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Introduction
We use the Economic Freedom Index to compare the institutional structure of ancient Athens in the classical period to modern economies. Our conclusion is that the level of economic freedom in Athens in the fourth century BCE is on level with contemporary Singapore and Hong Kong. It has been argued that ancient Greece witnessed significant economic growth, and our analysis suggests that the institutional setup should probably be considered as one among many possible explanations.
This paper is motivated by several facts. First, Morris (2004, 2005) suggests that real income per capita in ancient Greece increased by 50-100% in the period 800-300 BCE, representing a yearly per capita growth of 0.07-0.14%. This means that while there is an almost ten-fold increase in population, aggregate consumption increased even more. Ancient Greek society is also highly urbanized (Hansen, 2006). There are indications that the health of the population increased and that the ancient Greeks reached historically high levels of physical well-being (Kron, 2005; Morris, 2004; Ober, 2010), although the evidence is not strong (Scheidel, 2010a).
The Athenians seems to have been particularly successful. Ober (2008, Ch. 2) argues that the Athenians outdid their contemporary rivals in terms of prosperity, measured as aggregate material flourishing. This material success was not restricted to the periods of Athenian imperial power. It was present also in the second half of the fourth century. Scheidel (2010b) estimates that the real daily wage in Athens increased from 8-9 liters of wheat in the late fifth century to 13-16 liters in the late fourth century. 1
Second, from 700 BCE onward, fundamental institutional changes occurred in the Greek city-states (poleis). Coinage was introduced, short-term officials governed the state, the standing of foreigners was clarified, and several poleis introduced democratizing measures. Athens, for example, gradually developed into what was, for its male citizens, a far-reaching direct democracy. From 508/7 and through the fifth and fourth centuries, Athenian political, judicial, and economic institutions underwent a metamorphosis.
Third, among the potential determinants of economic growth, considerable attention is now directed toward institutional factors. Institutions provide the rules of the game in a society and, by shaping incentives, determine economic performance (North, 1981, 1990). Potentially efficient institutions...