Market, Ethics and Price in Economy
In order to define the concept of price, let's start with a small example.
Many people know what it feels like to be exploited or "scammed" by a seller when buying excess ice cream at a tourist attraction.
Yet according to the prevailing economic theory there is no such thing as a robbery. It is simply price, simply market price, simply the price sold in the market.
For market economists, price has no moral dimension, all pricing is an automatic function of supply and demand.
Traders who seem to be overcharged are pushing the price to their limits. If they push prices more than people are ready to pay, people don't buy and traders have to lower it on.
Market economists think the only way to determine the price is the market, because nothing - not even gold - has its own value.
A freely accepted price scans the prices of the marketplace and sets it sharply, with the view expressed by Sicilian scientist Thomas Aquinas in one of the first studies of the market, Summa Theologica.
For Aquinas, a scientist, price was a deep moral issue. Aquinas recognized greed as a mortal sin, but at the same time saw that a trader's lack of profit incentives would deprive the trade of the goods he inherited.
Aquinas concluded that a merchant could demand a "fair price" that includes a reasonable profit but excludes sinful excessive profiteering.
This is fair price, honestly informed, it is the price that buyer agree to pay freely. The seller is not obliged to inform the buyer of facts that may reduce the price in the future, such as cheap spice cargoes from the dock in a short time.
The issues of price and ethics are very lively today, as both economists and the public are discussing the "fair price" of a CEO's bonus or minimum wage.
Free market economists and advocates of government intervention - whether for moral or economic reasons - continue to argue about the rights and wrongs of restricting pricing.
Who is Thomas Aquinas?
St. Thomas Aquinas was one of the greatest scientists of the Middle Ages. Born in 1225 in Aquino, Sicily, to an aristocratic family, he started his education at the age of five.
17 The earthly decided to leave it behind and join the union of the poor Dominican priests.
His family was so shocked that they kidnapped him on their way to join the priesthood and held him captive for two years.
The family gave up, let Paris go, and the tutelage of the scientist monk Albert the Great (1206-80) entered.
Aquinas studied and taught in France and Italy, and founded a studio general (a type of university) in Naples, Italy in 1272. Many of his philosophical works were very effective in paving the way to the modern world.
What is Fair Price?
The market needs the goods.
Merchants will `` supply goods if there is a reward (profit).
But it also has a moral dimension.
To ensure that prices are "unfair" ...
… .. profit should not be excessive, because greed is a sin.
… No fraud can be made in determining the value of the goods.
… The buyer must freely accept the price.
Chronological Discussions on Price
ONCE UPON A TIME
In Politics of 350 BC, Aristotle says that all goods can be measured in value by one thing - "need".
529–534 BC Roman courts protect landowners from being forced to sell "at great loss" below fair price.
THEN
1544 The Spanish economist Luis Saravia de la Calle argues that price will be prepared by "common guess" based on quality and abundance.
1890 Alfred Marshall maintains that prices are determined automatically by supply and demand.
1920 Ludwig von Mises argues that socialism will not work because prices are the only way to generate need.