that in the Roman Empire as a whole, a ‘middling’ sector of somewhere around 6 to 12 per cent
of the population, defined by a real income of between 2.4 and 10 times ‘bare bones’
subsistence or 1 to 4 times ‘respectable’ consumption levels, would have occupied a fairly
narrow middle ground between an élite segment of perhaps 1.5 per cent of the population and a vast majority close to subsistence level of around 90 per cent. In this system, some 1.5 per cent of households controlled 15 to 25 per cent of total income, while close to
10 per cent took in another 15 to 25 per cent, leaving not much more than half of all income for all remaining households.

Thus, in Rome the top 1.5% controlled 15-25% of income while in the United States around 2007 the top 1% controlled 23.5% of income thus suggesting slightly more inequality in the United States. Scheidel and Friesen calculate a Roman Empire gini coefficient of .42-.44 again perhaps slightly less than the U.S. coefficient of around .4-.45 depending on source.

Interestingly, the Roman State did not manage to collect that much:

Given a GDP of somewhere
around HS17–19bn, annual state expenditure of approximately HS900m would have
represented an effective tax rate of approximately 5 per cent of GDP, which is the same as
for France in 1700. This finding confirms Hopkins’s claim that the imperial government
did not capture more than 5 to 7 per cent of GDP and that Roman taxes were fairly low.
The overall public sector share of GDP was somewhat larger depending on the scale of
municipal spending, while the overall nominal tax rate had to be higher still in order to
accommodate taxpayer non-compliance, tax amnesties, and rent-seeking behaviour by
tax-collectors and other intermediaries. Moreover, we must not forget that Italy’s immunity from output and poll taxes required the public sector share in the provinces to exceed
the empire-wide average. These various adjustments allow us to reconcile our GDP estimate with reported nominal taxes of around 10 per cent of farm output on private land
reported in Roman Egypt and somewhat higher rates in less developed regions where
enforcement may have been more difficult.

(Thus, despite the aqueducts Rome may not have done that much for the people after all.)

Hat tip to Tim De Chant at Per Square Mile who has further discussion.

Ken B December 17, 2011 at 1:23 pm

Slaves?

Dr. Octopus December 18, 2011 at 1:16 pm

That makes sense as a first response. My first thought was, “But, they didn’t have toilet paper!”

…or antibiotics.

L. Capelle December 27, 2011 at 4:40 am

Check the language of the U.S. 14th Amendment – slavery is illegal, except as a punishment for which the individual has been convicted. In the U.S., slavery is legal in prison. And now you understand the booming prison industry in the U.S.

Norman Pfyster December 17, 2011 at 1:29 pm

Are they counting the slaves?

CBBB December 17, 2011 at 1:55 pm

How much different are the debt-bound wage labourers of our time to slaves?

Will McLean December 17, 2011 at 2:25 pm

Aside from the fact that the indebted of our time can declare bankruptcy? And we can’t make our wage laborers fight to the death in the arena?

CBBB December 17, 2011 at 2:39 pm

So a few more tweaks of the bankruptcy laws and that will all be changed. Already you can’t discharge Student loans in bankruptcy.

NAME REDACTED December 17, 2011 at 5:12 pm

So government debt, in other words.

CBBB December 17, 2011 at 5:39 pm

I don’t really follow

NAME REDACTED December 17, 2011 at 7:28 pm

The vast majority of all Student loan debt is to the government of the US (this is why they made it non-dischargeable).

CBBB December 17, 2011 at 7:33 pm

Yeah maybe, or having the educated also be heavily indebted helps ensure a submissive population of workers

JonF December 17, 2011 at 2:42 pm

Student loan debt.
Child support debt.

Those can’t be erased. And the latter can land a person in jail.

FYI December 17, 2011 at 3:20 pm

You two are seriously comparing voluntary debt to slavery?

Aren’t you reading the wrong blog? I hear Crooked Timber is looking for some.

CBBB December 17, 2011 at 3:24 pm

In the ancient world that’s a big way you ended up as a slave – through voluntary debt. Other ways were conquest in war but voluntary debt leading to slavery was a major route so if you’re going to talk about slaves in ancient Rome. In fact even the plantation slaves of the New World became slaves originally through debt – look up something called the Aro Confederacy.

CBBB December 17, 2011 at 3:26 pm

I don’t know what I was typing there….
I meant to say “so if you’re going to talk about slaves in ancient Rome you simply can’t ignore debt”

FYI December 17, 2011 at 3:50 pm

This is nonsense. The large majority of slaves were the result of wars. Therefore, they were usually not even from the region. The large majority of Roman slaves were sold as children and by the 1st century there were praticaly no Romans slaves at all. So while there was some other cases were debt was used as a way for slavery, in Rome this was negligible.

Furthermore, our current form of voluntary debt is completely different than what was considered debt back then. There were no contracts in the form we have them, there were no lawyers, etc. So maybe you could compare owing money back then to owing money to the mafia… but to compare that to credit card debt or whatever other form we currently have is totally and completely ridiculous.

CBBB December 17, 2011 at 3:55 pm

There are more similarities then differences, and it only takes a few more tweaks to the bankruptcy code to change the current system into something more sinister (and there is absolutely the political desire to give ever more power to creditors).
And I’m not sure about there being no Roman slaves by the 1st Century – in the later Empire there was a major debt crisis which reduced much of the free population to near-slavery.
Furthermore how voluntary is debt? Throughout history powerful factions and states have figured out ways to essentially force people into debt. Perhaps the current absolute requirement of a university degree for any decent job is more then just signalling….

CBBB December 17, 2011 at 3:55 pm

The Debt-Peon Model of education should be considered alongside the Signalling and Human Capital models.

CBBB December 17, 2011 at 3:56 pm

There were no Lawyers in ancient Rome? News to me.

Ted Craig December 17, 2011 at 4:57 pm

Yeah, the state wants its money.

FYI December 17, 2011 at 6:17 pm

Even wikipedia explains (albeit quickly) the point about lawyers
http://en.wikipedia.org/wiki/Roman_litigation

CBBB December 17, 2011 at 6:55 pm

But even that article shows how under the Legis Actiones debtors were sold into slavery (and possibly killed!). And I don’t understand the whole difference lawyers make – most people even today can’t afford a decent lawyer so the existence of lawyers is largely irrelevant for most people.

JonF311 December 18, 2011 at 1:34 pm

FYI: Warfare was not constant in the ancient world. In fact the Roman Empire in its long heydey had only sporadic border skirmishes. So where did the slaves come from? Some few were taken in border raids and some were sentenced to slavery as punishment for petty crimes. But the majority of slaves were debtors sold by their creditors.

rpl December 19, 2011 at 7:40 am

Wow, talk about missing the point. Whether you think that modern “debt-bound wage labourers” are equivalent to slaves or not, the fact remains that if slaves are not counted as “population,” then the fraction of the population that actually controls that 15-25% of the wealth is actually much smaller than reported. Moreover, if slaves are not counted, then the inequality measures will be higher than reported because the reported measures will leave out the segment of the population that has no property and no income.

CBBB December 19, 2011 at 12:28 pm

Hey I have my own conversations on this blog – it may only be tangentially related to the actual blog post.

Dick Potomick December 17, 2011 at 1:42 pm

Free water, bread and entertainment –not too shabby. http://en.wikipedia.org/wiki/Bread_and_circuses

FYI December 17, 2011 at 1:44 pm

I was going to ask why this is relevant at all when I noticed that this is part of a “Journal of Roman Studies”.

I like history and think it is pretty important but this kind of thing sounds like a great example of superfluous academia.

RZ0 December 18, 2011 at 7:25 am

I’m with you, buddy. The conclusion supports any economic argument you want to make. To make mine, I’ll just add that there was one hell of a lot less wealth to control in 0 A.D.

David Wright December 17, 2011 at 1:45 pm

I know the headline “US more unequal than Roman Empire” is catchier, but given the error bars you quote, “US inequality statistically indistinguishable from Roman Empire” would be more accurate.

FYI December 17, 2011 at 1:46 pm

On a different note Alex, I heard you on Michael Medved a few days ago. It was great.

Nick December 17, 2011 at 1:49 pm

Why do you title your post this way when the estimates of the U.S. Gini bound the Roman Gini? Could we not just as easily conclude the U.S. Is more equal? And you’re comparing the top 1.5% from Rome to the top 1% of the U.S., who’s estimates are contained within Rome’s (again supporting the opposite conclusion you make on the equality of the two countries). All seems pretty ambiguous to me.

Anon. December 17, 2011 at 2:07 pm

Top X% have Y% of total wealth is a bad measure of “inequality”.

Let me demonstrate with two cases.

Case A: There are 100 people. 99 have $1 each, 1 has $100. The top 2% own 50% of the wealth.

Case B: There are 100 people. 98 have $1 each, 2 have $100 each. The top 2% own ~67% of the wealth.

But has inequality really increased in case B? It just depends on the definition you use…

Nick December 17, 2011 at 4:25 pm

When in Case B you add $99 to the economy and give it all to one person, I’d say yes it certainly is less equitable than Case A.

RZ0 December 18, 2011 at 7:32 am

Your cases are both extremes that don’t remotely represent reality. In the real world, a person moves into the top 2% with a 5% increase in wealth, not a 10,000% increase. And the third percentile isn’t left in the dust, as you have modeled it.
In the real world, X% controls Y% is an excellent measure of inequality. There are better ones, I guess, but don’t hold your breath waiting for a politician to say “standard deviation.”

Michael December 18, 2011 at 1:47 pm

A better example,

Case 2000: There are 100 people. 99 have $50k and make $50k a year. 1 person has $5 million and makes $10 million a year.
Case 2001: There are 100 people. They all work at Enron. 99 have $50k and now make $0 per year. 1 person now has $0 – and makes $0 per year.
Yea?

bill December 17, 2011 at 2:17 pm

Who needs dental care when you can have more equality?

anon December 17, 2011 at 2:31 pm
libert December 17, 2011 at 3:10 pm

Not to mention sanitation, wine, irrigation, education, the wine, public order and don’t forget “brought peace”…

msgkings December 18, 2011 at 7:22 pm

But apart from all that, what have the Romans ever done for us?

(Someone had to quote that)

mjw149 December 20, 2011 at 4:07 pm

yes, that was nonsense. The Roman state spent (foreign acquired) money on nothing but public works for the citizens. Aquaducts, which were hugely expensive for the time (running water in 1AD!), circuses, parades, public baths, roads, free grain, canals, a legal system (in 1AD!). People forget that Rome became essentially all of Italy (all were citizens) and they all got a safety net that rivals our modern day citizen benefits.

I’ve been reading a bit about Rome lately, and it makes me think that we’re abandoning the public sphere in this country. The USA, that gave free highways and libraries and schools and now lets monopolies and oligopolies restrict private enterprise and reduce government to a system of patriarchy aligned with different corporations, that doesn’t lead to public works. We can’t go to the moon, we don’t collect enough money. We don’t have free public broadband. We can barely fund two wars and a corrupt pharmaceutical public benefit. In Roman times, they had to build stuff and give stuff away to get public supports and prevent rioting, but American politicians can just buy ads to look good. Are we really more advanced? Is the decline in mortality making us more social and less rational? Do we have it so good it doesn’t matter anymore? Isn’t the Occupy movement too tame? Is our defense establishment and entertainment culture so perfect and good we’re all just sheep to the powerful?

jorod December 17, 2011 at 2:37 pm

I think it would be better to compare to 18th century France, as both had royal/imperial licensed monopolies.

Will McLean December 17, 2011 at 2:38 pm

The paper’s title is somewhat misleading, since it essentially deals with consumption rather than income. This may be true for subsistence farmers, but there were a lot of slaves in the empire. A slave may be getting enough to eat, but their net income would subtract the surplus value their master extracts from them above that. The true income of a slave could easily be negative.

NAME REDACTED December 17, 2011 at 5:14 pm

+1

Foghat December 17, 2011 at 9:14 pm

You could say the exact same thing about any exploited wage laborer. Remember how Adam Smith described the way owners of capital collude to bring down labor costs? Labors *in general* could easily have negative incomes, if you are calculating them the way you describe.

Dan December 17, 2011 at 2:49 pm

Think about the fall of Rome or Southern Confederacy:

Slaves.

In both cases, the elite decided they could do without the labor of the yeoman class and imported slaves to reduce labor costs. In the case of the South, a great many of the yeomen could and did migrate west where there was uncultivated land while others of an independent bent had to find land by fleeing to the hills—quite literally—to become despised by the elites as “white trash” or “hillbillies”.

The driver of this is “economic rent”.

Think about it like this: If you own land, the larger the economy becomes the more demand there is for your land. So you have an incentive to import more and more people—that is unless you are in the labor market! If you are in the labor market, as are most yeomen, you must balance the increase in value of your land (whose value is dominated by its provision of life to your family anyway—so you can’t really think of selling it) against the prices you can get for your labor.

If the value that falls on assets from increasing economic activity is not taxed away and redistributed to the posterity of the founders, a welfare queen elite will arise that thinks it is entitled to the benefits of civilization, and the rest of the population, who were intended as the beneficiaries of the nation by its founders, are increasingly forced to compete with imported slave labor until they are forced to sell their subsistence properties and then go into debt slavery.

The invading peoples will, of course, complain loudly about being enslaved—but the punishment will be handed out to the populace for the crime of being of the same ethnicity as the elite—while the elite will absolve themselves of guilt by surrounding themselves with foreign sycophants.

jvcn December 17, 2011 at 3:00 pm

As has been noted on a number of occasions, the existence of positional goods, control of labor, and of course the standard issues of diminishing marginal utility of income would tend to bias upwards modern measures of (material) income inequality especially when using modern prices. All else equal, diminishing marginal utility alone would get you a lot. Imagine two countries: A has average income of $2000 a year and B has average income of $100,000 a year but both have identical Gini coefficients and in fact identical distributions, then utility inequality would still be much worse for the poorer economy than the richer.
Finally taking into account social constraints (existence of slavery, class based restrictions on various economic markets, social rents on positional goods, differential access to various rights) would always tend to underestimate “true” inequality. Think of the Soviet Union, any measure of monetary or even consumption based inequality would have underestimated true inequality because political privileges determined access to goods and services to a much greater extent than in more purely money based, capitalist societies.

steve December 17, 2011 at 3:38 pm

“rent-seeking behaviour by tax-collectors and other intermediaries.”

Are tax collectors not part of the state in ancient Rome?

CBBB December 17, 2011 at 3:41 pm

Not exactly, they had what is called Tax-Farming. Tax collectors were essentially private contractors, technically working for the State but….only up to a point.

CBBB December 17, 2011 at 3:41 pm

By the way I’m sure many libertarians think Tax-Farming is a fantastic idea.

Laserlight December 17, 2011 at 5:31 pm

It IS a fantastic idea, if you are cold blooded and have the opportunity to become a tax farmer.

steve December 18, 2011 at 11:07 am

When you don’t think taxes are a good idea, it would be hard to come to the conclusion that tax farming is a good idea.

CBBB December 18, 2011 at 12:20 pm

I understand this, but given that taxes will be collected I’m sure libertarians would want the collection of taxes to be privatized – thinking it’s some new innovative, cutting-edge idea that’s never been done before…..

JonF311 December 18, 2011 at 1:42 pm

Yep. And they were free to demand what extra for themselves they could get away with. That’s why they are spoken of with such loathing in the Gospels, and the fact that Matthew, a tax collector, became an apostle was thought worthy enough to comment on.

This sort of privatized tax collection survived up until the French Revolution when members of La Ferme (the tax collectors’ guild) were treated with especial brutality by the Jacobins– it’s why early chemist Antoine de Lavoisier (whose day job was tax collecting) was sent to the guillotine despite his intellectual fame.

Casey December 17, 2011 at 4:09 pm

Course even the poorest of Americans enjoys a standard of living far beyond the wildest dreams of most well off Romans as well as a much wider degree of freedom and opportunity.

Equality of ends is overrated.

Hermenauta December 17, 2011 at 4:37 pm

Please let me introduce you to the concept of “hedonic threadmills”?

john haskell December 17, 2011 at 7:00 pm

please introduce me to the concept of a hedonic threadmill. May I assume that the thread is of very high quality?

anon December 17, 2011 at 8:07 pm

hahahaha

Oh, you meant hedonic treadmill….
http://en.wikipedia.org/wiki/Hedonic_treadmill

Another demonstration of reversion to the mean?

Morgan December 17, 2011 at 4:15 pm

Treasury Debt is effectively a tax-farming operation.

And there are cases of the IRS hiring de facto tax farmers:

http://www.dontmesswithtaxes.typepad.com/dont_mess_with_taxes/2006/09/the_great_taxco.html

Al Brown December 17, 2011 at 5:13 pm

Of course, there’s greater inequality today.

Today we have mechanisms for multiplying your efforts. You can sing and sell millions of copies and fly to many places quickly to do concerts in massive venues enabled by technology. All you could do in Rome is sing in the Coliseum and then travel for days to another city.

And if you invented a cool machine back then, there was no intellectual property and you couldn’t make millions of copies even if you had a way of distributing them. And you couldn’t find expertise to get all these things done.

So of course there’s greater income inequality today. And thank god there is.

NAME REDACTED December 17, 2011 at 5:15 pm

BINGO!

CBBB December 17, 2011 at 5:40 pm

Big time Actors, Singers and inventors make up only a tiny insignificant fraction of the elite in our society. The biggest gains have been the increased ability of rent-seeking managers and corporate bureaucrats to rip-off more and more people.

steve December 18, 2011 at 7:28 am

How much of our inequality stems from people inventing stuff and how much from “innovative” financial products?

Steve

Al Brown December 18, 2011 at 4:31 pm

Probably a lot of the inequality is due to corruption.

There are a great many people who’ve figured out ways to feed off our taxes, directly and indirectly, without giving anything of value in return. And we need to put a stop to all the subsidies and monopolies and bailouts and crooked contracts and people in government who become lobbyists.

But there are many people who create actual value and who get that value out to enormous numbers of people and collect a lot for their efforts. And they would be even richer and more numerous if our government wasn’t taking a lot of their money to give to its friends.

Jim December 17, 2011 at 8:39 pm

>>increased ability of rent-seeking regulators and useless bureaucrats to rip-off more and more people.

Fixed it for you.

Small wonder that the DC suburbs have the richest counties in the USA.

CBBB December 17, 2011 at 8:42 pm

Yeah I don’t disagree with you but I don’t think the corporate executives should excluded there, it’s all the same revolving-door system.

Dynotec December 18, 2011 at 8:21 am

Most of the increases in inequality in the past 30 years have been in one or two zipcodes in New York. DC has gotten richer, but that’s because it’s dominated by professionals who actually generally make less than they would have in the private sector.

You can be against the steady expansion of government, but a bunch of lawyers and upper-middle class professionals moving to DC away from other areas has nothing to do with inequality.

Inequality has mostly increased at the very top .1%, and that’s a field that’s dominated by people in the financial sector and by corporate executives who have been able to capture a greater share of producer surplus due to the downfall of private-sector unions.

y81 December 17, 2011 at 9:40 pm

This is kind of silly. Subsistence economies don’t generate much surplus, so even the top 1% can only appropriate so much. Gini coefficients were designed to compare one market economy to another, not to compare a slave-owning subsistence agriculture economy with a free market modern economy. It’s like trying to use the Freedom House or Heritage rankings to compare levels of freedom in ancient Rome and the United States: those rankings simply weren’t designed to measure ancient societies.

RZ0 December 18, 2011 at 7:37 am

+1. The low-tax, low-wage, tort-free Roman Empire would rank quite highly on Chamber of Commerce rankings of business competitiveness. But the chamber’s analysis wasn’t meant for those times.

CBBB December 18, 2011 at 12:18 pm

Well the Chamber’s “analysis” was meant for propaganda purposes so who knows

JonF311 December 18, 2011 at 1:47 pm

By the time of the later Empire the Roman economy was heavily subsidized and controlled by the government. It wasn’t until 440 AD (over a century after Constantine and fifty years after the Empire became officially Christian) that prositution, including homosexual prostitution, was taken off the list of imperially subsidized enterprises. I doubt the chamber of Commerce would have approved of such a profoundly state-directed economy.

Robert December 17, 2011 at 10:50 pm

and look what happened to Rome! Perhaps a more equal United States will fall, too!

Now December 17, 2011 at 11:59 pm

I wonder if the Romans also confused “income” with “standard of living”. Income may have a correlation with the standard of living in a country, however the poor people of our country have cell phones, cable tv, Internet access, access to educational facilities, and obesity problems. How is it that more income equality is desired when the standard of living for poor people is high compared to other countries? How is it determined that more income equality would be used properly by the beneficiaries to improve their standard of living?

Also, I would like to add that the Romans did not like Jesus.

will December 18, 2011 at 2:39 am

Most here do not object to income inequality. But I think they do object to income gained through rent-seeking. The general (populist) consensus is that anyone in the 1% aside from steve jobs got there through rent-seeking activities.

CBBB December 18, 2011 at 12:17 pm

Well not just Steve Jobs, but a lot of the 1% DID in fact get there through rent-seeking. Most of the 1% are corporate executives – many probably hired due to their contacts and connections within government or other companies. Even the medical doctors who make up the 1% could be classified as rent-seeking to an extent – they benefit extremely heavily due to the regulatory structure that protects them from competition.

y81 December 18, 2011 at 10:45 pm

Getting paid for your contacts and connections is hardly rent-seeking, unless you are getting paid more than you would in some other occupation. Most successful brokerage and sales types, i.e., the sort of people who most profit from contacts and connections, would be equally successful selling something different, so they are hardly rent receivers in an economic sense.

In any case, contacts and connections don’t have much to do with corporate success. What contacts do Jamie Dimon or Lloyd Blankfein have, except those that they made by working hard at JP Morgan or Goldman Sachs?

JonF311 December 18, 2011 at 1:48 pm

They later Romans liked Jesus just fine. They even built immense churches to honor him.

Leonardo Monasterio December 18, 2011 at 10:42 am

Remember Milanovic, Lindert and Williamson.
http://mpra.ub.uni-muenchen.de/5388/1/MPRA_paper_5388.pdf
The “inequality extraction ratio” is the much more important than the Gini index: US: 41%; Roman Empire 75%.

Neal December 18, 2011 at 12:44 pm

“Thus, despite the aqueducts Rome may not have done that much for the people after all.”

I don’t know about that. Seems like the proper conclusion is that 5-7% of GDP was on the most important government spending, not that since 5-7% is small Rome wasn’t doing a lot for the people.

NAME REDACTED December 19, 2011 at 4:17 am

Really interesting!

Tom December 18, 2011 at 12:25 pm

“(Thus, despite the aqueducts Rome may not have done that much for the people after all.)”

Poor conclusion. I think this shows that a government really only needs 5% of GDP to provide its bulk of value to society.

SDFII December 19, 2011 at 4:39 pm

“Thus, in Rome the top 1.5% controlled 15-25% of income”

I think the use of the word “controlled” here is quite telling and reveals a fundamental misunderstanding of what income is.

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