Does Cicero’s Decision Stand the Test of Time? Famine at Rhodes and Comparative Law and Economics Approach
Mitja Kovač is Professor of civil and commercial law at the University of Ljubljana School of Economics and Business. This post is based on his recent article Does Cicero’s Decision Stand the Test of Time? Famine at Rhodes and Comparative Law and Economics Approach published in the Special Issue of the Comparative Law Review “Rescuing Comparative Law and Economics? Exploring Successes and Failure of an Interdisciplinary Experiment” (G. Bellantuono ed., 2023).
From ancient times, legal scholars have been puzzled by the question of the circumstances under which an individual has a duty to disclose valuable information unknown to the person with whom she bargains. Even the great Marcus Tullius Cicero, one of the most prominent ancient lawyers and remarkable thinkers, has dealt with this complicated puzzle and explored whether or not it is honest of the merchant to profit by withholding the information that more ships with the grain will arrive at Rhodes soon, hence not sharing this with the Rhodians. In his classic, eternal writings, he weighs Diogenes’s and Antipater’s reasoning against each other, concluding that the merchant should tell the Rhodians that more ships are on their way to be considered honest.
As we show in our recent article, this more than two thousand years old case, while brilliantly addressing the ever-present issues of morality and ethical behavior, could be from the comparative law and economics perspective regarded as the first, in human history, recorded example of an asymmetric information problem.
While employing the main findings of the law and economics literature on the duty to disclose information, several surprising similarities with Cicero’s ethical arguments might be noticed. First, in our paper, we have shown how the praetorian and, in particular, Cicero’s decision in the Rhodes famine case efficiently addresses the problems created by asymmetric information problem. Second, our investigation shows that lawmaking in ancient Rome produced remarkable legal solutions to omnipresent legal problems. Third, Cicero’s decision in the Rhodes famine case stands the test of time and completely corresponds with the modern law and economics suggestions on how to address the asymmetric information problem in circumstances under which an individual has valuable information unknown to the person with whom he transacts.
Namely, also law and economics analysis of the Rhodes famine case suggests that the merchant should disclose the information to the Rhodians. After all, the merchant is the least cost information gatherer, and the information is valuable to the Rhodians, justifying the information and communication costs. It is unlikely that the Rhodians possess the information already, the information is not entrepreneurial as the merchant acquired it casually, and the other ships being on their way to Rhodes is not just an opinion or a non-falsifiable statement. Hence, all five cumulative conditions relating to this optimal doctrine to disclose information are fulfilled.
Although the ethical and economical perspectives on this case contain different reasonings, they both come to the same conclusion, i.e., the merchant should also, from the law and economics perspective, disclose to the Rhodians that more ships with grain are on their way. This posits the question of whether fairness maxims (ethics) and efficiency (economics) are really as opposing as they are often portrayed to be. This assessment seems a good example of what endless methodological discussions refer to as the “ethics versus economics” or “fairness versus welfare” debate. We argue that economics looks at what is efficient, which does not necessarily conflict with what is fair, but rather an interpretation or definition of fairness or ethics instead of a rejection of it. By applying the comparative law and economics methodology doctrine of disclosure of information, one may argue that, in this case, not revealing the information to the Rhodians is considered not only unfair but also inefficient. In other words, Cicero’s decision spurs wealth maximization since it induces an optimal disclosure of information, discourages opportunism and moral hazard, induces efficient reliance and allocates risk to the superior risk bearer. This also implies the reduction of the overall transaction costs and boosts allocative efficiency. In concluding so, we looked at both sides of the problem, i.e., the interests of the Rhodians as well as the interests of the merchant, and balanced them against each other.
Methodologically speaking, our investigation also illustrates the fruitful potential of comparative legal-economic theory for shedding light on the institutions of the ancient world and in particular, for enhancing our understanding of the legal and economic arrangements found in the Roman Empire. (1) Hence, our paper joins this critical debate and employs comparative law and economics theory and methodology to explore the disclosure duties in the contract law of ancient Rome. More particularly, while focusing on the famous Cicero decision on the famine at Rhodes case, the paper overcomes an old legal and moral crux and critically examines the legal obligations of parties to disclose private information to their counterparties in contracts for sale of ancient Roman law.
In this article, the analysis that we employ is as positive as it is normative. In order to gain valuable novel insights into the ancient development of legal institutions and their resonance in current legal regimes, we deliberately employed an inter-disciplinary dynamic (2) investigation and enriched it with the concepts used in the economic analysis of law. (3) Moreover, the employed law and economics methodology follows the classical comparative law and economics approach. (4) This classical comparative law and economics approach then, as we argue, serves as a bridge between facts and normative conclusions, between economic theory and policy proposals for an improved legal system. (5) However, due to the limited scope of this paper, we merely employ economic methodology, which seeks to complement other legal disciplines by uncovering the underlying economic logic and social effects of assessed legal institutions. (6) In looking for transparency in the law, the employed approach connects to what “the best traditional legal scholarship aims to do: clarifying the underlying order of law as it is; offering tools for fashioning law to cope with novel situations”. (7)
(1) See also G. Parsons Miller, Rome and the Economics of Ancient Law II, in II ROMAN LAW AND ECONOMICS 1 ( G. Dari-Mattiacci, D.P. Kehoe (eds.), 2020).
(2) The dynamic part of the analysis employs recent behavioral insights that offer a novel assessment of how parties will react in their daily behavior upon different set of rules and norms.
(3) For a synthesis of law and economics scholarship, see 6 CONTRACT LAW AND ECONOMICS – ENCYCLOPAEDIA OF LAW AND ECONOMICS (G. de Geest (ed.), 2nd ed., 2011). Also see R.A. Posner, Economic Analysis of Law (8th ed., 2011).
(4) R. van den Bergh, THE ROUNDABOUTS OF EUROPEAN LAW AND ECONOMICS 21–28 (2018).
(5) Mitja Kovač, The rise of the mailbox rule and formation of contracts in English, US and Canadian Law, 43 THE LIVERPOOL L. REV. 149–74 (2022); and COMPARATIVE CONTRACT LAW AND ECONOMICS (2011).
(6) Employed methodology complements traditional legal disciplines by bringing to light a logic which decision-makers follow without necessarily expressing it in their reasons for judgment, yet which constraints the results they can arrive at. It also seeks to make this logic transparent to outside observers. See A. OGUS, COSTS AND CAUTIONARY TALES: ECONOMIC INSIGHTS FOR THE LAW 11–16 (2006). See also G. CALABRESI, THE FUTURE OF LAW & ECONOMICS (2016); and R.A. POSNER, DIVERGENT PATHS: THE ACADEMY AND THE JUDICIARY (2016).
(7) E. MACKAAT, LAW AND ECONOMICS FOR CIVIL LAW SYSTEMS 6 (2013).
Cite as: Mitja Kovač, Does Cicero’s Decision Stand the Test of Time? Famine at Rhodes and Comparative Law and Economics Approach, LAW AS SCIENCE: LEGAL METHOD LAB (April 12, 2023), https://www.lawasscience.org/legal-method-lab/does-ciceros-decision-stand-the-test-of-time-famine-at-rhodes-and-comparative-law-and-economics-approach.
