Institutions, Trade, and Growth: The Ancient Greek Case of Proxenia

Abstract

Recent scholarship contends that ancient Mediterranean economies grew intensively. An explanation is that Smithian growth was spurred by reductions in transaction costs and increased trade flows. This paper argues that an ancient Greek institution, proxenia, was among the key innovations that allowed such growth in the period 500–0 BCE. Proxenia entailed a Greek city-state declaring a foreigner to be its “public friend,” a status that conferred both duties and privileges. The functions performed by “public friends” could facilitate economic transactions between communities. Accordingly, network and regression analyses establish a strong relationship between proxenia grants and trade intensity.