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Morality, Social Norms and the Rule of Law as Transaction Cost-Saving Devices: The Case of Ancient Athens


Anastassios Karayiannis


University of Piraeus

Aristides N. Hatzis


University of Athens - Department of Philosophy & History of Science; University of Athens - Faculty of Law; Athens University of Economics and Business - Department of Economics

April 1, 2010

European Journal of Law and Economics, Vol. 33, No. 3, 2012, pp. 621-643

Abstract:     
The importance of the institutional framework for economic development is widely accepted today and it is duly stressed in the economic literature. The protection of property rights, the enforcement of contracts and an efficient legal system are the pillars of the contemporary rule of law. However, formal institutions cannot function without being internalized by the citizens and without the strong backing of social norms. Morality and social norms are the major elements of the informal institutional structure, the social capital, which is also critical for social welfare and economic development. In this paper we will discuss both the formal and the informal institutional framework of Ancient Athens, which was a free market society with economic problems similar to contemporary market societies. Athenians developed a highly sophisticated legal framework for the protection of private property, the enforcement of contracts and the efficient resolution of disputes. Such an institutional framework functioned effectively, cultivating trust and protecting the security of transactions. This entire system however was based on social norms such as reciprocity, the value of reputation and widely accepted business ethics. Conformity to social norms as well as moral behavior was fostered by social sanction mechanisms (such as stigma) and moral education. The Athenian example is a further proof of the importance of morality and social norms as transaction cost-saving devices even in quite sophisticated legal systems. Their absence or decline leads inevitably to the need for more regulation and litigation and to a growing preference for clear-cut rules instead of discretionary standards. Athenian law was pioneering in the development of rules and institutional mechanisms suitable for the reduction of transaction costs, many of them surviving in the most complex contemporary legal systems.

Number of Pages in PDF File: 23

Keywords: Ancient Athens, Social Norms, Morality, Social Capital, Transaction Costs, Institutions, Economic Development, Stigma, Reciprocity, Reputation, Moral Education, Property Rights, Enforcement of Contracts, Efficient Legal System

JEL Classification: A13, B11, D02, K10, K41, K42, O43

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Date posted: July 19, 2007 ; Last revised: July 15, 2012

Suggested Citation

Karayiannis, Anastassios and Hatzis, Aristides N., Morality, Social Norms and the Rule of Law as Transaction Cost-Saving Devices: The Case of Ancient Athens (April 1, 2010). European Journal of Law and Economics, Vol. 33, No. 3, 2012, pp. 621-643. Available at SSRN: http://ssrn.com/abstract=1000749 or http://dx.doi.org/10.2139/ssrn.1000749

Contact Information

Anastassios Karayiannis
University of Piraeus ( email )
Karaoli and Dimitriou 80
80 KARAOLI & DIMITRIOU STREET
Piraeus gr185-34, Attiki
Greece
Aristides N. Hatzis (Contact Author)
University of Athens - Department of Philosophy & History of Science ( email )
MITHE, University Campus
Ano Ilisia
Athens, 15771
Greece
+30 210 7275565 (Phone)
+30 210 7275530 (Fax)
HOME PAGE: http://www.phs.uoa.gr/ahatzis
University of Athens - Faculty of Law
Athens
Greece
Athens University of Economics and Business - Department of Economics ( email )
Athens
Greece
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