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During the Republican period, Rome expanded from a small city-state to a massive empire that circumscribed the Mediterranean. Upon achieving this dominance, civil wars erupted, ending with die establishment of an emperor, and die new emperor instituted sweeping changes that curtailed die incentives for additional conquests. Can public -choice economics help to explain the institutional evolution of Roman history? Perhaps the first to recognize the role that increasing costs and declining benefits played in shaping Roman history was Edward Gibbon ([1776] 1984). He, however, undoubtedly drew his analysis from die statements of Caesar Augustus himself, who likened conquests to fishing with a golden fishhook, where the expected payoff had to be measured against the risk (Starr 1982, 19).
In The Decline and Fall of the Roman Empire, Gibbon wrote:
The seven first centuries were filled with a rapid succession of triumphs; but it was reserved for Augustus to relinquish the ambitious design of subduing the whole earth, and to introduce a spirit of moderation into the public councils. Inclined to peace by his temper and situation, it was easy for him to discover that Rome, in her present exalted situation, had much less to hope than to fear from the chance of arms; and that, in the prosecution of remote wars, the undertaking became every day more difficult, the event more doubtful, and the possession more precarious, and less beneficial. ([1776] 1984, 1, emphasis added)
Gibbon presented a marginal economic analysis of territorial expansion, a theory of the "optimal" level of conquests, a century before the establishment of marginal analysis in economics.
Almost all necessary ingredients of a modern economic theory of conquests are included here in Gibbon's description, with rising marginal costs of conquests, falling marginal benefits, and even falling probabilities of success.1 The rising marginal costs and the falling marginal benefits arose primarily from the world's natural heterogeneity and the logistical problems of conquest and control at greater distances from the home base. The potential conquests were at different distances from Rome, had different amounts and types of wealth to be taken, and had varying degrees of military capability. With wars fought for gain, the first countries to be invaded were those with great wealth, those nearby, and those that were relatively weak....