Rent seeking in the democracy of ancient Greece

This chapter investigates the sources and contests for rents in ancient Athens. After reviewing the institutions of direct democracy invented and practiced during the fifth and fourth centuries BCE, the chapter focuses on the rents derived from controlling citizenship rights, slave labor, subjugation of foreign territories and silver deposits. It then examines the insights that the rent-seeking approach offers to explain the political economy of regulatory policies, tax revenues and public expenditures in Athens. A distinctive structure is revealed that combined free market exchanges, trade taxes but no income taxes, taxation of the rich in the form of property levies and mandatory financing of public services, auctions of public assets, tax farming, wide access to paid public office, where appointment was made by lot, and payment of theatre money to all citizens. Political leaders had opportunities for rent extraction and rent seeking, but they were also closely scrutinized by popular courts. This pattern is broadly consistent with the prediction that under direct democracy large universal benefits are provided to the poor majority of voters. The chapter concludes by proposing that the rent-seeking approach validates the view that economic rationality was prevalent in the ancient economy.