Doing well by doing good

May 20, 2010 at 3:00 pm 2 comments

| Gabriel |

In the course of a recent post describing Haitian resentment of relief workers (who they view as stealing their jobs), Bryan Caplan links to a much older post he wrote (as inspired by a Cowen talk) about the “cargo” practice in rural Mexico. In this system anyone with wealth is expected to take on public office during which he funds public expenses from his private wealth. Caplan and Cowen describe this as providing an extreme incentive to either avoid wealth accumulation or to become an evangelico, which is a voluntary form of social death.

At first I found this pretty convincing (in part because I’ve heard an almost identical analysis from Alex Portes). However I was thinking about it some more and I realized that it’s a little more complicated than that. First of all, this dynamic is not unique to modern rural Latin America. An almost identical practice of euergetism was common in the ancient world, which didn’t exactly have the state capacity to collect a Value-Added Tax. Instead they relied on a combination of direct levies (conscription from the middle classes and euergetism from the big shots) and the relatively minor state treasuries came from the highly inefficient practice of tax farming the provinces. For instance, although Pericles financed most of his Athenian public works out of tribute from the other members of the Delian League, he offered to pay for them out of pocket on several occasions. Although euergetism was important in classical Greece and the Hellenistic world, I’m going to focus on Republican Rome as an example.

The main way euregetism worked in Republican Rome was through the aedileship (municipal officer), which was the second step in the cursus honorum. Every year four ambitious young men were made aediles and during their tenure they provided many municipal services, especially the ludi (games) which provided the young man an opportunity to show off his wealth and connections by bringing in exotic animals, gladiators, performers, etc. An arms race developed for largesse and spectacle and many aediles went heavily into debt.

So far this is all consistent with the picture drawn by Caplan, Cowen, and Portes, of the expectation of magnificent philanthropy being an indirect form of high marginal tax rates, with all that implies. Note though that their model implies that:
a) people would tend to avoid public service either directly or by forgoing wealth accumulation in the first place
b) the poor bastards who get stuck with public service would be bled dry

However neither of these are entirely true in the Roman Republic. The simplest way to demonstrate this is that there is a power-law distribution for how often families held the consulship. This implies cumulative advantage and thus holding high political office must have been, on net, profitable. How could this be given the massive expenses necessary to achieve and exercise high political office?

Consider the case of Gaius Julius Caesar. He was driven heavily into debt by his aedileship and praetorship (a judicial office that followed the aedileship). However then he was made propraetor (military governor) of outer Spain during which he won a lot of wealth by conquest and acquired the patronage of Crassus. Caesar then became consul (albeit in an especially ugly fashion) and went back North of the Alps to acquire enormous wealth in Gaul. So basically, the early stages of political office were expensive, but they provided the opportunity for later provincial administration where one could squeeze the provincials. Put more broadly, philanthropy is the price of purchase for political rent-seeking which could be extremely valuable. Likewise, my understanding is that in Latin America there are many opportunities for rent-seeking that are opened by embedding oneself in a patronage system. This may actually be the most invidious aspect of the system — it may not so much discourage wealth accumulation per se so much as redirect efforts away from positive sum wealth creation and to negative sum rent-seeking.

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Matrices within matrices Gnuplot [updated]

2 Comments

  • 1. Jay Livingston  |  May 21, 2010 at 1:38 pm

    Is is possible that for the ambitious, power may be as much of a prize as wealth? People may spend wealth to attain a position of power even if the likelihood of later evening up the balance sheet is uncertain. What you describe reminds me of the “big man” in Melanesia, except that big men, as I understand it, recoup the losses from their largesse not so much by rent seeeking but by inspiring their followers to increased production. It seems that the motivation is primarily political and secondarily economic, not the other way round.

    • 2. gabrielrossman  |  May 21, 2010 at 2:30 pm

      i think it’s entirely possible, yes. again, the case of Rome is instructive as you can contrast the senatorial and equestrian classes. it’s hard to distinguish exactly between the two classes but one dimension is that the equestrians were much less interested in politics.


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