Abstract
In the beginning of the second book of his Politeia (Republic) Plato in passage 2.358e–359a–c raises the issue of the administration of justice as a means of motivating people to behave fairly regarding their relationships and when cooperating with each other because, at the end, this is mutually beneficial for all of them. We argue that this particular passage could be seen as a part of a wider process of evolution and development of the institutions of the ancient Athenian economy during the Classical period (508–322 BCE) and could be interpreted through modern theoretical concepts, and more particularly, game theory. Plato argued that there are two players, each with two identical strategies, to treat the other justly or unjustly. In the beginning, each player chooses the “unjust” strategy, trying to cheat the other. In this context, which could be seen as a prisoner’s dilemma situation, both end with the worst possible outcome, that is, deceiving each other and this has severe financial consequences for both of them. Realizing this, in a repeated game situation, with increasing information on the outcome and on each other, they choose the “just” strategy so achieving the best outcome and transforming the game in a cooperative one. We analyze this, formulating a dynamic game which is related to international commercial transactions, after explaining how such a situation could really arise in Classical Athens. We argue that this is the optimal scenario for both parties because it minimizes the risk of deceiving each other and creates harmony while performing financial transactions.
Highlights
During recent years, scholars have researched various aspects of the ancient Athenian economy of the Classical period (508–323 BC), showing its modern character and institutional setup in many areas, such as banking, insurance and other financial services.Bresson (2016a, 2016b), O’Halloran (2018), Economou and Kyriazis (2019) and Bitros et al (2020) among other authors, have analyzed the market-type of economic institutions that ensured the smooth functioning of the Athenian market while Bitros and Karayiannis (2008) have analyzed the related issue of entrepreneurship in Athens under free market economic principles
We contribute to the international bibliography which argues that fair and honest behavior while performing commercial transactions is a key intertemporal axiom for reducing financial risks. We argue that such a behavior further sets the conditions for trade to flourish and the economy to grow in the long run, providing that the functioning of the economy is supported by a series of efficient institutions and auditing mechanisms which ensure the protection of private property, sound money, and the development of successful financial institutions such as banking, insurance, etc
Characteristic historical cases of nations which played a key economic and geopolitical role in their time, such as Medieval Venice, Early Modern Europe’s England, and the United Provinces (Dutch Republic), Great Britain, and currently the USA (Ferguson 2008; Puga and Trefler 2014; Economou and Kyriazis 2017), verify this financial axiom and with this paper we argue that we contribute to the relative discussion which should include evidence from Athens during the Classical period and the time of Plato and later on
Summary
Scholars have researched various aspects of the ancient Athenian economy of the Classical period (508–323 BC), showing its modern character and institutional setup in many areas, such as banking, insurance and other financial services. We contribute to the international bibliography which argues that fair and honest behavior while performing commercial transactions is a key intertemporal axiom for reducing financial risks We argue that such a behavior further sets the conditions for trade to flourish and the economy to grow in the long run, providing that the functioning of the economy is supported by a series of efficient institutions and auditing mechanisms which ensure the protection of private property, sound money, and the development of successful financial institutions such as banking, insurance, etc. In a repeated game situation, both parties choose the “just” strategy by adding auditing mechanisms in the game and they manage to achieve the best outcome by transforming the game into a cooperative one which maximizes the outcome for both Put it differently, being inspired by Plato’s views, we argue that the success of commercial cooperation between two partiers can be achieved when auditing institutional mechanisms of minimizing the risks of performing financial transactions do exist and are functional in practice.
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