From the July AD 2008
Our Lady of the Rosary
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On “the Just Price?”
[ Q&A ARCHIVES ]
On “the Just Price?”
Question: Doesn’t the Church have a moral teaching
on fair prices? Why don’t we hear anything from the pulpit about the way we
are being gouged at the gas pump and the grocery store?
Answer: Saint Thomas Aquinas has a section of the Summa
Theologica titled “On cheating, which is committed in buying and selling.”
The first article asks “whether it is lawful to sell an article for more than
it is worth?” Saint Thomas begins by excluding fraud from any lawful contract.
Then he distinguishes two types of buying and selling:
First, as considered in themselves ..
buying and selling seem to be established for the common advantage of both
parties, one of whom requires that which belongs to the other, and vice
versa.... Now whatever is established for the common advantage, should not
be more of a burden to one party than to another, and consequently all
contracts between them should observe equality of thing and thing. Again,
the quality of a thing that comes into human use is measured by the price
given for it, for which purpose money was invented.... Therefore if either
the price exceed the quantity of the thing's worth, or, conversely, the
thing exceed the price, there is no longer the equality of justice: and
consequently, to sell a thing for more than its worth, or to buy it for less
than its worth, is in itself unjust and unlawful.
Secondly we may speak of buying and
selling, considered as accidentally tending to the advantage of one party,
and to the disadvantage of the other: for instance, when a man has great
need of a certain thing, while an other man will suffer if he be without it.
On such a case the just price will depend not only on the thing sold, but on
the loss which the sale brings on the seller.....
On the other hand if a man find that he
derives great advantage from something he has bought, he may, of his own
accord, pay the seller something over and above: and this pertains to his
Saint Thomas’ fourth article questions “whether it is
lawful to sell a thing at a higher price than was paid for it?:
Augustine ... says: “The greedy
tradesman blasphemes over his losses; he lies and perjures himself over the
price of his wares. But these are vices of the man, not of the craft, which
can be exercised without these vices." Therefore trading is not in
... The other kind of exchange is
either that of money for money, or of any commodity for money, not on
account of the necessities of life, but for profit, and this kind of
exchange ... regards tradesmen.... [This] latter is justly deserving of
blame, because ... it satisfies the greed for gain, which knows no limit and
tends to infinity. Hence trading, considered in itself, has a certain
debasement attaching thereto, in so far as, by its very nature, it does not
imply a virtuous or necessary end. Nevertheless gain which is the end of
trading, though not implying, by its nature, anything virtuous or necessary,
does not, in itself, connote anything sinful or contrary to virtue:
wherefore nothing prevents gain from being directed to some necessary or
even virtuous end, and thus trading becomes lawful. Thus, for instance, a
man may intend the moderate gain which he seeks to acquire by trading for
the upkeep of his household, or for the assistance of the needy: or again, a
man may take to trade for some public advantage, for instance, lest his
country lack the necessaries of life, and seek gain, not as an end, but as
payment for his labor.
So, we see that Saint Thomas speaks both to the notion of
a just price, and to lawfulness of being in business to make reasonable profits.
Unfortunately, he does not speak to how the just price is determined. But, over
the centuries there have been several major theories as to what constitutes the
just price of an item.
● The first, held today mostly by Marxists, is that
the just price of an item depends on the amount of human labor that was put into
its manufacture. Presumably, this includes the labor to provide the raw
materials, and perhaps the labor expended to provide things like electricity or
water used in the manufacture. If a man takes a day to make an item, he is
entitled to a days pay for it. This definition of just price fails an several
What is a day’s pay? Who determines whether he lives at
the subsistence level or in luxury? Are his wife and children to be supported at
this same level? How many children? Is all labor equal in value? Does physically
exhausting labor count for more than light labor? Do working conditions count?
Does some level of skill get factored in? Education? What about the worker who
brings his own tools, or does not? What about the owner of the building or that
land? What about the organizers of the business?
If the just price is determined by solely the difficulty
of labor expended, that suggests a very high price for gravel cracked by hand
from huge boulders-particularly if it is done in the heat, the rain, and the
sun-particularly if it is done down-wind from the sewage treatment plant.
Conversely, by this theory, a bolt of fine cloth expertly woven in four hours
should cost half as much as a bolt of shoddy woven in eight hours by a
But how do you compel anyone to buy the high priced
pebbles or the bolt of shoddy material? A just price is of little significance
it there are no buyers. It is meaningless to say that the gravel justly sells
for $100 per pound if no one needs gravel, or if these needing it can buy it
from those who just dig nice smooth pebbles out of the creek and whose labor
equates to only $25 per pound.
This “labor theory of value” ignores the value
inherent in the labor of those with special skills or talents-say, the
physician, the computer programmer, the artist or the musician. It generally
ignores the owners of the land, buildings, tools, and machinery used in the
manufacture. It fails to recognize that things like skyscrapers, suspension
bridges, and symphony orchestras do not come into existence without people who
organize, and who may do so with very little of what we usually refer to as “labor.”
● If we go back to Saint Thomas’ time we find a
few other methods of fixing a “just price.” One of them was custom: “a
head of lettuce has always exchanged for two eggs” or “a suit of clothes
should cost about two silver shillings.” Money had been scarce since the
barbarian invasions, and was just coming back into widespread use in Saint
Thomas’ time, so barter was common.
The problem with custom setting the “just price” is, of course, that it
utterly fails to take account of current conditions. Weather, war, pestilence,
and blight can change the availability of goods very quickly. What no longer
exists or is far more difficult to obtain simply cannot be traded at the low
customary rate-What has become easier to obtain, perhaps through technology,
will not be purchased at the high customary rate-new arrangements must be made,
or there will be no trade at all. Saint Thomas would have seen the justice in
● In Saint Thomas’ time there were also prices
fixed by “authority.” Towns sought to regulate the cost of goods and
services. Guilds banded together to enforce the price they felt they deserved
for their work. Kings, counts, and manor holders regulated products which they
perceived to be essential to their realm. In modern times governments have felt
called to set similar regulations, often with disastrous results-the disaster
being proportional to the importance of the thing regulated, and the number of
regulations put in place. (The best modern example is “rent control” whereby
municipalities have made housing unavailable at any price by setting maximum
apartment rental rates without regard to the housing market.)
While the lord of the manor may be in close enough contact
to know what is available to and what is needed by the people on his estate, the
King, whose territory is far flung, most certainly is not. But even when price
regulations are made for apparently good reasons, they very often ignore the
longer term consequences.
If the government dictates too high a price for something, few or none will buy
it. If the government dictates too low a price for something, few or none will
furnish it. The only way for the government to enforce an abnormally high or low
price on something is by fine or imprisonment.. Even crazier things happen when
the government tries to change prices by debasing the currency, something quite
popular in our own time, again under the coercion under the guise of law.
A Spanish Scholastic, a successor of Saint Thomas, Juan de
Mariana, S.J. (1536-1624), addressing both the regulation of price and
debasement of the currency, wrote:
If money falls from the legal value, all goods increase
unavoidably, in the same proportion as the money fell, and all the accounts
Only a fool would try to separate these values in such a
way that the legal price should differ from the natural. Foolish, nay,
wicked the ruler who orders that a thing the common people value, let us
say, at five should be sold for ten. Men are guided in this matter by common
estimation founded on considerations of the quality of things, and of their
abundance or scarcity. It would be vain for a Prince to seek to undermine
these principles of commerce. 'Tis best to leave them intact instead of
assailing them by force to the public detriment.
● Father Mariana was clearly hinting at the only
rational way in which fair prices can be determined: by bringing buyers and
sellers together in an unrestricted market, allowing them to strike a bargain
agreeable to both, and allowing them to denominate that bargain in money of
constant value. The seller who demands too high a price will have no buyers, and
will be replaced by competitors willing and able to sell at a lower price. The
buyer who offers too little will find no sellers, or will offer more until one
In a truly free market, in which many buyers and sellers
participate, there are no monopolies or restraints of trade-prices held
artificially high can only last until someone takes advantage of them to enter
the market at a lower but adequate price. The monopolies and restraints on trade
we see in modern economies are those conferred by government power on those who
“work the system” to circumvent the free market.
The just price is the market price. Why? Because, as Saint
Thomas would require, it serves the common good. When trade is conducted at the
market price, no one is coerced, the maximum number of buyer’s and seller’s
needs are met, and the means of production run at an optimal level. If the
market price is tampered with by tax or subsidy, by wage or price controls, the
balance is disturbed and goods go unsold, or goods are unavailable, or
purchasing power is eroded by inflation.
A price above or below it is charity to the seller
or to the buyer-charity is a good and commendable thing, but it differs from
justice, which must always be observed; while charity is the occasional virtue,
practiced on behalf of those unable to see to their own needs by those who have
been able to earn surplus goods.
Mariana’s other point-“If money falls from the legal
value, all goods increase unavoidably, in the same proportion as the money fell,
and all the accounts break down”-is the other part of the “just price”
If a contract is negotiated at a particular price, the
seller is defrauded if the value of the money goes down (more likely), and the
buyer is defrauded if it goes up (less likely). Everybody holding money in
reserve-buyers and sellers-is defrauded by the devaluation. The loss is the same
whether the intent to debase the currency was based on a good or a bad
reason-and debasement is so virtually unavoidable in modern money systems that
it is hard to distinguish loss from fraud.
Coins can be devalued by filing off the edges (that is why
someone invented ridges), or by minting them with less precious metal content.
Few governments in monetary history have been able to resist the temptation-by
taking gold or silver enough to mint ten coins and minting eleven, one can be
put back into the treasury.
Paper money is far easier to debase. The underweight coins
can be found by weighing them-but one paper note looks just like any other. And
most money today isn’t even paper, but electrical impulses on a computerized
ledger, spent into existence, and further multiplied by fractional reserve
banking. Virtually every introductory economics textbook explains the method by
which Central Banks create money-few such books explain the implication-that the
more money created out of nothing, the less each monetary unit is worth.
● ● ●
So what is the relevance of all this to the question about
the morality of gasoline prices?
Well, that price, like all other prices is a function of
supply and demand, and the value of the currency in which it is purchased. What,
then, are the factors of supply and demand, and what is the currency currently
● Supply: OPEC is currently keeping oil output
constant, refusing to pump additional supplies.
● Supply: US Domestic production 1955-1990 ranged
from 200 million to 280 million barrels per month. Now at about 160 million.
● Supply: US coastal and Alaska National Wildlife
Refuge drilling is restricted or forbidden.
● Supply: War and rumors of war, the build up of
arms, and threats of war have destabilized the Middle East. On one day in early
June, oil jumped by $11 a barrel when an irresponsible threat of attack was made
● Supply: Support of oppressive regimes in the
middle east contributes to the danger of violence or revolution, with further
disruption of oil supplies.
● Demand: Large underdeveloped economies like China
and India have “come of age” and bring very large new demands to the market.
US demand has dropped, but is no longer the controlling factor in the oil
● Demand: Alternative energy development hampered by
socialist economics, ecological concerns, and peoples’ need to eat grains that
could be turned into fuel.
● Taxes: About $60 billion annually (almost always
higher than oil company profits). This does not include corporate taxes paid by
oil companies, but are paid directly by consumers at the pump.
● Taxes: Government officials threaten a “wind-fall
profits tax on oil companies. Such a tax would produce no oil whatsoever, and
would be an incentive to American companies to raise prices or move out of the
● Inflation: A policy of monetary debasement, paired
with deficit spending, continually destroys the buying power of the dollar,
while adding to the national debt which must be serviced with interest payments.
● Inflation: Monetary debasement finances wars
without the warning sign of tax increases. We pay not only at the pump, but in
the loss of human lives and limbs.
● Debt: The national debt is currently a bit over
$9,400,000,000,000, growing about $1,580,000,000 each day. Your personal share
of the debt is about $31,000 or $124,000 per family of four.
As a percentage of what the nation produces (GDP) the debt has increased from
35% in 1975 to 64% in 2005.
● ● ●
Are these moral issues? Setting the “just price” at
the intersection of supply and demand is morally correct. The currency
debasement certainly is not. Nor is war or posturing for war in all but the
desperate need of self defense. Using less oil or developing greater reserves,
or finding alternative energies might also have a moral dimension-these are
things that need to be thought out with regard to long term consequences.
In our society, the solutions to these various problems
can only come from the efforts of concerned and educated citizens making their
demands known to their elected representatives. Those representatives must be
required to act with economic prudence, seeking long term solutions rather than
politically popular, counterproductive policies.
 ST. IIa IIæ Q.77. http://www.newadvent.org/summa/3077.htm
 Q&A April 2005 www.rosarychurch.net/answers/qa042005b.html
 MUST READING: Henry Hazlitt, Economics in One
Lesson (New York: Three Rivers, 1979 edition.
 Jesus Huerta de Soto, Juan de Mariana: The
Influence Of The Spanish Scholastics http://mises.org/about/3238