Money Decentralization under Direct Democracy Procedures. The Case of Classical Athens

Abstract

By analyzing the case of Athens during the Classical period (508-323 BCE) the main thesis of this paper is that under direct democracy procedures and the related institutional setup, a monetary system without a Central Bank may function relatively well. We focus on the following issues: (i) Τhe procedures of currency issuing in the Athenian city-state, (ii) why the Athenian drachma become the leading international currency in the Mediterranean world (iii) how and towards which targets monetary policy without a Central Bank was possible (iv) defining the targets of monetary policy and the mechanisms for its implementation (v) the role of money in the economy (vi) the issue of deficit spending (vii) the reasons of the replacement of the Athenian drachma as a leading currency by others from the Hellenistic period onwards (viii) the correlation of our findings regarding the decentralized character of monetary policy in Classical Athens to today’s realities, such as the issue of cryptocurrencies. Our analysis shows that monetary policy without a Central Bank was possible, with its foremost aim being the stability of the currency (mainly, silver coins) in order to enhance trust in it and so, make it an international currency which could outcompete other currencies. Since there was no Central Bank like today, monetary policy decisions were taken by the popular assembly of citizens in combination with the market forces themselves.

Plato as a Game Theorist towards an International Trade Policy

“…As it was already mentioned in the introduction, the success of the Athenians should be attributed to the superior package of (the free market type of) economic institutions they developed, even if in a primitive form in relation to today. Bresson (2016aBresson ( , 2016b, Harris and Lewis (2016), O'Halloran (2018), Bitros et al (2020), Economou et al (2021), among others, have analyzed the Athenian "international" trade policy through the establishment of a unified "economic area" for interstate commercial transactions between the member city-states of the Delian League while Economou et al (2021) add that this area should be also seen as an ad hoc monetary union. According to Cohen (1992, p. 141) in the port of Piraeus, the products imported could be sold on site and directly exported to new end-user markets.…”

“…This intervention could result in transactions without fear of violence or intimidation according to Harris and Lewis (2016, p. 30). The second and equally important institution were the so-called dokimastai (dokimastes in singular) which are related to the introduction of reliable currencies for the exchange of goods and services and the impressive increase of the volume of commerce between Athens and its allies (Economou et al 2021). Figueira (1998), van Alfen (2011), andBitros et al (2020), among others, argued that the so-called Athenian silver drachma became the universal coin in the Eastern Mediterranean because of its purity of silver content, which minimized the risks of performing reliable financial-commercial transactions between Athens and its allies or every other state.…”

“…Having the above in mind (Ober 2008, pp. 222-25), Bitros et al (2020) and Economou et al (2021) argue that the Law of Nicophon reduced transaction costs and generated, by its existence and provisions, trust between the parties.…”

“…Apollonius has been deceived since he accepts jewelry of inferior quality while Heraiphon accepts fraudulent money. Based on the procedures as described by Bitros et al (2020) and Economou et al (2021) regarding currency issuing and the role of the Athenian silver mint we assume that at least both Apollonius and Heraiphon do not face a total loss (0,0). The jewelry that Apollonius accepts has at least a small value, while, on the other hand, Heraiphon can apply to the silver mint, and ask from the staff to melt the fraudulent coins, then receiving back a small percentage of silver bullion, and then asking the staff to produce (unadulterated) silver coins for him under a small seignorage cost in favor of the state.…”

“…The speed of litigation is of high importance so as to reduce significantly transaction costs (Coase 1960), and protection of commercial transactions through the law so as to become credible is a pivotal intertemporal axiom (Hodgson 2015). Bresson (2016aBresson ( , 2016b, Harris and Lewis (2016), O'Halloran (2018), Bitros et al (2020), and Economou et al (2021) analyze the international commercial orientation of the Athenian economy. During 478-404 BCE Athens benefited by international commerce, mainly with its 316 allied states (according to Figueira 1998, p. 52) through the Delian League and this led its economy to achieve economic growth, at least for some specific years.…”