The Just Price

From many sides there are indications that the gospels of revolt are being found wanting by experience and that a reaction in favor of older and saner doctrines has set in. As an example of this movement we propose in this paper to take the doctrine of the just price of services and commodities. It will be sufficient for our purpose to indicate the salient features of the revolt and the return to the sounder views which were once prevalent. We may thus perhaps be able to help things to move in the right direction.

Until comparatively modern times it was held universally that societies of men are chiefly held together by the virtues of justice and charity. Justice especially was considered the solid foundation of States, without which it was impossible for them to prosper or even to remain stable and permanent. Whatever may have been the practice in particular cases and at particular times the ideal at least was always upheld that justice must regulate the dealings of rulers with the governed, and the mutual relations of the governed among themselves. The doctrine concerning the nature of justice was that of Aristotle, who taught that it consists in a mean between two extremes, like other moral virtues. Just as liberality is a mean between the two vices of stinginess and prodigality, so justice is a mean between excess and defect. Justice, however, differs from other virtues in this— that while the mean in other virtues is a mean between two vicious habits in the virtuous man, justice has also for its mean the debt due to somebody else. Other people have certain definite rights — the right to live without let or hindrance, the right to protection at the hands of the public authority, the right to have and to enjoy what belongs to them — certain definite rights arising from contract. Justice requires that those and all other rights should be respected, that what is due to another should be rendered unto him. Not more than is due nor less, but just what is due. Justice, therefore, consists in an equality, a balance between what a person has a right to and the satisfaction of that right on the part of others. As long as each one gives to all others what they have a right to, justice is observed, no one has a legitimate ground of complaint, all are satisfied and contented, the State rests in security on the peace and concord of its citizens.

The justice that governs the relations of individuals among themselves was called corrective justice by Aristotle because it corrected unjust inequalities by making restitution for violations of right. It was called commutative justice by the schoolmen because it had to do chiefly with buying and selling and other contracts or exchanges. Justice regulates such transactions, and consists in this— that if a man buys a house he is in possession of the same value after the completion of the bargain as he was before. If justice has been observed he has not given too much for the house nor too little. The mean has been observed, and justice has been done. ‘“ But when,” says Aristotle, “by buying and selling, men have got neither more nor less than they had at first, but exactly the same, then they say that they have their own, and have neither lost nor gained. And hence corrective justice is a mean between the gain and the loss which are produced not willingly, but unintentionally, and is such that each party has the same both before the transaction and after it.”¹

¹ Ethics, V., 4.

Of course the great philosopher was not so foolish as to suppose that nothing whatever is gained by the contract. If that were the case there would be no motive for making the exchange at all. As he shows elsewhere,² Aristotle was fully aware of the two kinds of value which every commodity has in society, the value in use and the value in exchange. A man who sells wine which he does not want, and which he cannot use for money which he does want, makes a gain as to the value in use; but if he only got the just price he only got the equivalent of his wine as far as the value in exchange is concerned. In order that exchange may be possible and that commodities may have exchange value, some sort of society must have been constituted. As Aristotle says: ‘“ Now it is plain that barter could have no place in the first community, that is to say, in the household; but must have begun when the number of those who composed the community came to be enlarged; for the former of these had all things the same and in common; but those who came to be separated had in common many other things which both parties were obliged to exchange as their wants arose.’³

² Politics, I., c. 9.

³ Politics, I., c. 9.

Value in exchange, then, is given to commodities by the fact that there are other men who are willing and able to give other commodities of value for them. How much they are willing to give will not depend upon the value in use which the commodity may have for themselves or its present owner, or for any particular individual. If one be starving a loaf of bread will be worth more to him than all the gold of Midas, but its value to him will not measure its value in exchange. This value in exchange will be determined by what the members of the community at the time are prepared to give for a loaf of bread. It will be determined by the social estimate of its utility for the support of life and its scarcity. It will not depend upon its intrinsic perfection, else a mouse would be more valuable than the corn which it eats. It will depend on its capacity to satisfy the wants and desires of the people with whom commercial relations are possible and practicable.

All this, which is according to the express teaching of the great Greek philosopher, shows that Aristotle considered it a matter of justice to keep to what we call a fair and reasonable price in buying and selling. Then, as now, traders were apt to evade this ethical law, and on that account trade and traders were held in small esteem by respectable men. Plato only admitted them into his Republic because he knew that they were necessary, but in an interesting passage he tells us what should be done to prevent traders doing injury to the commonwealth and to prevent their sordid occupation injuring their own characters. “ And therefore,” he says, “in respect of the multifarious occupations of retail trade, that is to say, in respect of such of them as are allowed to remain, because they seem to be quite necessary in a State — about these the guardians of the law should meet and take counsel with those who have experience of the several kinds of retail trade, as we before commanded, concerning adulteration (which is a matter akin to this), and when they meet they shall consider what amount of receipts after deducting expenses will produce a moderate gain, and they shall fix in writing and strictly maintain what they find to be the right percentage of profit; this should be done by the warders of the agora, and by the warders of the city, and by the warders of the country. And so retail trade will benefit every one, and do the least possible injury to those in the State who practise it.”⁴

⁴ Laws, p. 491.

In the third book of his De Officiis,⁵ Cicero has a very interesting discussion on certain ethical questions connected with trade. He tells us that they were cases of conscience discussed among the Stoics. One is whether a corn-merchant who is selling his corn at famine prices, but who knows that abundant supplies are close at hand and will shortly arrive, is bound in conscience to make the fact known to the buyers. Another is whether the owner of an insanitary house which he wishes to sell is bound in conscience to make known the defective drainage to intending buyers. Cicero himself takes the strict view in both cases. He says: “That corn merchant, then, seems to me to be bound not to practise concealment on the Rhodians, nor this house-seller on the purchasers. For it is not practising concealment if you should be silent about anything; but when for the sake of your own emolument you wish those, whose interest it is to know that which you know, to remain in ignorance. Now, as to this sort of concealment, who does not see what kind of thing it is, and what kind of a man will practise it? Certainly not an open, not a single-minded, not an ingenuous, not a just, not a good man; but rather a wily, close, artful, deceitful, knavish, crafty, double-dealing, evasive fellow. Is it not inexpedient to expose ourselves to the imputations of so many vices, and even more?”

⁵ C. 12.

I quote these words not because I think Cicero’s opinion on this question the right one, but because the passage shows the attitude of a Roman gentleman and of one who took a keen interest in ethical questions with regard to fair dealing and the just price of commodities. If Cicero and those to whom he so confidently appealed had in their minds no definite standard of what was a just price to give for a commodity the whole passage is meaningless.

St. Thomas Aquinas and Catholic theologians generally have followed and appropriated the Aristotelian doctrine on justice and on the just price. In the question of the Summa,⁶ where St. Thomas professedly treats of the just price of commodities, he quotes both Aristotle and Cicero, and by giving as the reason for his decision the great and primary maxim of the natural law — Whatsoever you would that men should do to you, do you also to them — he shows that, according to his ideas, the question of the just price was one of natural law and natural reason. The words, indeed, were uttered by Our Lord, but that fact does not make them merely positive precept; much of Our Lord’s teaching is also that of natural reason. It may be added that common sense and English law both uphold the doctrine of the just price. Buyers of commodities who are fit to go to market know what the fair price is of the articles which they wish to purchase, and sellers know when they are giving fair value for the money which they receive. The Sale of Goods Act, 1893, sec. 8, sub-sec. (2) prescribes: ‘ Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.” This obviously supposes that there is such a thing as a reasonable price for goods —a price, that is, which right reason approves in the case. Price in other words is not something which is altogether indeterminate, subjective, and arbitrary. There is a price for everything that comes into commerce, not necessarily fixed and determined to the last farthing, but

⁶ 2-2, q. 77, a. 1.

ascertainable within fairly definite limits. It is the reasonable price, not too high nor too low, the mean between excess and defect, the just price, the fair equivalent in money for the goods. What that price is is a question of fact, says the law —a question of fact which depends upon the circumstances of each individual case, and which can be settled without much difficulty by a jury of honest and competent men.

All this is but the brief exposition of the teaching of Catholic moral theology on the famous question of the just price — teaching which St. Thomas and the scholastics derived from Aristotle’s doctrine on justice, and which they handed down to their modern successors. It was necessary to be thus explicit in order to have before our eyes a standard by which to judge the worth of the assertions of the liberal school of political economy.

According to the teaching of this school a seller always tried to sell in the dearest market and a buyer tried to buy in the cheapest. The price below which the one would not sink and that above which the other would not rise was fixed by the subjective and individual valuations of the utility of the goods to the seller and buyer respectively. The actual price at which the goods were sold depended upon the play of supply and demand at the place and time in question. Competition among buyers and sellers and of buyers against sellers settled the actual price which the goods fetched. The law of supply and demand was a law of nature, as inevitable as nature’s physical laws, and it was as useless for the State to attempt to interfere with economic laws of this kind as with the law of gravitation. Workmen were a necessary factor of production, an essential portion of the productive machinery, and the price of their labor was regulated by the same great law as that which regulated the price of the raw material which they worked up into saleable goods. The business man here, too, bought in the cheapest market and sold in the dearest; the price in the one case was what he was compelled to give, in the other it was what he could get. The old scholastic theory of the just price of commodities was hopelessly antiquated and even ‘absurd. Even the historical school of economists followed the prevailing doctrine on this point. Dr. W. Cunningham writes: ‘In accordance with current modes of thought [the scholastic theologians] tried to determine an ideal standard which should be realized in particular transactions, and sought for a definite conception of a ‘just price’; the practical enquiries then resolved themselves into means for discovering the just price of each particular thing. From the modern point of view this whole quest was quite chimerical; prices are always fluctuating, and must from their very nature fluctuate. . . . We know, too, that the commodity used for money must vary in value from time to time, and that therefore there must be continual fluctuations not only in values but in prices as well. The attempt to determine an ideal price implies that there can and ought to be stability in relative values and stability in the measure of values — which is absurd.

“The medieval doctrine and its application rested upon another assumption, which we have outlived.

Value is not a quality which inheres in an object, so that it shall have the same worth for everybody; it arises from the personal preferences and needs of different people, some of whom desire a given thing more and some less, some of whom want to use it in one way and some in another. Value is not objective — intrinsic in the object — but subjective, varying with the desires and intentions of the possessors or would-be possessors; and because it is thus subjective there cannot be a definite ideal value, which every article ought to possess, and still less a just price as the measure of that ideal value.”⁷

⁷ An Essay on Western Civilization, by W. Cunningham, D.D., p. 78.

It is obvious that when Dr. Cunningham wrote this he had no true conception of what the doctrine of the just price was and is. All that that doctrine asserts is that there should be and that there is an equivalence in social value between a commodity and its price at a certain time and in a certain place; it says nothing whatever about the stability or permanence of price at different times and at different places. While maintaining that the just price does not depend on the valuation of the individual buyer or seller, the medieval doctors did not dream of making it intrinsic to the object. They quoted with approval St. Augustine, who centuries before had pointed out that though mice and fleas are more perfect things in the order of nature than bread and money, yet people set a higher value on the latter.⁸ They knew fully well that value is not intrinsic to the object in the sense intended by Dr. Cunningham, but that it largely at least depends on the wants and desires of men, though, of course, there should be something in the object to rouse those desires and satisfy those wants.

⁸ De civitate Dei, XI, c. 14

Even Professor Ashley falls into the same mistake. “ With us,” he says, “ value is something entirely subjective; it is what each individual cares to give for a thing. With Aquinas it was something objective; something outside the will of the individual purchaser or seller; something attached to the thing itself, existing whether he liked it or not, and that he ought to recognize.”⁹

⁹ Introduction to English Economic History and Theory, I., p.

Professor Ashley’s treatment of the doctrine of St. Thomas is sympathetic, but in his failure to grasp some of its essential features he shows how difficult it is without special training to understand scholastic theology. Still less can another assertion of these two scholars be admitted. In the last edition of his Growth of English Industry and Commerce, Dr. Cunningham has the following passage: —“ The whole conception of a just price appears to be purely Christian; according to Professor Ashley, who has written an admirable exposition of the whole subject, it is unknown to the civil law, and had as little place in Jewish habits as it has in modern society; but it really underlies a great deal of commercial and gild regulation, and it is constantly implied in the early legislation on mercantile affairs.” 10 Although in the text just quoted Dr. Cunningham asserts that the

140. 10 Loc. cit., I., p. 252.

whole conception of a just price appears to be purely Christian, yet in a note to the passage he admits that it is partly based on Aristotle. As a matter of fact it was altogether based on Aristotle. It is an axiom with the scholastics that Christianity contains no directly moral precepts which do not belong to natural law except those which relate to Faith and the Sacraments. They certainly regarded the doctrine of the just price as part of the doctrine on Justice, and Justice is certainly a virtue of the natural law. If St. Thomas quotes the words of Our Lord — Whatsoever you would that men should do to you, do you also to them — he merely makes use of these words to enunciate the first great principle of the law of nature, a principle known to Moses as it was to Confucius, the fundamental axiom of all sound ethics. Professor Ashley did, indeed, at one time think that the phrase — justum pretium — first occurred in St. Augustine, but in a note at the end of the volume he shows that he had detected his mistake before his book was published. The phrase occurs twice in the laws of Diocletian and Maximian, which were inserted in the Code,¹¹ and the idea as distinct from the exact phrase is one which belongs to justice and human reason, as Aristotle and Cicero show. Within the last few years many signs have appeared of what is really a return, I will not say, to the scholastic, but to the true doctrine of value and price. Dr. Cunningham himself gives evidence of this. In his Essay from which we quoted above he admits that “modern moral feeling does not sensibly differ from that of medieval times in the desire, if it were possible, to interfere with the action of any dealers who are able to enrich themselves through the necessities or the ignorance of others, and to gain at their expense.” 12 Still more satisfactory is what he has in the last edition of the Growth of English Industry: “ Common estimation is thus the exponent of the natural or normal or just price according to either the medieval or the modern view; but whereas we rely on the higgling of the market as the means of bringing out what is the common estimate of any object, medieval economists believed that it was possible to bring common estimation into operation beforehand, and by the consultation of experts to calculate out what was the right price.” 13 A belief, it may be added, which is shared by the framers of English law, as we have seen, and by business men to this day. Henry Sidgwick, in an article contributed by him to Sir R. H. Inglis Palgrave’s Dictionary of Political Economy, writes: —“So far as it has attempted to supply this need, the teaching of political economists has generally pointed to the conclusion that a free exchange without fraud or coercion is also a ‘ fair’ exchange. It is, however, doubtful how far this interpretation has ever satisfied the common moral consciousness, when cases are considered in which one party to the exchange is found profiting by the ignorance or distress of the other. At any rate it has been widely maintained that a strictly competitive exchange does not tend to be really ‘ fair’— some say cannot be really ‘ free’— when one of the parties is 12 Page 80, 18 Page 253,

¹¹ Codex, IV., 44, 2 and 8

under pressure of urgent need. . . . Many who are not socialists, nor ignorant of economic science, have been led to give some welcome to the notion that the ideally ‘fair’ price of a productive service is a price at least rendering possible the maintenance of the producers and their families in a condition of health and industrial efficiency.”¹⁴

¹⁴ S. v., Political Economy and Ethics.

The doctrines of the liberal school of English political economy were never so widely accepted on the Continent as they have been in England, and it is on the Continent that their narrow doctrine about price has been most vigorously and successfully assailed. M. A. de Tarde, an advocate of the Court of Appeal at Paris, published his interesting work L’Idée du Juste Prix in 1907. It is a history and criticism of opinions not from the theological but from the economic point of view, and perhaps, the more valuable to us on that account. Price, of course, is merely the measure in money of the value of a commodity, and M. de Tarde shows that the various theories of value, sometimes even in spite of the protestations of their exponents that ethics had no place in such questions, involved also an idea of justice. With the liberal school competition was supposed to settle what a fair equivalent for any commodity was in the circumstances, while Marx and the socialists maintained that the laborer has a right in justice to all the wealth that is produced, for all wealth is the produce of labor. Recent economic theory is adverse to both views, and shows a marked tendency to return to earlier theories. As M. de Tarde says:

“Mais, si le XIXᵉ Siècle paraît s’être inspiré, pendant longtemps, de ce libéralisme, et s’être abstenu de faire triompher dans la réalité un idéal défini de justice, cependant, l’état présent des doctrines et des moeurs semble faire retour à des conceptions plus proches, par certains côtés, de celles qui avaient cours à l’époque médiévale. Les dangers que la liberté de l’usure a causés dans l’Europe centrale et orientale, ont été assez grands pour induire la législation allemande et autrichienne à revenir en arrière et à faire renaître le délit d’usure. La législation anglaise les a suivies ces temps derniers. Les autres nations conservent précieusement leur limitation légale du taux de l’intérêt. Enfin, le récent code allemand de 1900 crée de toutes pièces une théorie générale sur la lésion par inéquivalence dans les contrats, qui consacre le fondement de l’idée d’un juste prix. Ces faits sont significatifs. La croyance que le prix le meilleur est le prix de concurrence, paraît fortement ébranlée. Tout le mouvement si puissant des conditions industrielles, tant ouvrières que patronales (trusts), proteste contre elle. Or, le régulateur de la concurrence supprimé, il faut faire appel à de nouveaux principes, et, dans ce désarroi, les doctrines idéales de justice paraissent devoir prendre une nouvelle force” (p. 66).

We quoted H. Sidgwick above as testifying to a common conviction that the workman has a right to a living wage which will keep him in decent comfort.

This, too, is a return to Catholic principles so beautifully set forth by Leo XIII in his encyclical on the condition of labor. On this point M. de Tarde says: “A l’opposée de la conception des économistes, celles de saint Thomas et celle des trade-unionistes anglais demandent le fair wage, le living wage. C’est de ce côté là que penche la conscience moderne” (p. 256). Perhaps the most interesting portion of his book is where M. de Tarde outlines the theory of price which is coming into vogue. According to this theory, value is not something which is inherent in an object, it is not crystallized labor, as Marx and his followers asserted. Neither is it, ordinarily at least, the result of agreement arrived at through the competition of buyer and seller. Values and prices are not settled by individuals, still less are they a compromise brought about by competition between the different values in use of buyer and seller. Exchange values are settled in society and by society; they express the social judgment as to the equivalence in social value between a commodity and its price. “Au contraire les jugements de valeur, qui influeront sur l’échange, seront plus habituellement d’une part, celui que l’acheteur suppose chez son vendeur; d’autre part, celui que son vendeur suppose chez son acheteur. Ce sont des jugements moyens de vendeurs et d’acheteurs qui sont pris en considération, c’est-à-dire des jugements basés sur des désirs moyens et des croyances moyennes. Ainsi, la valeur qui sert de fondement le plus souvent à la prétention de chaque échangiste, c’est la valeur collective, celle qui est commune à tout un groupe. C’est celle-là, notamment, que le vendeur prévoit et calcule avant de fixer son prix de vente, et, s’il a intérêt maintes fois à faire descendre ce prix jusqu’au minimum du coût, c’est qu’ainsi, en abaissant le jugement de valeur moyen sur lequel il table, il s’adresse à un plus grand nombre de désirs, il étend sa clientèle.”¹⁵

¹⁵ A. de Tarde, p. 247.

If we enquire how the collective judgment concerning the value of a commodity is formed, we are entering on a question of social psychology. Groups and societies of men have their special desires, prejudices, opinions, like individuals. They express their opinion in a variety of ways as to the value of a commodity, as to the price of a horse, for example. That collective judgment gives exchange value to commodities, and it is its measure.

The same view has recently been defended in Germany in a pamphlet published last year by Dr. Lifschitz. It is, of course, the doctrine of the common estimation, the cause and measure of value according to the scholastics. But it is noteworthy that it is not, as Dr. Cunningham said in the passage quoted above, the result of the higgling of the market; it exists already and is presupposed while the higgling takes place; it guides and directs it, as M. de Tarde, resting on experience and observation, explains. There is reason to rejoice at the return of sounder views which we have tried to show and illustrate, not simply because these views are those of the scholastic theologians, but because they are truer and more wholesome than those which they tend to supplant. One theory favored usury, sweating, commercial dis-honesty, and oppression of the poor; while another formed the central doctrine of modern socialism. The true doctrine of value and price rests on justice, the only firm foundation of States.