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Diocletian also instituted the capita, or head tax, taxing towns based
on the number of people in them, instead of based on production. This
allowed the government to back long-term budgets, but it also crippled
towns economically when famines hit which brought down production.
He also started major reforms of the military. Before Diocletian, the
legions were stationed statically on the borders to stop invasion, but if
enemies got passed them into the empire, there was no one to stop
them. So instead of stationing all the troops on the border, he
organized the troops in defensive layers, with mobile field armies to
respond quickly to threats and large amounts of cavalry to increase
mobility.
Diocletian established the tetrachy system; the Roman Empire was
split into four, each with its own Emperor. The Empire was very large,
and during this period it was under attack on all fronts. So the idea was
to have Emperors with smaller jurisdictions that could quickly respond
to a crisis, instead of having to simultaneously deal with problems on
several faraway fronts. It was also supposed to make succession of
Emperors smoother, but the system fell apart after his death, yet its
legacy lived on in the divide between Eastern and Western halves of
the Empire.
Diocletian passed a series of reforms to try to curb the decline.
However he is best remembered for dividing the empire into the
tetrarcy and his persecution of the Christians.