As one of the most popular works of literature of all time, as well as the subject of the current most popular movie in the world, the Odyssey has long been analyzed from a political perspective. But the classic adventure tale also offers important insights into the economics of ancient Greece—and of today.

What does the Greek etymology of the word “economy” reveal about its meaning? How does Greek theology inform ideas of economic risk? Why has Odysseus’s relationship to the sirens been used as metaphor to explain the work of central banks?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: What kind of economic history about the Trojan War is relevant as background for the Odyssey?

Adam Tooze: The crucial thing to realize is that the Homeric epics are from about 800 B.C., which is 400 years before classical Greece, Athens, Sparta, and so on. And they are about events which are 400 years before Homer. So, they’re about a period that we would roughly place at about 1200 B.C. So this is as though we were, in a complicated, arcane, poetic way, writing poetry in 2020 about stuff that happened under Charlemagne.

The date commonly given for the sack of Troy is something like 1250 [B.C.]. And what that does is to place this within the frame of what is now commonly referred to as the Bronze Age, which is a period in the eastern Mediterranean of great imperial, large-scale state structures. Egypt’s still there from much, much earlier. The Hittites in central Turkey, the Greeks organized in the Mycenaean state structures and statelets, the Babylonians, and many more. And the key commodity is bronze, which itself is an amalgam of copper and tin. And so the great-power economics of the age are thought to have revolved essentially around the trade in those two commodities, of which copper was relatively abundantly available, whereas tin had to come from as far away as Afghanistan by ship. And that’s what we think the economy of Troy was most likely based on, which was basically a kind of toll-taking on shipments of tin to the Mycenaean Greek states.

And from the early 1200s through to the mid-1100s B.C., a total catastrophe hits the eastern Mediterranean civilizations. It’s known as the great crisis of the Bronze Age, out of which only Egypt survived. So all of the other state structures were massively disrupted. And so, Homer’s epic is looking back not just at the disaster of the war, but also at a civilization that is on the cusp of disintegration. And we think it’s an effect of warmaking, various types of dysfunctional economic structure, and of climate change that by the 1100s already had essentially destroyed all of the major civilizations of this era. So it’s not for nothing in Western civilization, in Western culture that this epic marks the kind of foundational shock of Western civilization and its epics and its telling of these stories.

CA: The word “economy” itself, the word that we have in English and other similar languages, derives from the Greek word oikos, for “the home.” What does that etymology tell us about economics today?

AT: The big drivers of the economy in the Bronze Age in this region were the palace economies. Those were the super oikoi—the big, large households that were driving long-distance trade. But the basic unit, presumably, of society was not the palace but large oikoses, so households, which were units exactly of integrated economic management and material production in which you would have an owning family member property, land which they owned, perhaps some craft implements, slaves, laborers, in a relatively self-sufficient term. And it’s not by accident that the word for economic self-sufficiency, autarky, is also Greek, because that’s what describes one of the functions of an oikos.

And it achieves that through a second fundamental principle, which is division of labor. So this is already a social organism in that not everyone does the same thing. This system is organized into a series of appropriate tasks. So men typically managing agriculture, women doing indoor tasks, certain work for free people, certain work for slaves. And then also it is a model of management and patriarchal management. And that, after all, is the central question on the domestic side of the Odyssey story is, “Who’s going to end up marrying the widow, the supposed widow?” Because they then enter into control of this oikos.

CA: How does the theology of ancient Greece shape its understanding of risk? If capricious gods can just kind of intervene to ruin any ship journey, is it even possible to conceive of insurance in the first place? How do these kind of theological ideas ultimately underpin ideas of risk in the economy?

AT: This is a fascinating question, because risk is also so closely associated with questions of underlying metaphysics. What do we think about? How is the world organized?

There’s a source, a farmer named Hesiod, who in the 8th century B.C., so a little after Homer, writes this text called Works and Days, in which he describes to his lazy brother how the world works. And his underlying theory of the riskiness of the world is tied to a historical narrative, what we would call historical narrative. So he thinks there was a golden generation that was created by Zeus directly, who lived like gods, and they were in harmony with the gods and all was good for them. And then came the second generation, who were the silver generation, who were arrogant and proud and began to get ahead of themselves. And then there was a bronze generation who were violent and self-destructive. And then came the fourth age, the age of heroes described by Homer, who went to their graves at Troy.

And Greeks now, he’s saying to his brother, from the 700s B.C. onward, live in an iron generation, which is marked by a weather system, if you like, of good and bad fortune in which pain and joy alternate in ways which you have to prudently learn to manage. So he has a meta theory of why there is risk, and we’re at risk because we live in an age of iron. We got there through our own psychodramas with the gods. And in that world, to live free of worries is essentially impossible, you can’t. You’re going to live in a world in which things don’t last. Summer won’t last forever, so what have you got to do? You’ve got to build granaries. There is neither a stop to toil and sorrow by day, nor to death by night. You know, you have to adjust to this tough, iron reality, he lectures his brother.

So what can you do? Well, what you’ve really got to do is figure out what the gods will. You know, what Zeus wants, because that’s your only hope of navigating this space. And so, according to Hesiod and this Hesiodian kind of view, well then, it puts a huge premium on divination. What you’ve really got to be able to do is figure out what these forces are aiming to do. And so every kind of divination, most famously, of course, the Oracle of Apollo at Delphi, which I’ve had the privilege of visiting, may have even done a show from there. It’s the sort of place that could make you think you could see the spirit of God acting here. But then if you can’t afford the trip to Delphi and you can’t afford to pay for an oracle, you throw dice. The Greeks were, in the Western tradition, the great originator of games of luck. And not just games of luck but means of divination. And they would look for any kind of omen.

But the other way of mitigating risk is that you make offerings. And you try and, as it were, establish a relationship with the gods, which is benign. You signify your subordination. You try and read their minds. Because you’ve got this theory that we’re in this age of iron where, through our own failure to basically live in harmony with the gods and through the disaster of Troy where the true heroes died, we’re now in this space of what we would call uncertainty.

CA: The story of Odysseus resisting the call of the sirens has been evoked as a metaphor for the operation of central banks, with central banks setting long-term goals and rejecting the temptation of short-term fixes. But if we were to unpack this metaphor, how exactly does it work? What, in the first place, is motivating the central banks’ temptation then to listen to their sirens?

AT: Yeah, I think the general problem is that of self-binding, right? Of credible commitment and the sort of slightly perverse logic by which depriving yourself of freedom is a way of better achieving your goals. And what central banks want to do is establish a credible, reliable reaction function. They want to make themselves into a function. And to do that, they have to deprive themselves of freedom. And this is the central message in Western culture of this image.

And the temptations, in the case, of political economy—this is a conservative myth, by the way—the temptation is that you might succumb to the blandishments of democratic politics, which might opt for a short-term fix of some kind, and that if central banks consistently indulge this impulse, the result would be a destabilization of expectations, first of all. And then if you keep on indulging, in the end, you’ll end up in hyperinflation, and then you’ll really be on the rocks, and that’ll be the disaster, and you’ll never get home. And so to avoid this, you establish independence of institutions.

And it would make sense, you could certainly follow through, and just simply say, “Well, why go through the whole Odysseus heroic thing? Why not just stuff your ears, as well, and just use a mechanical function which will be the sort of totally nondiscretionary central banking tailor rule?” But that would also deprive you of the drama, whereas the drama of central banking, in some senses, is to resist the thing that will be easy and to be seen to be resisting it. So not be a robot, to be a person that actually resists.

And what’s interesting is there’s another type of model that the central banks also sometimes invoke, which is a slightly softer version, what they call the Delphic model. The Delphic vision is a little bit more like the forward-guidance-type story that is now so much in debate because [Kevin] Warsh, the new chair of the Fed, is against it. Which is a kind of, you might call it, data-driven, negotiated conversation. You go to the oracle, and you present omens, or the oracle sees things, and you ask questions of the oracle, and the oracle gives you answers. And the central bank becomes a sort of participating forecaster, rather than simply this rock-like Odyssean figure tied down and bent on its course regardless.