The Ancient Greek Economy. Markets, Households and City-States

128 EDwARD M. HARRIS

The role of the state in protecting property rights and creating archives with

documents to prove ownership helped to lay the foundations for economic

growth in the Greek world. The existence of sales records served to reduce

transaction costs by assuring buyers that sellers had secure title. As de Soto

observes, these records also encouraged landowners to think of their land as

an asset that could be exchanged on the market. The best indication of this is

the Greek view of real security. There are two basic forms of real security, sub-

stitutive and collateral. In the substitutive form of security, the creditor accepts

the property as a substitute for the loan if the debtor defaults.^78 The creditor

does not view the property pledged as security as a commodity that can be

exchanged for cash in the market to pay off the debt. He is not interested in the

cash value of the security but in the security as property for his own use. This

has two important implications. On the one hand, the borrower cannot make

further loans on the security after pledging it to one creditor. On the other, if

there is a difference between the market value of the security and the amount

of the loan, the borrower does not have a right to the excess, and the creditor

cannot demand the payment of any deficit. In more general terms, it means that

the creditor does not view the security as a commodity, only as property capa-

ble of being transferred to his ownership. In the collateral form of security, the

creditor views the object pledged as security as a commodity, which can be sold

in the market. He is not interested in taking over control of the asset, but in sell-

ing it on the market for cash. This has three important implications. First, if the

debtor defaults and the creditor takes the security and sells it but does not gain

enough cash to cover the total amount of the loan, the creditor has the right

to demand the deficiency from the debtor. Second, if the creditor distrains on

the security, sells it and recovers a larger sum than the amount of the debt, the

debtor has the right to recover the excess. Third, if the creditor believes that the

value of the security far exceeds the value of the loan and gives his agreement,

the debtor can contract additional loans on the same security.

There can be no question that the Athenians in particular and the citizens

of the Greek poleis in general viewed land as an asset that could be exchanged

on the market and therefore adopted the collateral form of security as the fol-

lowing passages demonstrate.

1) Dem. 28.18

To where would we turn if you should vote for any other verdict? To the

property pledged as security to our creditors? But that belongs to them.

To the excess (resulting from the sale of the security)? But that belongs

to him if we owe the epobolia.

Demosthenes brought a private suit against his guardians for mismanaging and

embezzling his inheritance. In this passage he tells the judges that if they vote

against him, he will not have any property left. He claims that he has pledged