Civic Order and Contract Enforcement

Abstract

This chapter looks at contract enforcement and transaction costs under the Roman Empire. The unification of the Mediterranean Basin by a single state ameliorated economic conditions in practical ways: monetary and metrological systems were standardized, removing costly barriers to trade. Legal rules were standardized as well, which held the potential for an even greater transaction-cost-reducing effect. However, without third-party enforcement, private means still had to be employed to enforce contracts. It is therefore not immediately clear why transacting parties would adopt the Roman legal system. The chapter then argues that contracts drawn up in accordance with imperial law and in the presence of witnesses were “publicly embedded,” which increased their enforceability and reduced enforcement costs. Indeed, this enforcement-enhancing effect was an “emergent property,” the result of legal, social, and ideological factors interacting in an undesigned and unintended fashion.