The political economy of Byzantium: transaction costs and the decentralisation of the Byzantine Empire in the twelfth century

This thesis aims to contribute to an explanation of how the development of political institutions is influenced by the costs of information and exchange across society in a pre-modern context. The Byzantine Empire in the twelfth century presents an apparent paradox of an expanding economy alongside a weakening central state. Application of a dynamic transaction-cost framework can illustrate how political and economic decentralisation can rationally occur as non-state actors begin to gain a comparative transaction-cost advantage over the state. Geopolitical and economic developments of the late-eleventh and twelfth century empowered non-state provincial interests in the Byzantine Empire to the detriment of the central state apparatus, including the imperial bureaucracy. Economic growth, an increasingly fluid provincial political environment, and the decline of the imperial navy simultaneously raised the transaction costs of the state and lowered the transaction costs of local interests. This shift prompted the decentralisation of power that ultimately contributed to the destruction of the Byzantine state in 1204. The state faced increasing relative costs of information acquisition, security provision, and tax collection as provincial transaction costs declined and state networks were allowed to degrade. Decentralisation of political and economic power became first possible, then practical, and finally unavoidable in a process that fatally undermined the cohesion of the empire. This thesis uses a transaction cost framework to provide an economically informed explanation of political decline that complements the traditional politically focused narrative and begins to address the contradiction apparent in a state ruling over increasingly prosperous territory, yet proving so fragile by the closing years of the twelfth century.