Democracy, Institutional Changes and Economic Development: The Case of Ancient Athens

The discussion of strengths and weaknesses of democracy is almost as old as democracy itself and it still continues. In the present paper we present a new theoretical perspective on democracy as a system that facilitates changes, especially in the form of direct democracy. We stress the role of the “initiator”, e.g. anybody who has the right to introduce a new proposal. This possibility increases the existence of the number of available strategies in a point of time. The decision makers can choose strategies form this set, and under a continuous situation of trial and error can reject wrong ones and retain correct ones (in the sense of welfare increasing strategies). Thus, society gains knowledge and new efficient institutions emerge. Lastly, we analyse the prototype direct democracy of ancient Athens, as a case study to highlight and test our model's hypotheses. It will also be analysed how under direct democracy of the Athenian type, the Assembly became a market place for the competition of ideas.