The Effect of Bankruptcy Law on Roman Credit Markets

Business & Bankruptcy Law Journal, Volume 2, 207 (2015)

Given the importance of lending to economies both ancient and modern, and given the widely acknowledged relevance of creditor and debtor protections for nurturing a vibrant and productive credit market, a large critical literature has developed exploring the intersection of law and lending. However, little work has been done analyzing the role of default law in historical credit markets, particularly those in the ancient world. This article attempts to remedy that gap by considering the interaction between Imperial Rome’s famously pro-debtor default laws and its idiosyncratic credit practices. By constructing a hypothetical model derived from economic analysis of foreign and domestic credit markets and comparing that model’s predictions to literary, historical, and documentary evidence of late Republican and early Imperial lending behavior, this article demonstrates the applicability of a law-and-economics analysis to the Roman world and provides a historical study into the dangers of excessive debtor protection without highly sophisticated risk-sorting procedures on the part of creditors.