Homo bulla est. Man is a Bubble. Varro, "De Re Rustica"

3 Questions:
          -Is the primary economic object of speculation land?
          -Are our herd-like speculation behaviors instinctual?
          -Did speculation behavior first arise in Roman times?

Repeating the same behavior and expecting a different result generally describes insanity. Despite a four-hundred year period of successive speculative mania, populations continue to form asset bubbles decade after decade. The allure of profit from runaway growth triggers our most primal herd response while hijacking our risk perception. Theories abound as to the source of this group behavior--capitalistic abhorrence of limits, an intrinsic anglo-saxon sickness, ineffective regulation, or using the wrong economic model.  

But what if the roots of the phenomenon are deeper? If the phenomenon crosses cultural lines, existed before true free-market capitalism, and occurs in various regulatory environments, then we may need to address speculation as part of our biological imperative, not our cultural contingencies. The following investigation comprises the first step in describing speculation as a behavioral trait of Homo economicus. It tentatively assesses whether the protean form of speculation lies scattered about in the rubbled foundations of the Roman villa system.  

Monte Circeo, 2000 Years of Investment, modern villas (left) and ancient villas (right)

26 x 26 in

The rise and crash of the Roman villa system reads eerily like the modern story of American foreclosures crisis-profit schemes of land speculation, frenzied landowners seeking to expand their profits beyond the average market growth, farming negotium (business) from one villa to derive otium (pleasure) from another. The modern financial industry terms this quasi-magical level of compounded profit alpha returns, in contrast to the more average beta returns. Investors, day traders and 'quants' spend their intellectual energy feverishly chasing the strategies that will achieve alpha level returns. Their debt-fueled schemes spin out risky ventures like one more residential development in the south Florida swamps or yet another artificial island off Dubai. If this maniacal pursuit of alpha spans two millennia and vastly different cultures, then the roots of our speculative tendencies are perhaps more biological than cultural.    

The systemic behavior that leads to overdevelopment, real-estate price crashes, avalanches, phase changes in matter, and population crashes are strikingly similar. Theoretical biologists are making the nascent strides in mapping how normal population behavior can build into the more radical swarming behavior that reaches beyond ecological tipping points. In parallel, complexity theorists and economists are attempting to describe the same phenomena in financial markets, forming a new discipline and lexicon called econophysics. The history of speculation provides fertile ground to explore the bio-physical tendencies of Homo economicus.

Episodes of Speculation, 1600-2010


The tipping points which force speculation over the edge are brainlessly easy to identify in retrospect, yet painfully elusive to predict. Recent speculative episodes reveal a phased progession--excess capital and credit flood the market through an initial exogenous shock to the system (disasters, financial innovations or new technologies), credit surges as irrational exuberance guides all to assume unsustainable values will continue to rise, and most investment vehicles begin to march in unison up the speculative bubble and tumble down through the panic and crisis phases. The synchronization stage has been called co-movement, a behavior common to basic phase changes in physical matter, organism populations, and certainly financial markets over time that precedes a sudden massive change. Unsurprisingly, most of the 46 episodes of speculation over the last four centuries exhibit these basic phases as well.    

The mere existence of 46 episodes indicates a gluttonous tendency in our economic behavior. However, our behavior is not mindless, tending to concentrate on particular objects of speculation. Land was central to about 90% of the speculative crises since 1600. It seems that as human groups accumulate surplus wealth, they inevitably overbuild the landscapes associated with the wealth gain, assuming that land is the true, tangible asset that will never decline. Agricultural and mining landscapes, large landscape-based infrastructures, and financially linked estates were repeatedly the sources of overzealous speculation that led to financial collapses and economic decline. In the 1980s, a mere section of Tokyo's Ginza district became as valuable as all of Californian real estate in the Japanese bubble economy, while the most recent subprime mortgage bubble incited banks to lend out over 30 times their underlying value for real estate.  

Bubble No. 04: South Sea Co. Bubble Mapping


Bubble No. 47: Subprime Crisis/Leverage Ratio Mapping


Ancient economic behavior was likely no exception. Sadly, despite the lavish scholarly attention devoted to villa gardens and garden architecture, relatively little work has focused on the villa as a system of land colonization, speculation, and profit. These complexes were built to provide the major export commodities traded on the ancient markets--grain, olives, and wine-thus accumulating profits for their owners. The use of villas and their commodities as investment vehicles had certainly matured by Columella and Pliny the Elder's time, as each references various levels of profit margins tied to wine and oil production.  

As speculative investments, the vast villa-farms formed the latifundia, from latus for the sprawling spatial dimension and fundus to suggest the piece of land as a base. The relationship between the modern term 'fund' to the ancient Latin proves instructive. Latifundia, serving as the base of the fledgling Roman market economy, would have been the primary source of profit and thus the most lucrative object of speculation.

Villa/Grotto of Tiberius, Sperlonga

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Villa of Tiberius 2, Sperlonga

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The senatorial elite may have been heavily invested in this agri-speculation, seeking the ever-intoxicating alpha-level returns. Pliny the Elder suggests that a mere six landowners possessed half of the African provinces. Pliny the Younger may have owned eight villas himself, hedging losses of one with the fruits of another, possibly mortgaged by the Roman government itself. The wealth generated from these villas fueled the purchase of more, as well as prompting imperial jealousy and elite imitations. The game of one-upmanship and speculation drove emperors, merchants, soldiers, and senators all to spread villa-based latifundia from the mountainous enclaves to the coast in every corner of the empire.  

It is not mere coincidence that these photographed locales serve as prime villa real-estate in the modern era. Nor is it surprising that after a first and second-century building boom spanning the entire Western Roman Empire, the latifundia went bust in the third century. This period of economic decline, leaving the villas and the overall empire in crippled state, may have been the first episode of a speculative crisis, where our biological proclivities subsume our economic activities. While the Roman civilization was a mere 62 million people spread over half a continent, current civilization embodies a globe-spanning 7 billion-strong population of potential speculators. The Roman prototypical episode merely left tantalizing ruins dotting a relatively small swath. But our economic dominion has the potential to swarm the planet with a blanket of ecosystem-replacing investments. Are we doomed to repeat these wasteful cycles of overdosed landscape speculation or can we tweak our behavior to understand limits and capacities?    

Villa della Vignacce, Roman Suburbium

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Villa Nerone, Anzio

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All photos and drawings by Casey Lance Brown

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