The Roman Market Economy by Temin Peter;

Author:Temin, Peter;
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2013-07-06T16:00:00+00:00

Chapter 8

Financial Intermediation

In order to evaluate the sophistication of the Roman financial market, we need to know if there were credit intermediaries, that is, institutions that mediated between borrowers and lenders, obviating direct contact between them. The most popular credit intermediaries in many societies are banks, and it is fortunate that ancient historians and modern economists employ the same definition of a bank. Cohen (1992, 9) opened his discussion of Athenian banking by quoting the legal definition in use in the United States today. This same definition can be found in a recent textbook on financial markets and institutions, which states: “Banks are financial institutions that accept deposits and make loans” (Mishkin 2010, 7). The text explains that, “banks obtain funds by borrowing and by issuing other liabilities such as deposits. They then use these funds to acquire assets such as securities and loans” (Mishkin 2010, 225). Deposits are bank borrowing for which banks furnish services in place of paying interest, either in part or in full. Demand deposits, which are totally liquid, typically do not pay any interest today. Savings deposits, which are available only with a delay, pay a low interest rate, and time deposits, available at a predetermined time, typically pay more.

This definition has been used by ancient historians investigating the financial markets. Bogaert (1968) defined banks, typically individual bankers identified as trapezitai or argentarii, as accepting deposits and making loans. Andreau (1987a, 17) expanded this definition slightly by adding a third function: “Banking is a commercial business involving receiving deposits from clients to whom the banker provides cashier services and lends available funds to third parties with whom the bank acts as a creditor.” By adding cashier services, Andreau appears to be saying that ancient banks must have dealt with the day-to-day needs of their clients for cash even if most deposits were not available on demand, that there were financial arrangements like demand deposits in addition to other, less available, deposits.

Andreau in The Cambridge Ancient History minimized the role of ancient banks, asking and answering, “Should the ancient bank be compared to that of the nineteenth century, or even to that of the eighteenth? If the question is put this way, then the reply is clearly negative” (Andreau 2000, 775–76). A more accurate reply to Andreau’s question, rephrased to focus on the eighteenth century, should be a qualified yes. Andreau contrasted the agrarian economy of Rome against the industrial economy of the nineteenth century. He also noted the variety of financial conditions around the Roman Empire, but he implicitly assumed that all of modern Europe was the same. In this chapter, I compare the early Roman Empire with preindustrial Europe and stress the range of financial structures that existed even among even the most advanced agrarian economies of the eighteenth century.

Loans between individuals are an important part of any financial system, but they do not by themselves show the existence of a sophisticated web of financial transactions. For example, the presence of interest-bearing loans informs us only about one way of raising funds for someone seeking to start or expand a business activity.

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