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Risk (Management)

  1. Dennis Kehoe

Published Online: 7 FEB 2012

DOI: 10.1002/9781444338386.wbeah06277

The Encyclopedia of Ancient History

How to Cite

Kehoe, D. 2012. Risk (Management). The Encyclopedia of Ancient History. .

Publication History

  1. Published Online: 7 FEB 2012

As is the case in any period of history, economic activity in the ancient world was subject to substantial risk, and its management was essential to safeguarding the welfare and security of individuals and families. Moreover, the proper allocation of risk in business activities provided incentives for people to enter into productive contractual arrangements. Put differently, if either party in a business arrangement bore risks for the other's failure out of proportion to the potential gain, then he would have little incentive to engage in such an enterprise.

The most basic element of risk surrounded agriculture; failure to manage the risk for drought and crop failure could result in ruinous consequences for both farmers and the urban population dependent on their production for their survival. The basic problem lay in the irregular rainfall characteristic of the Mediterranean climate, which made droughts a regular feature of ancient agriculture (Horden and Purcell 2000: 175–230). Individual farmers had a number of ways to protect themselves against the possibility of drought and other factors leading to crop failure, for example, by cultivating drought-resistant grain crops, such as barley, or by storing surpluses (Gallant 1991). In addition, polyculture (cultivating grain in between olive trees or vines) allowed the farmer to budget his labor over the course of the agricultural year and to diversify his sources of income. Large landowners could diminish their exposure to catastrophic weather conditions by owning lands in different locations. The approach that classical Roman law took toward allocating the risk between landowners and tenants suggests what the most important issues might be. The farm tenant was entitled to a remission ofrent in the event ofan unforeseeable disaster (vis maior), such as an earthquake, an unforeseeable weather disaster, an infestation by predatory birds, or an invasion by an enemy army. The tenant was responsible for the normal risks associated with agriculture, including irregular rainfall. This allocation of risk can be seen as economically efficient, in as much as it provided incentives for both the landowner and the tenant to take what steps they could to minimize their exposure to risk. But landowners still might be forced to go beyond their strict legal requirements and make concessions to tenants when droughts produced poor crops that left tenants unable to pay their rents. The Roman government recognized this possibility and developed legal rules to define the rights and duties of landowners and tenants under this circumstance (Kehoe 2007: ch. 3). In addition to granting remissions of rent, landowners could take steps to reduce the risk of their tenants by introducing sharecropping, which Pliny the Younger did on some of his estates in the early second century (see Sharecropping).

At the level of the state, maintaining adequate supplies of food was a constant concern, in view of the volatility of markets for agricultural products (Erdkmap 2005). Some communities appointed officials to manage the market for foodstuffs (Garnsey 1988). The Roman government took extraordinary steps to protect the imperial capital's food supply, including developing port facilities at Ostia and Portus, providing incentives for shippers transporting grain to Rome, and maintaining control over farmland in the provinces.

It is likely an overall lack of alternatives for investing large amounts of wealth and limited possibilities for economic growth in the ancient world imposed a cautious strategy on many property owners. Their desire for a stable income to maintain their social position affected their approach to managing their agricultural properties as well as their business activities. For example, in the law of tutorship, tutors managing the property of the fatherless pupils were expected to invest any funds available in farmland, since it was considered the safest investment, and they were only allowed to sell it under tightly restricted circumstances. Tutors were authorized to invest in loans only when it was not possible to purchase land. They were expected to display the same diligence in enforcing the loans of their pupils as they would with loans of their own money (Kehoe 1997). A similar conservative approach toward risk informed commercial law. In the law of agency, Roman law tended to restrict the liability of the property owner when an agent, often a slave, made a contract on his or her behalf. Either the explicit permission of the principal was required to create liability for the owner, or the liability would be limited to the property, or Agriculture, ancient Near East, set at the disposal of the agent. This approach to agency in theory protected property owners, but potentially also made entering into potentially productive contractual arrangements more difficult.

References and Suggested Readings

  1. Top of page
  2. References and Suggested Readings
  • Erdkamp, P. (2005) The grain market in the Roman Empire: a social, political and economic study. Cambridge.
  • Gallant, T. W. (1991) Risk and survival in ancient Greece. Stanford.
  • Garnsey, P. (1988) Famine and food supply in the Graeco-Roman world: responses to risk and crisis. Cambridge.
  • Horden, P. and Purcell, N. (2000) The corrupting sea: a study of Mediterranean history. Oxford and Mal-den, MA.
  • Kehoe, D. P. (1997) Investment, profit, and tenancy: the jurists and the Roman agrarian economy. Ann Arbor.
  • Kehoe, D. P. (2007) Law and the rural economy in the Roman Empire. Ann Arbor.