For some context, the "Edict Concerning the Sale Price of Goods" (usually just called the Edict on Prices), was issued in 301 AD by the eastern Roman Emperor Diocletian to combat economic troubles that had been ongoing for several decades. Where it was followed, it was blamed for causing civil unrest as people and merchants fought over the prices of goods, but it seems to have been largely ignored.

How was inflation understood in antiquity?

We are not entirely sure that they had much of a concept of inflation at all. But they did understand something strongly related, which was debasement. And debasement was often at the heart of ancient inflation.

The value of ancient coins was assessed according to their precious metal content, which was set by the emperor and enforced by mints working with treasury officials. The precious metal content allowed a coin to be used across a wide geographic area, which was important to merchants and soldiers, groups who both did a lot of travelling and were the main beneficiaries of the issuing of new money. This was because soldiers were paid by the state, and merchants handled large quantities of coin and credit as part of their job. It was important that these two groups had confidence in the coinage, as underpaid soldiers get rebellious and ripped off merchants will take their trade elsewhere. Confidence in the coinage was key, and that relied on the worth of a coin being dependable. If it was not dependable, then people would not know how much the coins in their pocket were actually worth and confidence in the monetary economy as a whole would decline.

The problem was that the imperial treasury rarely ran a budget surplus. This was not a recent problem to Diocletian, it had been normal for centuries. To mint new coins to pay the army and fund imperial projects the mint needed a constant supply of silver, but trade meant that existing coins moved outside the empire and the inefficiency of the tax system meant that it was difficult to meet expenditures through taxation. This issue was solved through the mining of precious metals, which the mint turned into new coins. But there was rarely enough precious metal being mined to mint enough coins to plug the gap in the empire's budget.

The solution to this was debasement, where the precious metal content of coins is lowered so that more coins can be minted. If they could reduce the silver and gold content of coins just a little, then they could mint more coins with the same amount of precious metal and appear to balance the budget. This was done very slowly and incrementally, usually just a percent or two at a time every few years, so it didn't undermine the confidence people had in the worth of currency. After all, what's the difference between a coin that's 94% silver and a coin that's 92% silver? Would a merchant even notice?

Well, eventually they did notice. The century prior to Diocletian's reign was an economic disaster. Entire chunks of the empire broke away for a while and rival claimants to the title of emperor bribed soldiers with the promise of more and more pay. The army took up about 1/3 of the imperial budget, so that was an insane expense. And of course, to meet those obligations the new emperor would debase the coins significantly. The worst were the early Severan emperors, who between them reduced the silver content of the dinarii by 25% in a handful of years. You can bet that people noticed that one.

I mean, just look at this graph of the denarii's value over time. Not only had the silver content fallen from over 75% to below 50% in a single lifetime, but the content became so inconsistent as well. Does the coin in your pocket have 60% silver or 30% silver? Nobody can be sure! It became so bad that counterfeit coins were often worth more than the official ones, and at that the point the economy was well and truly fucked. Knowing that the silver content of coins was at an all time low, and falling significantly every year, people put up prices so that they were still getting the same amount of silver. And because lower grade copper coins were valued against the supposedly reliable silver and gold coins, the price of everyday goods like bread and wine went up as well.

Diocletian, when he dragged the empire out of the Third Century Crisis, inherited this problem. So the coins are worthless, and prices have skyrocketed to compensate. What do you do? Diocletian's solution was to tackle both at once with the Edict of Prices. Part of the edict attempted to deal with inflation by just setting a cap on how expensive things can be. It's crude, but I'm sure we can all see where Diocletian was coming from here. The other part was a realignment of the currency. Diocletian wanted to phase out the dinarii in favour of a new coin with a much higher silver content, effectively trying to undo the past two centuries of debasement. All currency was to be measured against this new coin, and eventually the existing coins in circulation would be phased out in favour of the new ones that people could have confidence in.

was his response on par for what other leaders would have thought to do?

Absolutely. This resetting of currency is a viable solution to the problem of inflation. Constantine the Great did it by ramping up production of the gold solidus, a coin of almost pure gold. This coin may have been invented by Diocletian as part of the Edict of Prices reforms, but he lacked the gold reserves to mint it on a large scale. Constantine did have enough gold to issue the solidus in large amounts, and this did the job! People's issue was with the silver coins and their unreliability, but the solidus was pure gold! Even if people were not willing to trust the value of coins, they could trust the evident quantity of precious metal in the solidus, and from there confidence in Roman coinage was gradually restored. That's the odd thing about the reforms in the Edict of Prices - it wasn't the idea that was bad, it was the execution. Diocletian might have been significantly more effective if he had focussed on gold instead of silver. It worked for Constantine.

The solidus eventually suffered the same debasement problem and by the 11th century confidence in it had collapsed. So the emperor, Alexius I Comnenus, just did the same thing again in the 1090s and replaced the system of coins established by Constantine with a new one starting from scratch. This has been done in more modern times, such as in Weimar Germany when the paper Mark was replaced with the Rentenmark and then the Reichsmark to halt hyperinflation. When confidence in the worth of money is so low that nobody will use it, throwing it out and starting again does work because it restores the confidence in its value that makes it a viable currency.

The other problem with the Edict of Prices was its crude attempt to prevent inflation. Although price regulation had been a thing before Diocletian, and would continue to exist afterward, few were quite as careless and heavy handed about it. The Edict of Prices gave no room for people to adapt once they hit the price caps, so the production of some goods became completely unprofitable because the cost of producing them exceeded the price cap for their sale. This was not a mistake later rulers made even when the necessity of price caps was sometimes recognised. Medieval rulers, for example, tended to set the price of specific goods like bread so that people could afford to eat, but left the rest of the economy alone while they recalled and reissued coins to restore confidence in them. This worked well, as merchants didn't feel cheated and the market could balance itself over time, but the poor wouldn't suffer for it because the prices of essential goods were fixed to be affordable.