The Greek world enjoyed remarkable economic growth starting in about 600 BC. Although communities in ancient Greece could not measure gross domestic product, there is much evidence for steady growth. Thucydides observed how the resources of the Greek states increased in the 200 years before the Peloponnesian War, and modern research has confirmed his observation. Field surveys by archaeologists have revealed a substantial increase in the number of settlements from 600-300 BC. Many cities had the resources to build impressive walls in the 6th century, and more did so in the following centuries. Inside settlements, the average sizes of houses grew several times during this period.

Coinage provides another sign of economic growth. Invented in Lydia during the 7th century BC, the practice of minting coins spread quickly to Greek communities. By 500 BC there were dozens of cities minting mainly silver coins, and the number of cities minting and the volume coinage grew steadily. Thousands of amphoras found in excavations that carried wine, oil and other products, attest to the thriving trade between all parts of the Greek world. Public building provides another sign of growth: the number of stone temples adorned many Greek cities in the 6th century. In the following centuries, public buildings like stoas and theaters increased exponentially.

In Classical Athens there were almost two hundred different professions providing an amazing array of goods and services. The market was so large that it was divided into different sections, each specializing in one type of product. Craftsmen did not cater just to the wealthy, but increased living standards for the majority of citizens and non-citizens residents. Their earnings were far above subsistence, allowing them to participate in market-exchange. The Agora of Athens was so busy that it was open almost every day. Goods came not only from Attica but also from overseas. In his Funeral Oration of 430 BC Pericles boasts that the Athenians enjoy products from all of the known world. These were not the fruits of conquest, but the benefits of trade.

Besides the central Agora there were also markets in many of the Attic demes such Sounion, Eleusis, Besa, Deceleia, Erchia, Kollytus, Kydathenaion, Skambonidai and other places. One must not think of the average Athenian farmer as living in splendid isolation and existing from what he grew on his land. Aristophanes’ “Acharnians” shows us that Athenians in the countryside loved their markets and the products they could buy there. Attica was no exception: the marketplace was a standard feature of most Greek cities. Even Sparta had a thriving marketplace during the Classical period.

What was the reason for this remarkable economic growth and thriving trade in the Classical period? One cannot explain this phenomenon as a result of the rise of slavery in the 6th century BC. Slavery provided the surplus of Greek elites as early as 700 BC. As any reader of the Odyssey and Iliad knows, Odysseus, Agamemnon, Achilles and Priam had large numbers of slaves either bought or captured in war. The Greeks used slave labor, but it cannot explain how they used this and other forms of labor to create economic growth after 700 BCE.

The ancient philosopher whom modern scholars call the Anonymous Iamblichi knew the reason for the growing volume of trade: the rule of law (eunomia). According to this thinker, under the rule of law, goods circulated widely and freely; without the rule of law, goods do not circulate and there is not enough for anyone. When the law provides security, the wealthy have their assets protected, and the less wealthy can obtain credit. When there is no respect for the law, men hoard their assets through lack of trust and goods grow scarce.

The rule of law is an aspect of ancient democracy rarely discussed by historians, but it was crucial for economic growth. The rule of law contained many elements: peaceful resolution of disputes by fixed rules, obedience to laws enacted by the community, equality before the law, accountability of all public officials, fairness in trials, speedy resolution of disputes. The rule of law preceded democracy and laid the foundations for democratic ideas.

The Greek city-state promoted the rule of law that supported the economy in several ways. First, Greek communities appointed public officials to enforce market regulations and ensure that merchants use standard weights and measures. This built the trust necessary for market relations and reduced transactions costs by reducing what modern economists calls “asymmetry of information.” Athens had “testers of coins” in the Agora and Piraeus to detect counterfeits.

Greek communities built so many agoras for commerce that they became a regular feature of public architecture. Pausanias thought that a community without an agora did not qualify as a polis (city-state). To attract foreign commerce, cities on the coasts built harbor installations to protect ships and facilitate the loading and unloading of merchant vessels. Some cities built lighthouses to help merchants find harbors at night. We call this “investment in infrastructure”: the ancient Greeks considered it common sense.

An important role of the state was to protect the property rights of owners. This did not benefit just the wealthy because the majority of citizens in Athens and many other Greek communities owned land. To strengthen these rights, many cities pledged not to carry out redistributions of land, which was associated with tyranny. It was also customary for states to keep public records of sales, which helped owners to prove title and to resolve disputes about property.

These records about property were essential for the growth of credit: owners who had secure title could pledge their land as security for loans. Credit was widely available to many citizens: hundreds of horoi, markers indicating land served as collateral, have been found in Attica. The state also provided creditors with effective legal procedures for creditors to recoup their losses on non-performing loans. Easy access to credit was key for economic growth. For instance, silver from the mines at Laurion, perhaps the most profitable Athenian export in the late 4th century BC, was extracted by entrepreneurs, who financed operations with borrowed money.

According to New Institutional Economics, one of the necessary requirements for growth is effective third-party enforcement of contracts. The Athenians were well aware of the connection between the enforcement of contracts and thriving trade: a litigant speaking in an Athenian court around 330 BC observed that when the courts enforce contracts, Athenian trade increases. When they do not, however, merchants avoid Piraeus. In fact, around 350 BC, the law at Athens ensured that commercial lawsuits brought about trade would be tried within 30 days.

This is not to say that the ancient Greek state was interested mainly in protecting ownership rights and enforcing contracts. The ancient Greeks knew that markets were imperfect and did not always provide effectively for everyone’s needs. Cities therefore created funds to buy grain and distribute it for free or at low prices in times of shortage. Some cities used state funds to hire public doctors, who provided medical services for free.

Greek cities expected the wealthy to spend their profits providing entertainment and supporting athletic competitions and festivals. By rewarding those who contributed generously with honors and statues, the Greek city-state stimulated more spending and promoted social harmony between classes. The wealthy did not send their money abroad to Swiss bank accounts because they enjoyed security at home.

Despite war and occasional civil strife, the economy of the Greek world grew continuously from the Archaic period until the Roman conquest. The glorious achievements of Greek culture were underwritten by sound economic policies based on the rule of law. Whether the history of ancient Greece holds any lessons for the present government of Greece, I leave it for the readers to decide.