‘As Rich as Croesus’- How the King of Lydia Shaped the Iron Age Kingdom’s and Today’s Commerce
‘A market for something exists if there are people who want to buy it and people who want to sell it’ — Reinventing the Bazaar, John McMillan
Lydia was located east of Ionia, an ancient land of western Anatolia, and extended from the Aegean Sea, occupying the valleys of the Hermus and Cayster rivers. The Kingdom of Lydia existed from 1200 BC to 546 BC and covered a vast territory of the western Anatolia. Notwithstanding, it is not only its culture which made this region so special, but its attributes of having invented one of the most useful tools for today’s commerce.
During the 7th century BC, the Lydians were known for their coinage activities which originated the first gold and silver coins on earth. After establishing a dynasty at Sardis, what then was the capital of Lydia, under the legendary king Gyges, the kingdom was about to experience a turnaorund on its history. Nevertheless, it reached its zenith under Alyattes (c. 619–560) who strengthened its regime in Ionia, after wrestling with the Cimmerians.
Lydia reached even more significance under Alyattes’ son, Croesus, the last king of Lydia who reigned from 560 until his death in 546. He was renowed for possessing a great wealth (there the famous expression: ‘as rich as Croesus’) and for using his economic dexterity to foster the territory’s market economy.
Moreover, it is said that the Lydians were a commercial people who dressed like the Greeks and were the first western people to establish retail shops. Coupled with the boom in national commerce, new primitive currencies ensued as the barter of cattle and the like for means of exchange could not meet the buyers’ and customers’ needs. It is at this point when the king Croesus issued the first gold and silver coins which showed the fidelity of money and which helped to improve the sprawling commerce.
This invention of metallic coinage was quickly adopted by the Greeks and played an important part in the beginning of what was a commercial revolution, which transformed many western civilizations in the 6th century BC.
What would have happened if the Lydians had not implemented the gold and silver coins? How would look like today’s worldwide market economies if we still used the ancient methods of exchange? Without doubt, we would have thought of another sort of exchange when doing commerce as a product of evolution, if not, we would probably be now still bartering with cattles or other types of raw materials, which are, in a sense, quite abundant and available for everyone.
In his book Reinventing the Bazaar, John McMillan, a professor of Economics at Standford University’s Graduate School of Business, highlights the far-reaching significance of having a well-designed market inclined towards meeting all the agents’ needs and not leaving anyone behind. He referred to this as the ‘market design’: the several methods of transacting and the devices used in those transactions. It is striking that in every market there are transaction costs, such as time, effort and money, recognized from a consumer’s perspective.
In order to understand the complexity of a well-designed market, the author tries to explain this by taking a tourist as an example. McMillan deems the time and effort that a tourist lacks while being in a Marrakech bazaar during summer holidays. The sellers know that she can’t afford to spend a lot of her appreciate holidays time comparing prices from an equal single item she wants to purchase. Therefore, sellers may reach an agreement with regard to the establishment of prices in specific products, putting aside the quality of goods. This may be a clear disadvantage for the apparently uninformed tourist who wants to buy a souvenir from the country and will have to overpay for it.
In contrast, merchants don’t overcharge a local customer as they might come more than a once in their lifetime (then, they stand for ‘repeat business’). On the whole, tourists are overcharged because of search costs. However, thanks to the latest technological advances, there are an array of e-commerce businesses whose aim is to help reduce the mentioned search costs, for instance Amazon.com (comparing prices between different products depending on the category; books, household appliances…) and also real estate agents, who actually play an important role as ‘intermediaries’, informing interested buyers on the different houses available and their prices.
With the example of the tourist and considering the utterance from the beginning of this article, we should own up the importance while creating a flexible market economy which must be capable to adapt to uncertain times while going through doldrums that can exacerbate its survival and where money is seen as a means of exchange between goods.
Now, one can recognize the helpful work provided by the ancient Lydian King in enabling the use of coins which, as a matter of fact, would facilitate not only the local commerce in that region but also today’s worldwide commerce and retail sector. It is therefore not surprising that our society keeps its roots to the then Lydian commerce using coins and bills.
Croesus told us a valuable lesson on ‘market design’ which shows to require sharp eye sight and wit and it is history which has kept this knowledge over time and has taught to it us. It stands to reason that governments and international financial institutions should consider Croesus’ dexterity and the development of Greek and other western economies so as to seek the betterment of the welfare, implementing solutions to problems (as the mentioned king did when there was a high demand in retail products and which demonstrated that markets could not rely on the old method of exchange, thus, a new one was required) and building a sustainable society driven by confidence and solidarity.
Markets are the most important antipoverty engines
As John McMillan uttered, “markets are the most important antipoverty engines” and it is our duty to allow information to flow smoothly and effectively.
