In the year 301, Diocletian, who was Emperor of the Roman Empire, enacted widespread price ceilings for many good. How did that work out One canonical source for a discussion of what happened at that time is an essay by Roland G. Kent, \”The Edict of Diocletian Fixing Maximum Prices,\” which appeared in 1920 in the University of Pennsylvania Law Review (69: pp. 35-47). It\’s available at various places on the web, like JSTOR and here). The heart of the article is to offer a translation of the Diocletian Edict. Here, I\’ll just offer some of Kent\’s description of what happened. He writes:
In the year 284 A. D., Diocletian (as we now know the Dalmatian soldier of lowly origin) was by his soldiers proclaimed Augustus or Emperor of the Roman Empire, stretching from the Atlantic Ocean to Mesopotamia. … In these and the following years the prices of commodities of all sorts and the wages of laborers reached unprecedented heights. In the year 301, consequently, Diocletian felt obliged to issue an Edict fixing maximum prices for practically all articles and services. Of this Edict we know but little from literary sources; but as it was published in inscriptional form throughout the countries to which it applied, we have the actual text recorded in stone. …
After providing a translation of the edict, which as one might expect is heavy on expressions of piety and condemnations of avarice and greed, Kent summarizes it in this way:
The provisions of the Edict are, in simple language, that maximum prices are set for articles of trade and for services, and that these are not to operate in such a way as to raise prices where the current level of prices is lower; that traders shall not buy in localities where prices are low and transport and sell the goods elsewhere at the maximum price; that the penalty for the violation of the law is death, and that leniency is not to be expected in return for a conciliatory attitude in court; further, that the same penalty applies to him who purchases at an illegally high price, and to him who hoards goods and refuses to put them on the market at legal price. After the preamble come the price lists arranged in schedules.
How did the Diocletian Edict work out? Kent wrote:
\”Before passing to the text of the Edict, we might consider briefly its working; the available material, in fact, permits only a brief treatment. The writer De Mortibus Persecutorum, in the seventh chapter, says, \”He (Diocletian) likewise, when by his varied unreasonable tax-levies he caused an immeasurable rise in prices, tried to regulate the prices of merchandise. Then much blood was shed over trifling and cheap articles; through fear, wares were withheld from market, and the rise in prices became much worse, until after the death of many men the law was through very necessity rescinded.\” In other words, the price limits set in the Edict were not observed by the traders, in spite of the death penalty provided in the statute for its violation; would-be purchasers, finding that the prices were above the legal limit, formed mobs and wrecked the offending traders\’ establishments, incidentally killing the traders, though the goods were after all of but trifling values; the other traders, rather than sell at prices which would bankrupt them, hoarded their goods against the day when the restrictions should be removed, and the resulting scarcity of wares actually offered for sale caused an even greater increase in prices, so that what trading went on was at illegal prices, and therefore performed clandestinely.
\”Ultimately the Edict was of necessity rescinded; how long it remained in force is unknown. But Diocletian is known to have abdicated the imperial power in 305, four years after the promulgation of the Edict; the cause assigned was ill-health resulting from the strain and burden of government. It would not be going very far from likelihood to assume that the failure of the Edict to restore business stability was a considerable factor in his poor health and abdication, and that the Edict was rescinded very soon after his abdication, if not indeed before. It remained law, therefore, not much if at all over four years.\”
As anyone with a smattering of economics–or just knowledge about human nature–might expect, it\’s highly unlikely that a sudden and unprecedented upsurge in greed and avarice circa 300 AD caused the rapid price rises. Instead, the more likely causes stem from high spending to finance the courts of the time, which in turn was financed by a currency (the denarius) in which the amount of silver was continually being reduced and which Diocletian turned to copper. As the value of the currency fell, prices increased–and the short-lived Diocletian Edict was the result.