# Economics of the Ancient World



## Nameback (May 1, 2013)

In any large kingdom, republic, empire, or other political organization, economics is important. This is just as true of the ancient and medieval world as our world today. To that end, I'd like to use this thread to answer economic questions and provide insight into how economic policy can affect fantasy worlds. 

First, I'll start with a post on some of the most essential basics: inflation and deflation. I'm starting with these because I find that macroeconomics--the economics of whole societies--is best understood by understanding money and how it is used. 

*Deflation*: Deflation is nasty, and almost always accompanied by economic contraction, unemployment, and reduced output (fewer real-world goods and services being produced). What is deflation? Well, simply put, too little money and too many goods. When you don't have enough money to buy all the things society can make, deflation happens. 

Remember, M (the supply of money) * V (how fast people spend their money) = P (the general price-level) * Q (the amount of actual stuff people can make). So when money disappears (M going down), or people hoard their money (V going down), then either P or Q must go down--and typically it's both. And it's Q going down that really hurts. 

So, how does this happen and what does it have to do with your fantasy world? Well, it can happen a lot of ways, but usually it happens when a lot of debts go bad (people default on them) all at once. And it matters because it can cause depressions and huge social upheaval--ancient Rome suffered several deflation crises in the Late Republic era that contributed hugely to the political instability that led to Caesar's civil war, and the formation of the Empire.

What mostly happened in Rome was that, for one reason or another, the aristocracy hoarded huge amounts of money, leaving not enough for everyone else, causing prices to fall. When prices fall, people earn less for their labor--the problem for Romans was that most Roman citizens carried a good bit of debt. When they received less money for their labor and goods, they could no longer pay their creditors, and began to default in droves. This led to foreclosures, unemployment, poverty, and dispossessed masses--not to mention even more falling prices which perpetuated the cycle! 

One reason in 91-86 BC that this happened was that because of the Social War (an uprising of Italian allies against Rome), people (especially the aristocracy, or _patricians_) began hoarding money out of fear and uncertainty at the war's outcome. This led to a dramatic fall in the prices of commodities and land. People could not service their debts and began defaulting. These defaults often resulted in foreclosures, which made prices fall even further by flooding the market with more land and goods that creditors had foreclosed on and were trying to sell to break even.

Another cause during the same period was the war with Mithridates, who invaded Roman Asia Minor. This made it very hard for Roman creditors to collect on their debts in Asia Minor (which was heavily indebted), causing liquidity problems in Rome; because these creditors had lent out so much in Asia, and because they could not be repaid because of the war, they could not make new loans to Roman citizens or indeed even the government! This led to even more deflation (sound familiar? This is rather similar to the 2008 financial crisis! Replace "Asia Minor" with "investment banks" and "Mithridates" with "subprime loans" and you get the picture!).

All this caused unemployment, people being kicked off their land (due to foreclosure), and general malaise. The unwashed masses grew in Rome as foreclosed farmers left the countryside and moved into the city. Soon, there was political fighting over proposed forms of debt relief. 

In Rome, this meant typically that the _Populares_ (populist politicians) wanted debt relief for citizens in general. However, the _Optimates_ (conservative politicians) opposed debt relief, as the aristocracy was behind much of the creditors in Rome, and they would lose out if debts were wiped clean. This conflict was one of the most significant factors that led to the civil wars of the era! Indeed, Julius Caesar was a frequent proponent of debt relief, and this was one of the hot-button issues that divided him from the Senate.

*Inflation*: Inflation, in moderate amounts, is pretty much irrelevant. It hurts people who have a lot of money in cash, but most people had their wealth in things like land or commodities or slaves, whose prices would rise in time with inflation. However, sometimes hyperinflation would strike, and governments would print huge amounts of money. The problem with inflation, in simple terms, is the opposite of deflation: too much money, too few goods. 

High or hyper- inflation happens because society needs more of a real good or service (something people actually make) than it can produce. Basically, when hyperinflation happens, it means that the society in question is suffering from a lack of _real wealth_. As opposed to deflation, when society doesn't have enough _money_, but has plenty of goods and services. 

I'll again use Rome as an example. In the 2nd and 3rd centuries AD, Rome had a huge inflation problem that grew progressively worse. Prices were rising constantly at extremely fast rates and people had trouble paying for necessities. Why? Mainly because of the military. 

Rome's military had grown progressively larger since Augustus to defend longer borders. Not only that, but each Emperor vied to lavish money on the army, because that helped secure his power. And if you didn't pay the army well? Your head typically ended up on a spike, and an army commander took your place. 

So, Rome needed lots of money to pay its growing (and growing greedier) army, for purposes of both actual defense and defense against civil war from within the ranks. However, this became increasingly untenable. Why? Because most of the largest land-owners and aristocrats were exempt from most forms of taxation. This meant that taxes fell on the populace, from merchants and artisans and local creditors down to the peasantry. And frankly, they didn't have enough money to pay for the upkeep of the army. 

A Roman Emperor at this time had basically a few bad options:
(1) Reduce the size of the army, lose the ability to defend large swaths of the Empire.
(2) Reduce the pay of the army, get assassinated or cause civil war.
(3) Tax the populace into oblivion, still not be able to pay army
(4) Tax the aristocracy and large land-owners, get assassinated or cause civil war
(5) Print money.

Naturally, the Emperors chose the fifth option. However, this didn't address the fundamental issue--Roman society simply _could not make enough goods and services_ to support both a bloated army and a tax-free aristocracy! The result was a two-tier currency system, in which the army and bureaucrats were typically paid in un-inflated gold currency, and everyone else used hyper-inflated silver currency. 

But, again, even if the Empire didn't print the money, something terrible would still occur. This is what I mean when I say that high inflation is a sign that a society needs more of something than it can produce. Because of the political instability and threat of civil war in the Roman Empire, it was a society whose political structure demanded a huge army and a hugely wealthy and untaxed ruling class--and the agrarian economy of Rome could not support that AND an entire plebeian population. 


Now, if you have any economic questions, please feel free to ask and I will do my best to answer them!


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## Butterfly (May 1, 2013)

See... it all comes back down to supply and demand., which is the driving force of price. It is the level of demand that causes prices to inflate or deflate. Higher demand for a certain good drives up the price, less demand brings the price down.

Take five families, and the baker has only one loaf of bread left on the shelves... the highest offer will get the bread, because five people want it.

Now the opposite, five bread, one family... the baker will take what he can get to shift his stock.

So, when demand is greater than the ability to supply, prices are high. And the opposite, when the market is saturated and has few buyers, prices reduce.

So what it seems you're basically saying, is that the Roman army bought up all the food supplies, and left very little to feed the general population. Low supply = high demand = price inflation = a reduction in the populace ability to both pay taxes and feed themselves.

Likely, printing more money for the army drove up demand from the army to unsustainable levels, and the market was stripped of goods leaving none for the common folk.


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## Nameback (May 2, 2013)

Butterfly said:


> See... it all comes back down to supply and demand., which is the driving force of price. It is the level of demand that causes prices to inflate or deflate. Higher demand for a certain good drives up the price, less demand brings the price down.
> 
> Take five families, and the baker has only one loaf of bread left on the shelves... the highest offer will get the bread, because five people want it.
> 
> ...



Basically, yes. Money and demand are almost interchangeable concepts (although sadly a lot of neo-liberal economists seem to not understand this idea). Therefore, when money pours into the economy, demand rises--which is great if you don't have enough demand (like in a debt crisis). 

But the point I was trying to make, in addition to the simple economics of it all, is that when governments resort to printing money, it's because they have no good options left. There are serious harms coming down the pike, no matter what the government does. You can either bleed the population by tax or inflation, or ensure civil war by trying to fix what's broken in the political system. That was the problem set before the Roman Emperors in the late 2nd and all of the 3rd century. 

I think it's important to understand economics in terms of their real-world implications. What does hyper-inflation _mean_, on the ground. _Why_ is it happening? 

That's why I think it's important to go back to what the economy is really about -- real-world goods and services, not just abstract concepts like money and demand. And in a hyper-inflationary economy, there is a real shortage of real _necessities_, leading to a choice between different evils. The Roman army was a necessity, and indeed the aristocracy was also (because if it was not constantly placated, it would foment instability, assassination, and civil war, which caused the entire society to suffer). Of course, so were food and land and other basic goods--and all these necessities together was an insurmountable challenge for the pre-industrial technology of ancient Rome.

If Romans had invented the steam engine in 100 AD and followed up with industrialization and electricity, then who knows--their increased productive capacity could have been enough to feed an empire _and_ the demands of its bloated ruling class. But we'll never know!


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## ThinkerX (May 2, 2013)

Well...there were other things as well:

Most of the ancient civilizations were fundamentally 'slave states'.  Their leaders and most other people literally could not imagine things being any different.  Repeated slave revolts meant with a baffled attitude and ever harsher penalties on the part of the 'owners'.  

The dependance on slavery meant that the slaves became a measure of wealth: owning a couple hundred slaves back then carried very roughly comparable prestige to owning a couple dozen classic cars now.  Therefor, things that threatened to reduce a slaves value also reduced the wealth of the owner.    I remember reading a possibly apocyrphical account of plans in late Rome to build an aqueduct.  The people behind this just couldn't make the numbers work; it required more slaves than they could muster.  At this point an engineer-inventor showed up with diagrams for primitive but workable construction machinery greatly reducing the amount of required labor.  The aqueduct backers looked over his plans, decided they were workable...and then told him to go away because implimenting those plans would have dramatically reduced the value of their slaves.

There were some fairly clever bits of technology in Roman times, like Hero's steam engine, devices to make doors open themselves, and that funky astronomical computer, but the slave state mentality was so deep these things remained 'toys'.

I figure what really scr*wed over the Roman Economy was Diocletians 'reforms', about AD 300.  He managed to combine the worst aspects of communism and capitalism and lay the groundwork for medivial serfdom all in one go: son's bound to their fathers trades being the one which leaps to mind.


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## Nameback (May 2, 2013)

ThinkerX said:


> Well...there were other things as well:
> 
> Most of the ancient civilizations were fundamentally 'slave states'.  Their leaders and most other people literally could not imagine things being any different.  Repeated slave revolts meant with a baffled attitude and ever harsher penalties on the part of the 'owners'.
> 
> The dependance on slavery meant that the slaves became a measure of wealth: owning a couple hundred slaves back then carried very roughly comparable prestige to owning a couple dozen classic cars now.  Therefor, things that threatened to reduce a slaves value also reduced the wealth of the owner.    I remember reading a possibly apocyrphical account of plans in late Rome to build an aqueduct.  The people behind this just couldn't make the numbers work; it required more slaves than they could muster.  At this point an engineer-inventor showed up with diagrams for primitive but workable construction machinery greatly reducing the amount of required labor.  The aqueduct backers looked over his plans, decided they were workable...and then told him to go away because implimenting those plans would have dramatically reduced the value of their slaves.



Hah, great anecdote! 

It should be noted too that slave states often lent themselves to deflationary events due to so much of the productive labor force not actually receiving wages, and consuming less than they were producing. In particular, you see a pattern throughout history of large slave-run plantations running small farmers out of business with their cheap labor and economies of scale. This was a consistent source of rural unemployment -- which in turn usually became urban unemployment as hapless ex-farmers fled to cities to survive on public grain disbursements. 

As to the value of slaves being deliberately preserved, basically all societies have this to some extent. People who have a strong interest in a given technology will resist the advance of technologies that threaten to replace the existing standard. However, someone will always have a strong interest in adopting the new technology. While I can see aristocrats not seeing the appeal, or even actively suppressing such innovations, it seems to me that a great deal of the Roman middle class would find value in these technologies.


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## Jess A (May 3, 2013)

Useful posts by all! I can't add to it but I will be following the thread.


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## Nameback (May 4, 2013)

Well, if anyone has questions around issues of economics, feel free to ask. In the meantime I'll try to think of some more things to add!


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## Jabrosky (May 4, 2013)

How much do you know about economic systems of pre-modern civilizations other than Rome? I am most interested in places like the Nile Valley (i.e. Egypt and Nubia) and maybe West Africa, but information on those may be hard to find.


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## Nameback (May 4, 2013)

Jabrosky said:


> How much do you know about economic systems of pre-modern civilizations other than Rome? I am most interested in places like the Nile Valley (i.e. Egypt and Nubia) and maybe West Africa, but information on those may be hard to find.



Well, the nice thing about economics is that most principles apply across cultures. I used Rome as an example to show how inflation and deflation _can_ or _might_ arise, but any culture that uses currency can have the same problems arise in their own way, according to the problems and political structures of their own culture. In Rome, deflation happened because of debt defaults -- but not all ancient cultures used debt as extensively as the Romans. So in those places, deflation may be less likely, or it would arise in other ways, such as a decrease in the supply of money (perhaps by lots of money flowing out of the domestic supply and into a neighboring country, because the domestic culture is importing all their food from the neighboring country). So if you have a fantasy culture in a place that has poor farmland, they might have deflation (and resultant unemployment) because they are importing so much food that it's using up all their money. 

The rule of thumb for good economic information about a pre-modern culture is that it depends on the prevalence of good written records. So, Rome, Greece, China, Egypt, Byzantium, etc. It's hard to learn about the economics of a culture from archaeology alone. 

Egypt, IIRC, didn't use coinage, but had currency in the sense that they used common and widely-valued goods as a sort of currency. And, since trading huge amounts of bread or beer was too logistically difficult, they would usually just trade accounts of commodities. In other words, large warehouses and storehouses would hold commodities like grain (which would stand in for more perishable goods like beer and bread) in the name of various account holders--like a bank. And when people made trade agreements, grain would get moved from one account to the other, without any physical movement taking place, just like a modern bank changing the 1s and 0s in electronic accounts without moving any actual money. 

I can imagine this would make things rather different from a coinage-based currency system, because the supply of money would be restricted to the amount of actual real commodities that are available. This means that the money supply could not expand or contract as wildly as an economy where money can be printed by the government, or created/destroyed via loans/defaults. However, this could be a downside as well, if they economy _needs_ more or less money, because the government wouldn't be able to change the supply of money, since it can't just create beer and bread out of thin air the way it can create coins.


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## Nameback (May 4, 2013)

Also, let's look at how a commodity-based currency culture (like Egypt) would fare against a coinage-based currency culture (like Greece). 

If people need to hoard commodities like grain, iron, copper, tin, and cloth in order to have money to buy things with and money for savings, then the saved commodities cannot actually be put to use. Whereas if a culture uses coins made of relatively useless materials like gold and silver, they can put all their commodities to use, and the populace will still have the ability to save money and carry out their economic activity.

Imagine how this affects the military power of two neighboring cultures. If 20% of the iron, copper, and tin that a culture produces is used as money instead of being refined and forged into weapons and armor, then a neighboring coinage culture can make just as much armor and weaponry with only 80% of the total production of metals. And if they both can produce equal amounts of metal, then the coinage-based culture will have better armor and weapons for its military. The same goes for the grain and animals to feed the army, cloth to clothe it, etc. 

This shows the relative efficiency of coinage versus commodity money: a coinage economy could buy and use productively 100% of the commodities that it is capable of producing, and people would still have all the money they need to carry out economic activity, including savings. Meanwhile, a commodity economy would be incapable of using 100% of its commodities productively, because that would leave them without any money for economic activity. 

The more value a commodity culture puts on thrift and savings, the higher the proportion of commodities that are held useless in that economy.


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## Jess A (May 4, 2013)

Nameback said:


> Well, if anyone has questions around issues of economics, feel free to ask. In the meantime I'll try to think of some more things to add!



Thank you! I see by Jabrosky's question your knowledge is fairly extensive.

Any chance you know anything about non-ancient world economics? Renaissance, for instance? Also, some of the places on the continent I am writing about still use slavery, which is why the above posts are very useful. 

If one nation has a very important strategic port, what kinds of agreements occurred when other (perhaps landlocked) nations wanted to use that port? What taxes did the other nations/merchants pay, concessions etc? How does this relate to power struggles and the economy? 

If able to help, thanks! If not, no worries, there's a lot of information here that is useful nonetheless.


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## skip.knox (May 7, 2013)

Nice summary. Your examples are all ancient, but you really could have named the thread "pre-modern" economies.

Here's something to chew over. I have no idea where it could lead, but it occurs to me that while we freely think of alternative religions, cultures, even different sexual habits for dwarves and elves, nobody (to my knowledge) has posited different economic systems.

If we *could* take basic economics in a different direction, where might that head? No fair claiming the laws of economics are universal, like laws of physics. Heck, we mess with laws of physics without even breaking a sweat!


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## ThinkerX (May 7, 2013)

> How much do you know about economic systems of pre-modern civilizations other than Rome? I am most interested in places like the Nile Valley (i.e. Egypt and Nubia) and maybe West Africa, but information on those may be hard to find.



It sounds like you are talking about barter or precoinage type societies - before money was invented.

Might have something for you.

A key thing here was weights, scales, and measures.  Coins didn't exist, yet goods still changed hands.  X amount of silver, by weight, was good for Y amount of produce.  Hence, you needed uniform weights to measure all this against.  The bible has a couple of rants about using 'false measures', because much of the OT predates 'money'.  I seem to remember the death penalty being mandated for the use of false measures, but I'm not going to swear to this...its all in the more 'legal' sections anyhow.


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## Nameback (May 7, 2013)

Jess A said:


> Thank you! I see by Jabrosky's question your knowledge is fairly extensive.
> 
> Any chance you know anything about non-ancient world economics? Renaissance, for instance? Also, some of the places on the continent I am writing about still use slavery, which is why the above posts are very useful.
> 
> ...



Well, while my historical knowledge of the Middle Ages and Early Modern periods is spotty, I would be happy to dig around to answer any questions -- and of course the principles of economics still applied no matter what. It's just a matter of how people organized their societies around those principles that is geo-historical. 

As to your port question: I imagine that land-locked powers would still probably use river trade--they would have their own ports, they would just be inland ports. It seems unlikely that their merchants would transport goods over land and then ship them from the port of a different country. 

However, if it is necessary for your story that such a shared port exist, then it might get a bit messy. While the ideas of customs and import duties/tariffs are very old indeed, this was usually a relatively easy thing to enforce -- if a ship arrives in port and offloads goods, you charge them a percentage of the value of their goods. Charges between 2-3% were very common throughout history, being used by the ancient Greeks, Romans, all the way up through the Kings of England into the Parliamentary era. 

Like I said, though, this was a fairly easy thing to do. It's hard to miss a ship docked at port. There's relatively few things to keep track of. However, if merchants were bringing goods in over land to ship _out_ from a port, it would be rather difficult to keep track of who was entering the port city from within the nation's borders, and who was entering from beyond the nation's borders. Obviously, passports and other marks of citizenship were somewhat rare in pre-modern days. 

The result is that merchants from the land-locked nations would try to pass themselves off as belonging to the nation of the port-city, in order to avoid any duties collected by the port. If some system of identification were developed for the enforcement of duties, then counterfeiting would develop, and merchants would buy legitimate papers from actual citizens--without photo ID, it would be easy for a domestic merchant to sell or lease his proof-of-citizenship to foreign merchants as an additional revenue stream.

In short, the whole thing would be unwieldy, hard to enforce, and would create all kinds of perverse incentives. Which may be useful for your story!


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## Jess A (May 8, 2013)

Nameback said:


> Well, while my historical knowledge of the Middle Ages and Early Modern periods is spotty, I would be happy to dig around to answer any questions -- and of course the principles of economics still applied no matter what. It's just a matter of how people organized their societies around those principles that is geo-historical.
> 
> As to your port question: I imagine that land-locked powers would still probably use river trade--they would have their own ports, they would just be inland ports. It seems unlikely that their merchants would transport goods over land and then ship them from the port of a different country.
> 
> ...



Yes plot devices would abound, according to the information you have given me! Thank you for the comprehensive response. There are no rivers - just one enormous lake which freezes over in the winter time. I suppose if I didn't want it to be a plot device, I could invent a river that runs through the border of the duchy but doesn't connect to the lake where the main city is. 

I love the ideas for difficulties that you've posted. New plot lines could even emerge from it. I could even invent some sort of identification that is hard to falsify - might take a little creativity.


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## skip.knox (May 8, 2013)

Jess A said:


> Any chance you know anything about non-ancient world economics? Renaissance, for instance? Also, some of the places on the continent I am writing about still use slavery, which is why the above posts are very useful.



Slavery of course survived right through the Middle Ages, but if you're going for historical verisimilitude, the slaves will primarily be household, not agricultural. 



Jess A said:


> If one nation has a very important strategic port, what kinds of agreements occurred when other (perhaps landlocked) nations wanted to use that port? What taxes did the other nations/merchants pay, concessions etc? How does this relate to power struggles and the economy?



Nations pretty much didn't exist yet; think rather in terms of cities and individual merchants or merchant associations. The whole notion of "landlocked" is basically modern.

Merchants paid endless fees. There were, famously, over 200 tolls levied down the length of the Rhine River, for example. Whatever might be paid once you got to Bruges or Antwerp was only one factor among many. Sometimes tolls got bad enough that merchants tried to find other routes, but again tolls were but one factor (condition of roads and especially bridges, and conditions of war were two other important ones). In a few cases, merchants banded together to try to protect themselves--the Hanseatic League is one such example, the Swabian League another. Going in a different direction, the counts of Champagne got filthy rich by the simple expedient of promising peace and justice to merchants who came to their annual fairs (Troyes, e.g.), and charging fees for attendance as well as getting a cut from the mercantile courts held there to settle disputes.


But, really, we're writing fantasy, right? So we can change the rules as we please. Maybe dwarves have a tunnel system under the Pyrenees. Maybe you can't go through the Black Forest because of renegade elves. Maybe merchants can ship by dragon. Have fun!


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## Nameback (May 8, 2013)

Jess A said:


> Yes plot devices would abound, according to the information you have given me! Thank you for the comprehensive response. There are no rivers - just one enormous lake which freezes over in the winter time. I suppose if I didn't want it to be a plot device, I could invent a river that runs through the border of the duchy but doesn't connect to the lake where the main city is.
> 
> I love the ideas for difficulties that you've posted. New plot lines could even emerge from it. I could even invent some sort of identification that is hard to falsify - might take a little creativity.



It would certainly aid in the development of a vibrant and thriving underworld, which is always fun.


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## Jess A (May 9, 2013)

*Skip.knox*: Thanks for the feedback! And yes, it's also a fantasy world, but loosely based on Renaissance-era technology and customs. I'm of the mind where to create something realistic and reasonable, I want to first 'learn the rules, then break them', so to speak. The point about poor roads and also merchant group ... could you call it a union? ... could help with plot too. 

*Nameback*: Oh yes - and I have just the characters for it. I must dig into this more thoroughly, because it's perfect for what I want to achieve. 

Thanks again, guys!


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## skip.knox (May 10, 2013)

A merchant association might be called a compagnie (French) or a Hansa or Zuenft (German). In English, company will do fine. You should think of the word more like a company of mercenaries -- a group of people come together for a specific purpose. Mercantile companies were not at all like a modern corporation; they were a true association of participants, with the members buying shares of the overall enterprise. They were often formed to buy into a ship or even a fleet of ships. The company would exist for the duration of the voyage, then would split the profits (or losses) and then dissolve. On land, families tended to be the basis for commercial enterprises. See the Medici in Florence, the Fuggers or Welsers in Augsburg, the Paumgartners in Nuremberg, for examples. 

The term "merchant adventurer" doesn't crop up until late 16thc ("adventure" here is in the sense of a venture). The term brotherhood was used as well, but that's more medieval and might confuse readers.

Definitely not a union.


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## Ddruid (May 11, 2013)

This thread is simply bursting with useful tidbits and information. I loved how you guys explained the basic concepts with examples from ancient history. And knowing that this stuff can help me when I'm worldbuilding just got me hooked even more. Thank you for starting this thread Nameback. You have achieved the impossible. You've made economics interesting for me. In fact, you made me wish I paid more attention in my Social Sciences class.  

I think any subject would be fun to learn if you try and think about how it could be applied in a fantasy world.


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## Jess A (May 11, 2013)

skip.knox said:


> A merchant association might be called a compagnie (French) or a Hansa or Zuenft (German). In English, company will do fine. You should think of the word more like a company of mercenaries -- a group of people come together for a specific purpose. Mercantile companies were not at all like a modern corporation; they were a true association of participants, with the members buying shares of the overall enterprise. They were often formed to buy into a ship or even a fleet of ships. The company would exist for the duration of the voyage, then would split the profits (or losses) and then dissolve. On land, families tended to be the basis for commercial enterprises. See the Medici in Florence, the Fuggers or Welsers in Augsburg, the Paumgartners in Nuremberg, for examples.
> 
> The term "merchant adventurer" doesn't crop up until late 16thc ("adventure" here is in the sense of a venture). The term brotherhood was used as well, but that's more medieval and might confuse readers.
> 
> Definitely not a union.



Points taken. I had a book on the Medici somewhere. I need to dig it up. Also, Robin Hobb did a portrayal of merchants/traders (Liveship Traders) but it has been a long time since I read them. It'll be a big research point for me, because I like to work with detail and then change it to suit my world. Thanks again!


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## skip.knox (May 12, 2013)

Peter Spufford, "Power and Profit: The Merchant in the Medieval World" is way more interesting and readable than it sounds, and it's the best work on the topic in the last thirty years. Being an academic work, it's grotesquely overpriced, but you might find it in used books or, if you may be able to get a copy from a library. It's probably not worth owning unless you're a historian, but it's most definitely worth a read. His book on medieval money is also a classic.

Economics is a great topic. It is, at its heart, the study of how we all make a living. How could that not be interesting?  Oh, I remember. It gets taught by boring teachers who think economics is about theories and formulae rather than being about people. Yeah, I hated that version of economics, too!


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## Jess A (May 13, 2013)

skip.knox said:


> Peter Spufford, "Power and Profit: The Merchant in the Medieval World" is way more interesting and readable than it sounds, and it's the best work on the topic in the last thirty years. Being an academic work, it's grotesquely overpriced, but you might find it in used books or, if you may be able to get a copy from a library. It's probably not worth owning unless you're a historian, but it's most definitely worth a read. His book on medieval money is also a classic.
> 
> Economics is a great topic. It is, at its heart, the study of how we all make a living. How could that not be interesting?  Oh, I remember. It gets taught by boring teachers who think economics is about theories and formulae rather than being about people. Yeah, I hated that version of economics, too!



Checked one of the University libraries - not there! A tad surprised since it has a great history section. I'll check some others, though. Thanks for the lead. Google Books also offers previews - sometimes you can get a lot of information from the few pages available for free.


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## Devor (May 13, 2013)

Nameback said:


> First, I'll start with a post on some of the most essential basics: inflation and deflation. I'm starting with these because I find that macroeconomics--the economics of whole societies--is best understood by understanding money and how it is used.



You've got some good stuff here.  The only thing I would add is that an economy isn't a single entity even though we often talk about it as such.  If you for some reason have deflation in the slave market, for instance, you won't fix it by spending on wheat or stone.  You've got to find a solution which targets the sector that's causing the problems.  Making people ignore those kinds of details might be a good way to present corrupt or inept advisers, using everything as an excuse to spend on their pet projects instead of on addressing the real problems people face.  You could also take a look at where the government gets the money from as a source of conflict - "printing money" could be difficult if you don't control the gold and silver mines.  In some economies, inflation could happen just because new mines were discovered, and deflation because the population grows faster than the gold or silver supply.

Also, a lot of people don't understand the old-school economic principle of "Mercantalism."  Essentially, people believed that every country had a fixed amount of resources, and the only way to get more is to acquire it from another country through trade or warfare.  That's a big part of why we think of old kings as being obsessed with foreign affairs.  Governments would co-own major companies and pass laws designed to boost their trading power.  You'd also see governments protect trade guilds - groups of, say, purse makers that would go out of their way to make it difficult for anyone else to make a purse, which keeps down supply and props up the price.  In parts of Asia, there might be laws requiring that all of a certain kind of porcelain be used only for export.  They saw these foreign trade gimmicks as the best way to improve the state of their countries by giving them a bargaining chip with other nations.  Usually it held them back because they weren't as focused on finding customers and increasing employment or education.


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## ThinkerX (May 13, 2013)

Something else to keep in mind:

In ye olde pagan societies, trade (economic forces) were seen as being occult.  Merchants and others were continually attempting to influence trade through magic.  (Curse tablets aimed at enemies, seeking the aid of the gods, ect).  Economics was seen through a sort of supernatural prism.


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## skip.knox (May 14, 2013)

Do you have some examples of this, ThinkerX? I've not read anything about that. Seeking favorable signs before setting out on a voyage, yes, but I wouldn't classify that as using magic to influence trade. That was just praying for protection prior to undertaking something chancy. The same was done before sowing crops or setting out to war.


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## Nameback (May 15, 2013)

Devor said:


> You've got some good stuff here.  The only thing I would add is that an economy isn't a single entity even though we often talk about it as such.  If you for some reason have deflation in the slave market, for instance, you won't fix it by spending on wheat or stone.  You've got to find a solution which targets the sector that's causing the problems.  Making people ignore those kinds of details might be a good way to present corrupt or inept advisers, using everything as an excuse to spend on their pet projects instead of on addressing the real problems people face.



Well, I'd say that this depends. If we're talking about society-wide deflation or inflation, then the effects are beyond any one market. Also, spending in one market will often have an effect on other markets. Spending on wheat or stone, for example, would increase overall demand in the society, including for slaves. Certainly quarries and large farmers would want to buy more slaves to meet demand for stone and wheat. This would soak up the excess supply that's causing the deflation.

Now, if the deflation is caused by a change in preferences, then additional monetary demand might not solve the problem. If people are buying fewer slaves because there's a new religion that forbids slavery that's gaining prominence in the society, then giving people more money with which to buy slaves might not increase demand. But, for the most part, spending in one area of society will spread out to other sectors. This is the principle behind government infrastructure projects. When government spends money on roads and bridges, the construction workers and suppliers then spend their government paychecks on all manner of goods and services in the society--who in turn spend that money on still other things. So, spending in one sector will generally improve demand in all sectors. But you can be more or less efficient about it by targeting where the money goes. 



> You could also take a look at where the government gets the money from as a source of conflict - "printing money" could be difficult if you don't control the gold and silver mines.  In some economies, inflation could happen just because new mines were discovered, and deflation because the population grows faster than the gold or silver supply.



Very true--just look at some of the inflation that happened in Spain after they colonized South America and began importing huge amounts of gold and silver. This was one of the pitfalls of using money based on a supply that the government doesn't explicitly control. However, this is correctable. If there is an influx of gold and silver causing inflation, then the government can undertake policy to make more goods available for purchase to bring prices down. Or they can just hoard the metals and not let anyone use them. Conversely, if population is expanding faster than the gold/silver supply, then the government should debase the currency. Instead of the standard coins being 75% silver, say, the government could make them only 60% silver. This allows them to print more coins with the same amount of precious metals. 



> Also, a lot of people don't understand the old-school economic principle of "Mercantalism."  Essentially, people believed that every country had a fixed amount of resources, and the only way to get more is to acquire it from another country through trade or warfare.  That's a big part of why we think of old kings as being obsessed with foreign affairs.  Governments would co-own major companies and pass laws designed to boost their trading power.  You'd also see governments protect trade guilds - groups of, say, purse makers that would go out of their way to make it difficult for anyone else to make a purse, which keeps down supply and props up the price.  In parts of Asia, there might be laws requiring that all of a certain kind of porcelain be used only for export.  They saw these foreign trade gimmicks as the best way to improve the state of their countries by giving them a bargaining chip with other nations.  Usually it held them back because they weren't as focused on finding customers and increasing employment or education.



All good points. This was more common in the Early Modern era. Many ancient societies didn't adhere to these principles. Rome was a fairly free-market state, for the most part.


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## Devor (May 15, 2013)

Nameback said:


> Well, I'd say that this depends. If we're talking about society-wide deflation or inflation, then the effects are beyond any one market. Also, spending in one market will often have an effect on other markets. Spending on wheat or stone, for example, would increase overall demand in the society, including for slaves. Certainly quarries and large farmers would want to buy more slaves to meet demand for stone and wheat. This would soak up the excess supply that's causing the deflation.



Well, I think that would be a poor solution compared to just buying slaves.  If you're giving money to wheat and stone suppliers, you have no control over how they spend it or when.  They could have excess supply on hand or excess capacity from their current slaves, or they may end up finding other ways to provide the extra wheat, like working the land themselves or by buying land, equipment and fertilizer.

But that's assuming they even want to supply more wheat.  If they think the extra demand is temporary, in many cases they might just raise their prices, and the slave market won't be affected much at all.  And if all you do is drive up the price of wheat, then you hurt everybody but the wheat suppliers, and there's no telling where they'll spend the extra income.  You may even drive some people to buy their wheat from abroad.

Also, I was thinking about household slaves when I typed that example.




Nameback said:


> But, for the most part, spending in one area of society will spread out to other sectors. This is the principle behind government infrastructure projects. When government spends money on roads and bridges, the construction workers and suppliers then spend their government paychecks on all manner of goods and services in the society--who in turn spend that money on still other things. So, spending in one sector will generally improve demand in all sectors. But you can be more or less efficient about it by targeting where the money goes.



Only kind of - the theory about spending on infrastructure projects is that they're labor intensive, so you're giving money directly to consumers who spend it locally.  It's still temporary, as it ends when the construction is over.  The hope is that the spending works to jump start everything else.  Sometimes that works, sometimes it doesn't.  Sometimes it backfires and the area becomes dependent on outside funds that can't last.  But if you spend money giving a grant to a giant research lab, you won't get the same result because they spend their money very differently.  Very little of it may be spent locally, so the multiplier will be much lower.

But by and large you have to target the problem.  A generic any-new-spending-is-going-to-help won't really fix anything, unless the problem is just "Nobody wants to spend so government will."  But it usually isn't that simple.


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## Ddruid (May 16, 2013)

skip.knox said:


> Economics is a great topic. It is, at its heart, the study of how we all make a living. How could that not be interesting?  Oh, I remember. It gets taught by boring teachers who think economics is about theories and formulae rather than being about people. Yeah, I hated that version of economics, too!



You nailed it buddy. You just nailed it. 

And yeah, I don't think economics is boring at all now. Thanks for opening my eyes about that.


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## Nameback (May 16, 2013)

Ddruid said:


> You nailed it buddy. You just nailed it.
> 
> And yeah, I don't think economics is boring at all now. Thanks for opening my eyes about that.



Also, unlike when you learn basic Newtonian physics in phys101, econ teachers won't remind you that everything you're learning is a very rough approximation. 

Like, sure, yes, that model works great in a world of perfect competition--but that's like trying to fly an airplane without accounting for air resistance. Of course you're not going to learn everything in a 101 course, but econ teachers present it as if it were gospel, when they should really be adding: "of course it almost never works this way in real life" to the end of almost every sentence in introductory courses.


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## Devor (May 16, 2013)

Nameback said:


> Of course you're not going to learn everything in a 101 course, but econ teachers present it as if it were gospel, when they should really be adding: "of course it almost never works this way in real life" to the end of almost every sentence in introductory courses.



Yeah, I was thinking about the "fifth year for a master's" program they offered for a bit, and when I talked to people, several people said "What you learn in a Master's is that everything they taught you so far is wrong."  There's just too many variables and second-third-fourth order effects to say much.


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## Tevaras (May 21, 2013)

Good evening, 

if the Egyptians are using grain as a form of 'currency' that got 'virtually' transferred between people, would not a major drought cause a problem?

I only did one unit of Economics, and have forgotten most of it :-(.

Thank you for an informative article.

Tevaras


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