5 - Prices and price formation: issues

Summary

INTRODUCTION

The amount of price information which has survived from the ancient world is substantial. Although spreading over a great number of commodities and services, and scattered over a number of centuries and locations, in total it forms a considerable lot. In recent years it has been compiled into electronic databases too large to print out or make sense of by cursory reading. Yet what kind of economic information do prices render? The information, for example, that trumpets cost 60 drachmas in Athens at the end of the fifth century bc is as useless in itself as the question of how far a flea can jump.

Several approaches have been adopted in recent decades. On the one hand, scholars have used prices as an index of standards of living. Comparing per capita income and subsistence costs with estimated nutritional needs and the work-capacity of individuals or families has provided some idea of the financial balance-sheet of ancient households. Another project has been to understand the nature of price formation. According to the neo-classical market model, prices settle at ‘market’ price (i.e. the intersection of supply and demand) and the market for a good is cleared. Were prices in antiquity, too, formed mostly by the market mechanism, or were they more strongly influenced by other factors, such as state intervention, custom or vague notions of normal or ‘just’ price? What exogenous factors affected prices, such as wars, conquest, army movements, political alliances, questions of upper-class power, or the formation of empires?