What Are Just Prices?

We all have strange and contradictory wishes concerning what prices should be. We are outraged at what is happening to the price of gas and food. We don’t think they should go up. In real terms, we want them to fall, and they have fallen in the last decade and a half. That’s a good thing, right? That’s how the world should work.
But housing? Now, that’s a different matter. When the prices fall, people freak out. It’s like the end of the world. How is it possible that my own home would fall in price? That’s not the way the world should work! Everyone knows that house prices are suppose to go up, up, up — always, without fail, until the end of time.
Same with stocks. We want to open the Web page that lists our portfolios and see the prices higher and higher all the time. When they fall, we flip out and demand justice.
But let’s stop and think about how peculiar this is. What kind of theory of the world insists that houses and stocks always go up in price, whereas gas and grain always go down? That doesn’t really make sense. A price is not set by natural law, nor are price movements intended to follow a preset pattern like the movements of stars. They are nothing but exchange ratios — points of agreement between buyer and seller. They reflect many factors, none of them fixed parts of the universe.
So why do we expect some to rise and some to fall? It all depends on whether you are in the position of a producer or a consumer. As homeowners, we are in fact “producers” of our home — that is to say, we are holding it with the expectation of someday offering it for sale. The same is true of our stocks. We own them, so of course we want the price to go up. Then we can sell them at a profit.
On the other hand, with things we intend to buy — things like gas and grain — we want the price to be as low as possible. We want the price to fall. That way we save resources.
So what’s at work here is self-interest. Think of the same situation from the point of view of someone who is a first-time house buyer. Does this person want high prices or low prices? Of course the answer is obvious: He wants the lowest price possible, so for him this “housing bust” is not a bust at all. It is a boon. But once this person becomes a homeowner, matters change. Now he wants prices to rise.
Think of the gas-station owner. If it didn’t affect how much he sold, does this person want prices to rise or fall? Of course he wants the highest prices possible.
I recall once dickering with one of those insufferable car salesmen. I had my eye on some car and I said I couldn’t afford it. He asked me how much I wanted to pay for this car. I said $0. He looked at me like I was crazy, but I was only telling the truth. I added that I know how much he wants me to pay: a trillion dollars. And he reluctantly agreed. So how does the person who wants to pay $0 and the person who wants to get $1 trillion come to agreement? You find some meeting point in between, the point at which the car is worth more to me than the money I will give for it, and the money I will give for the car is worth more to him than the car. The resulting terms are called the price.
It’s the same in all markets. We can see that it is perfectly absurd to attempt to fashion national policy around the interests of only one party to an exchange. To try to keep house prices high and rising cheats the first-time buyer. To keep them low cheats the current owner. To keep grain prices high helps grain producers but hurts grain consumers. Some gas companies might like high gas prices, but consumers hate them. On the other hand, gas prices forced lower by dictate might thrill consumers, but producers might end up hurting so much that they shut down. That helps no one.
The only real answer here is to let the free market rule, which is another way of saying that people should be free to come to their own negotiations about the prices they are willing to pay for this and that. Those points of agreement should be as flexible as human valuation itself. That is to say, we should be free to change our minds, with each exchange taken as an end in itself, with no bearing on future points of agreement.
This is not only fitting with the needs of freedom — any attempt to force prices to do this or that does in fact impinge on our freedom to negotiate — but it is also essential to a well-functioning economy. That’s because the prices are heavily influenced by factors such as resource availability, the subjective valuations of consumers, and the profitability of the undertaking in light of accounting costs. In the end, the books have to be in the black. The prices that are accepted in the market must sustain this state of affairs. Even in mega-industries like oil, the difference between revenue and expenses can be surprisingly thin. Even small regulatory and tax changes can drive companies of all sizes to bankruptcy.
Prices are crucial to the wise apportioning of resources in a world with unlimited wants and limited needs. Prices affect the way in which we use things, whether conserving them or throwing them away. You will note that higher gas prices change the way you make judgments about going places and doing things. This is a good thing. They signal the need to conserve — and without unworkable mandates from government. And from a producer’s point of view, prevailing prices provide crucial information concerning the forecasting of future profits, and hence today’s investment decisions.
Now we must address the matter of justice. We think we know what a just price is, but do we really? And what actually constitutes justice in prices? What comes first to my own mind is the Parable of the Treasure in the Field. An unknowing landowner is just living day to day with no knowledge that there is a treasure in the backyard. Some other guy, however, has knowledge of the treasure, so he sells everything he has, knocks on the owner’s door, and nonchalantly says, “You know, I would be glad to buy your property.” The owner sells.
But let’s be clear here: The owner did not know that there was a treasure back there. Nor did the buyer say a word about it, lest the price he had to pay go sky high. Today, people might say that the owner got ripped off. But Jesus doesn’t say this. He holds up the buyer as wise and moral. Interesting, isn’t it? Is there justice in this exchange? Most certainly. And why? Because they agreed voluntarily. That’s all there is to it.
There is no way to observe an existing price and declare it just or unjust. As St. Bernardino — a shrewd observer of economic affairs — said: “Water is usually cheap where it is abundant. But it can happen that on a mountain or in another place, water is scarce, not abundant. It may well happen that water is more highly esteemed than gold, because gold is more abundant in this place than water.”
The Late Scholastics, followers of St. Thomas Aquinas, all agreed that the just price has no fixed position. It all depends on the common estimation of traders. Luis de Molina summed up the point: “A price is considered just or unjust not because of the nature of the things themselves — this would lead us to value them according to their nobility or perfection — but due to their ability to serve human utility. But this is the way in which they are appreciated by men, they therefore command a price in the market and in exchanges.” (For more on the views of the Schoolmen on prices, see Faith and Liberty: The Economic Thought of the Late Scholastics, by Alejandro Chafuen.)
Now, there are ways for a price to become a matter of injustice. It can mask fraud. The prices can result from or be influenced by some act of force, such as price controls or taxation or restrictions on supply and demand. Behind each of these we find coercion, a body of people who are mandating or restricting in a way that is incompatible with free choice. Arguably, this is not just.
We can conclude, then, that to the extent we complain about unjust gasoline prices, we need to look at the restrictions on refineries or exploration or drilling, or examine the role that high gas taxes have in pushing up prices beyond that which they would be under conditions of free exchange.
And as for those who believe that all prices should move in ways that benefit their own particular economic interests at the expense of everyone else, don’t confuse your agenda with a matter of justice. Prevailing prices in a business-based economy are a reflection of cooperative arrangements involving people with free will.
Jeffrey Tucker

By

Jeffrey Tucker is managing editor of Sacred Music and publications editor of the Church Music Association of America. He writes a bi-weekly column on sacred music and liturgy for Crisis Magazine and also runs the Chant Cafe Blog. Jeffrey@chantcafe.com

  • Francis Wippel

    Great article, Jeffrey. In a nutshell, it

  • jeffrey

    So if you got to the end of this article, you are a bit unusual because that implies you are slightly intrigued by economic reasoning. Most people figure that economics is some sort of trick imposed by eggheads to confuse us about the merit of government management. Others might think, well, what you say is true enough because economics is rather narrow and irrelevant to the larger issues of life. Actually, in fact, economics is central to the whole of life on earth and every educated person needs to study it and understand it. So, this is just a note to say thank you for reading to the end, and I do hope you will continue to think about these issues!

  • Scott Hebert

    I feel that the article would have been better served with having the issues of justice at the beginning instead of a retelling (and an astute one) of the law of supply and demand.

    This is odd, but I am becoming more and more Libertarian in my views, and certain points over at mises.org have resonated with me on a very deep level. Democracy and a free market economy go hand-in-hand, and one does not really ‘work’ without the other.

    The points made here are very cogent, and make proper use of the term ‘free choice’. Very edifying.

  • David W.

    …as Orwell pointed out in his critique of FA Hayek, that in all competitions, somebody wins them. Who is to say that the businessman is necessarily more or less benevolent than a government? I’m not saying the government should fix prices, but I find the Libertarian model to be just as absurd as the Communist….Both Laissez Faire Capitalism and Communism are materialist philosophies, reducing people to economic units…as labor to be bought and sold, or a cog to plug into a command economy. Two wings of the same Heresy…

  • Christian

    “Who is to say that the businessman is necessarily more or less benevolent than a government?”
    Speaking as a businessman, I’d say the difference is that I have to compete against other businesses for the customer’s business- the government doesn’t have to.
    In my experience, benevolence doesn’t enter the picture. The customer just looks for the best deal.

    BTW, the example of rising home prices strikes “home” for me. My house is paid for, and I have 5 kids 16-31. Because I want each child to be able to afford a house, I’m not enamored of an ever rising market.

  • Francis Wippel

    “Who is to say that the businessman is necessarily more or less benevolent than a government?”

    I work for a Healthcare information services company, and we interact with CMS, the Center for Medicare and Medicaid Services. CMS has no concept of ‘customer service’, which in one sense is understandable because they don

  • David W.

    …does that mean that businesses don’t have a social responsibility?

    And I don’t advocate government control of everything, I just find the “Free Market will fix everything” argument to be flawed, to put it mildly. I see nothing conservative or desireable about Wal-mart coming into a town and putting all the smaller businesses out of business. Nor do I find it particularly moral for businesses to profit on other people’s misfortunes or struggles…IE the Oil companies or people who are in the “Foreclosure Racket”…or banking practices that are Usurious.

  • Christopher Chapman

    I agree with much of what is written by Jeffrey but it still must go deeper. Those who have wealth have a serious-very serious obligation- to use it for the welfare of their brother and sister.
    I am no fan of the government dictating these things although the principal of subsisdiarity would definitely include the machinations of local government, especially the government of the each family. There is a problem when everybody just says that it is just the law of supply and demand working itself out, when many people begin to suffer because of that “law”. There are many higher laws which must trump that! Morality always trumps economics although it too must be congnizant of how economics work.
    It may be true that some gain a great deal because of the law of “supply and demand” but one’s responsibility increases exponentially as one gains more and more. There are many admonitions against the accumulation of wealth and the very dire one that “the love of money is the root of all evil”.
    The western world has a real problem with greed-it may be the case that Senators hauling Oil Execs up in front of them to grandstand is foolish and superficial-but we cannot explain away one of the 7 deadly sins by blindly repeating it is the law of “supply and demand”. We need deeper analysis and deeper commitment to the Gospel and the laws of human nature.
    This dismissal of the issue and the blind faith of laissez-faire economics does not do justice to the problem. It is merely the flip-side of what the Senators have done. Western society is sick unto death and our love of money is one of the main symptoms.

  • David W.

    …you hit the nail on the head. Morality must ALWAYS trump profit and economics, and that I believe was the message that Pope Leo XIII was emphasizing, and subsequent Popes have reaffirmed. The attitude that businesses who engage in gross practices will be called into account by the “consumer going elsewhere” doesn’t always play quite as the theorists would have you believe. Self-Interest often overrides morality or sense, and while I don’t advocate the government confiscating the “means of production”, I do believe the government has a policing role in such things. In the pure Free Market model, the only responsibility a business has is to deliver profit to its shareholders/owners…a false assumption.

  • Rob H.

    “In the pure Free Market model, the only responsibility a business has is to deliver profit to its shareholders/owners…a false assumption.”

    But “how” does a business deliver profits? In a Free Market they compete to provide the best product/service at the lowest cost. Prices are set through voluntary exchange and BOTH parties win: the seller values the money received more than the good/service sold, and the buyer values the good/service more than the money he spends. Otherwise the transaction does not take place. There is absolutely nothing immoral about that, is there? I’m not sure what is meant by “gross practices”, but in a Free Market there are still laws against fraud. Government’s only role should be to protect both parties from fraud. Otherwise, when government interferes, some people benefit at the expense of others. Coercion and force (in the forms of taxation, imprisonment, subsidies, price controls, etc.) are substituted for voluntary exchange. How is this in any way preferable to a system where both parties win?

  • Eponymous

    Jeff – For the most part, I agree. If only we had a free market in the United States. Our economy is more akin to corporate socialism than free market capitalism. But that’s another topic.

    And while I agree, I cannot accept the idea of a completely unregulated free market. For an example of what can happen in that circumstance look to the fincanical and credit crisis currently playing out around the globe.

    And I don’t think I’m willing to limit the government’s role solely to preventing fraud. There are market failures and other non-fraud issues that have to be controlled. But aside from that, yes, a free market with few regulations and strict enforcement is the best we fallen creatures can hope for.

  • Scott Hebert

    There is nothing inherently moral about business practices. There is nothing inherently immoral about them, either.

    OTOH, it can definitely be argued that having your money forcibly taken away from you (e.g., government taxes) and given to someone else is immoral.

    If I can make a product for $2, and everyone else must spend $3 to make it, there is no moral imperative to ‘pass this savings on’ to my customers. I could charge $4 while everyone else charges $5, and most likely get a certain amount of market share from it. However, if I chose to charge $4.50, I have not committed a sin. In fact, as long as I accurately portray my product and its capabilities, I could charge $100 for my product, as opposed to everyone else’s $5, and not worry in the least about the moral issues.

    Now, from the perspective of profit-maximizing, my price should really depend on the supply I have. Given a sufficient quantity of sales, keeping my price as low as possible would result in the maximum profit.

    Thus, one can argue that it is economic principles, and not moral principles, that will result in lower prices and better quality.

  • Rob H.

    “…I cannot accept the idea of a completely unregulated free market.”

    I think it could be reasonably argued that the “fincanical and credit crisis currently playing out around the globe” was brought on primarily because of government interference, not a lack of regulation. Central banks around the globe already have tremendous control over the financial markets. I think it would be hard to argue that the financial markets are an example of an “unregulated free market”.

    I’d be interested to hear an example of a “market failure” that requires government oversight.

  • Eponymous

    Rob – I agree that central banks are meddlesome. My point was that the absence of regulation and/or insufficient enforcement of regulations related to investment banking activities (not including mortgage lending, which would likely fall into the fraud category) in the United States likely led to the creation and dissemination of billions of dollars of worthless investments.

    As for market failures, I’m thinking monopolies, externalities, collective action problems, and other things arising from the fact that we live in a real world of transaction costs and imperfect information, and not in an economic model.

    I’ll concede that if you implemented the pure free-market vision in its full theoretical glory most of the market failures would be rectified. But I don’t believe we could ever hope to achieve more than a fraction of the full glory, and as such, regulation will always be necessary.

  • Rob H.

    I’ll agree that the real world does not, nor will not, offer us the opportunity to witness the effects of a pure free-market economy. I’m just weary of the ability of regulations, however well intended, to ever actually accomplish what they set out to do. I think the problems associated with monopolies, externalities, and collective action arise in large part from government action in the first place. I fail to see how additional government action can be relied upon to correct them. Don’t government regulators face the same transaction costs and imperfect information problems that supposedly trip up the free-market?

    In your example of the investment bankers, why not let the holders of the worthless investments suffer losses? Investing itself involves risk. If due dilligence wasn’t done prior to purchasing the securities, that is the fault of the investor. If they are allowed to fail this time, won’t that prevent investment bankers from peddling those worthless investments in the future? Isn’t this an example of how the markets can punish, and correct, the bad apples far more efficiently than regulators can?

  • R.C.

    David:

    I respectfully offer a rebuttal to your earlier post:

    DavidW wrote: …as Orwell pointed out in his critique of FA Hayek, that in all competitions, somebody wins them.

    Yes. But in the free market, competition is derivative and not always unhealthy. It’s not the core of the system.

    The core of the system is free will and responsible decision-making. Two people transact only because each believes he will be better off when the transaction is over. It is voluntary: A reflection of their moral priorities. And if both are correct, then society as a whole is wealthier when the transaction is complete. With lots of transactions like these, everybody wins!

    As for competition, it comes in two forms: Healthy and unhealthy. If we compete in a friendly way to outdo each other in excellence of craft, or piety, or service, or even a game of racketball, each knowing we thereby assist the other, it’s hardly a bad thing! The same is true between businesses and consumers when they have right attitudes.

    Unhealthy competition only arises in the sense that, if I make wiser transaction choices than you, I’ll be wealthier. If you regard all of life as a race to get wealthy (or worse, to drive me into poverty), then of course you’ll regard my success a bad thing! But in that case the problem is you, in two ways: (1.) You need to make better choices, and (2.) Your philosophy of life is wrong.

    DavidW wrote: “Who is to say that the businessman is necessarily more or less benevolent than a government?”

    I’ll say it. The businessman (assuming he is not a crook or liar) asks you to voluntarily buy his goods and services. His offer respects and expands your free will. He is not permitted to use force to achieve his aims.

    The government, by contrast, is that organization in society which *always* uses force, or the threat thereof, to achieve its aims. It overrides the free choice of the person by incapacitating him or subjecting him to fear.

    Government, then, is a necessary evil. In a perfect world, there will still be “trade” of some kind, for individuals will still have blessings to distribute and the recipients, some choice in which blessings to accept! …but there will be no need for government, for there’ll be no need to use force to make people do what is right.

    DavidW wrote: “I’m not saying the government should fix prices, but I find the Libertarian model to be just as absurd as the Communist.”

    In one sense I think you’re right: They both tend toward a fanciful utopian view of what can be accomplished in a fallen world.

    But in another sense I thing Communism is obviously worse, for its creed specifically advocates the use of force against property-owners, whereas Libertarianism vows, “I will not, except to defend the innocent, initiate force or fraud against another, or ask my representatives to do so on my behalf.”

    Of the two, I know which one I regard to be more Christlike!

    (continued next post…)

  • R.C.

    Continuing my rebuttal, you state:

    DavidW wrote: “Both Laissez Faire Capitalism and Communism are materialist philosophies, reducing people to economic units…as labor to be bought and sold, or a cog to plug into a command economy.”

    No. Communism is a materialist philosophy, which is why it advocated atheism by force. And that is also why it indulges in eschatology (eventual classless society, following the overthrow of the capitalist oppressors): It tries to be a salvific faith, saving the world from class divisions.

    But Laissez-Faire Capitalism says: Individuals are free-willed. (Correct philosophical reasoning leads from this inescapably to such conclusions as “souls exist” and “moral decisions matter”; these ideas are obviously not foreign to Catholics!)

    Laissez-Faire Capitalism then says, “Allow people to do as they wish so long as they do not thereby violate the rights (that is, impede the ability to freely make choices) of others, and so long as they make wise and good decisions, a wise and good society will result from the sum total of those decisions. If, however, their decisions are unwise or evil, then of course the net sum of their decisions will also be evil.”

    Laissez-Faire Capitalism, then, depends upon people (overall) making more good choices than bad. This will be true, and will therefore produce a good society, anywhere where the Church’s moral teachings hold sway — and Laissez-Faire Capitalism, unlike Communism, has nothing to say against those teachings.

    Of course, in a place where the Church’s moral teachings are suppressed, then the sum of the decisions of individuals will be less good, and the likelihood of producing an evil society, greater.

    The Free Market, then, needs Christianity to inform the consciences of its participants. And this should be no surprise, as some of the most famous advocates of freedom have warned us that such governments are only suited to governing a religious people.

  • R.C.

    Christopher Chapman writes:

    Christopher Chapman wrote: I agree with much of what is written by Jeffrey but it still must go deeper. Those who have wealth have a serious-very serious obligation- to use it for the welfare of their brother and sister.

    Yes, yes, yes!

    Government, through welfare programs and redistributionist taxation, has usurped the proper role of the Church and of individuals: Our obligation to help the needy.

    Just for giggles, I propose the following:

    (1.) Abolish social safety-net programs;
    (2.) Reduce taxation by the amount previously used for social safety-net programs;
    (3.) Let every Christian find out his Income Percentile and his Wealth Percentile. (That is, what percentage of the population makes less than he, and what percentage of the population has less than he, respectively.)
    (4.) Let every Christian take his Income Percentile, divide it by three, and give the resulting percent of his income to the poor (directly or indirectly through Church-managed programs) each year.
    (5.) Let every Christian take his Wealth Percentile, divide it by ten, and give the resulting percent of his wealth to the poor (directly or indirectly) each year.

    The result of items 3-5, in practice, would look like this:

    Joe Smith is in the 39th percentile of wage earners, and the 30th percentile of wealth possessors. So, following normative Christian teaching, each year he gives 13% of his income and 3% of his wealth to the poor.

    …or this…

    Bill Gates is in the 99th percentile of wage earners, and the 90th percentile of wealth possessors. So, following normative Christian teaching, each year he gives 33% of his income and 9% of his wealth to the poor.

    Yes, yes, I know: Hilarious, isn’t it?

    Yet who can argue that this is how it ought to be? (That’s why the above is “hilarious” with a bitter sort of laughter.)

    The problem of the poor is not that we don’t have enough welfare programs. The problem is that we don’t tithe (and then some) as we ought.

    Yet we know the teachings. “From he to whom much is given, much is expected.”

    Does anyone not agree that, if Christians were only to live according to Christ’s teachings in THIS ONE AREA, the need for government assistance would be utterly non-existent? And furthermore, that the Church’s role as “salve” for society would be amplified and vindicated?

    By government’s usurpation of the Church’s role in education and almsgiving, the Church has been marginalized into a sort of social club for people with shared metaphysical beliefs.

    You want the Church to be relevant again? Then stop supporting what is legalized theft (for no matter how noble the intent, taxpayer-funded welfare is still taking by force, authorized nowhere in the Constitution) and take up instead the banner of private charity.

  • bill bannon

    The essay neglects imbalances that are tragic in free systems. Doctors moving from third world countries to the US due to better pay here and leaving many people in the third world with far less doctors (Phillipines and India).
    Also he neglects to mention monopolies as something that comes into being where Governments are hands off business. We just had a collapse of world markets due to regulators either not doing their jobs or due to government not outlawing certain instruments like CDO’s which contained healthy mortgages and dangerous mortgages within one instrument which was then given ratings by ratings agencies which ratings were not truthful about the nature of the contents.

    Further a distinction must be drawn between necessities and luxuries….it hurts no one if a Monet is 23 million dollars but it hurts the poor if they are continually eating rice because protein in their country is high priced and if cattle farmers etc in that country seem quite well off.

    His use of Christ for the benefit of free markets is bizarre. Here is the passage in Matt.13…”The kingdom of heaven is like a treasure buried in a field, 24 which a person finds and hides again, and out of joy goes and sells all that he has and buys that field.”
    There is no indication that Christ is approving this as legit nor condemning it. Christ elsewhere talks of the unjust judge that gives into a woman because she harangues him constantly. Christ talks of a king whose feast is not attended by those invited and who then invites strangers and then throws one of them out for not wearing wedding garments. Christ talks of a landowner in Luke who requires return on his money when he returns and the non productive employee describes him thusly: ” you are a severe man; you take up what you did not lay down, and reap what you did not sow” to which the man agrees and says: “Why then did you not put my money into the bank, and at my coming I should have collected it with interest?’ (forbidden for centuries by the Church).
    Christ simply is not commenting on the moral character of His many parable people some of whom resemble God or good acts only in one very small aspect of what they are doing but not in all aspects.

  • bill bannon

    PS
    He forgot to tell us that the treasure/land buyer had found the treasure by trespassing and then rehid it on land on which he was trespassing.

  • Harja

    Interesting column. As a person with both an M.Div and an M.B.A., I think I have a legitimate point of view.

    If one were to take the operation of the “Free Market” as stated by the author at its definition, one would be able to bid for every transaction one takes part in. When going to the service station, I should be able to negotiate the price of my tankful with the owner and not just pay the price that the sign indicates will be charged by the pump.

    The same holds for the grocery store or any other retail operation. Away with list and sticker prices! Bargaining and barter are the logical expressions of the free voluntary market.

    Of course this would require the staff of any store to be able to quote accurately the cost of the item for sale as well as the margin. The buyer should then be able to quote the size of his (her) income and wealth and what proportion is considered to be fair.

  • Avignon Days

    Harja
    You are so correct. I just bought olives, wine and smoked Gouda. Had I asked to see the wholesale list, I would have heard the cashier yell…”SECURITY”…lol.

  • Mary

    I don’t think we can take the parable of the field as a guide to economics. Anymore than we can take the parable of the Unjust Judge to mean that God needs to be bribed. The point of the parable is that the man was willing to sell everything else in order to get his hands on that treasure.

  • Mary

    On the duties of the rich: it might be wiser to remember one’s own. In particular that Envy is as much one of the Seven Deadly Sins as Avarice is.

  • Fr. Vincent Fitzpatrick

    “Just prices” is a meaningless phrase that has worked incalculable mischief.

    A “price” is a piece of information. To attach the adjective “just” or “unjust” to a piece of information is an absurdity.

  • georgie-ann

    “The Free Market, then, needs Christianity to inform the consciences of its participants. And this should be no surprise, as some of the most famous advocates of freedom have warned us that such governments are only suited to governing a religious people.”–R.C.

    agreed

    ************

    “If I can make a product for $2, and everyone else must spend $3 to make it, there is no moral imperative to ‘pass this savings on’ to my customers. I could charge $4 while everyone else charges $5,…”–Scott Hebert*

    and isn’t this what is happening now?,…”I” can use cheaper outsourced labor from China/India/Mexico, (Mexico, both here and in their own country), in the place of homegrown labor, and make the product for $2 instead of $3?,…(*i realize this was not Scott’s point)

    it appears to the untrained, uncalculating, observing, non-theoretical eye, that an “I” with power, (clout–financial or otherwise), can too easily rationalize–(in a mathematical, “bottom line” fashion)–becoming my brothers’ USER, as opposed to “being my brothers’ keeper,”…

    sad to say, the actual demonstrated cold “facts of the matter” ARE that we really really DO live in a very very fallen world,…and NO, we CANNOT trust our neighbor, the businessman, OR the government overseer,…so, other than praying, can someone/anyone out there, PLEASE suggest something more down-to-earth REALISTIC and practical, with regards to the situation at hand?

    so often, it sounds like “economics” afficionados just enjoy the broad definitions and theories that do not describe where the “common man” (which is MOST of us) fits in, in as pro-active and self-determining a way, as the moneyed elites,…

    if one cannot trust those “in powerful positions” (anywhere)–(isn’t that what “checks and balances” are supposed to be all about?)–it would seem that a certain amount of oversight and guiding principles would be in order,…

    the Bible says we are in this world, but not “of this world,”…we are not all called to be a St. Francis, but, as Christians, we are called to “be our brother’s keeper,”…(and as telecommunications have linked us all together worldwide, we become aware of so many more potential brothers and sisters, with political and economic disparities that are increasingly mind-boggling),…

    where DOES the interest of the common man fit into these kinds of discussions?

  • Martial Artist

    …that we cannot trust others. This is why there are two critically important conditions which must obtain in any society in order to have a truly free market. First, the Rule of Law must be rigorously enforced, i.e., the law must treat everyone equally. Second, there must be strong property rights which are strictly enforced.

    Given those conditions, a free market will produce the greatest benefit for the greatest number. In your example the person who can produce the product for $2 and sells it for $4 has, in point of fact, benefitted everyone who uses that product. And, so long as that maker is not using slave labor, the only reason he can do so, is that he has figured out that labor costs, and typically costs of living, are that much lower where his factory is. Do you somehow think the people in the country that are buying his products are better off for having to spend an extra doallare per unit? To think that is clearly misguided. As the living standards and costs rise in the country of manufacture, his prices will either go up or he will find a new location for his factory.

    I seem to detect a tone in your question that suggests you don’t realize that in a properly governed society (see the preconditions I cited at the beginning of this comment), in a truly free exchange, both parties gain from the transaction.

    Pax et bonum,
    Keith Töpfer

  • Martial Artist

    Your comment about Orwell simply demonstrates that Orwell was wrong and Hayek was correct. In a properly governed free market Rule of Law strictly enforced and strong property rights, two somebodies win, which is what Hayek (not to mention A. Smith, et al) demonstrated. Each party to a transaction, the willing seller and the willing buyer, want what the other has more than they want what they already have, which is why they are willing to exchange. Introduce external controls over the transaction and that entire complementarity breaks down. I don’t know if you have actually read Hayek, but your comment suggests a likely answer. Smith pointed out that the tradesman doesn’t operate out of any sense of altruism, but rather out his own self-interest. The importance of the Rule of Law and strong property rights is to establish an environment where all exchanges are among willing participants.

    Pax et bonum,
    Keith Töpfer

  • Fred S.

    The funny thing about arguments for or against the free market is that each of these positions misses something key. That key something is that when you are talking about national life, and the order of that life, you are talking about things political, economic and social. Two persistent errors from both liberal, and often conservative, camps are (1) a lack of understanding of the context of American life, and (2) a lack of understanding of the integration of the social sciences, in tandem with their “division of labor,” based on the nature of man in the light of being created in God’s image.

    First, national life takes place in the context of faith and reason, religion and morality. The Founding Fathers clearly stated that their experimental Republic would only succeed if the American people were a religious and moral people. The religion and morality of this people is that of the Old and New Testaments, and is thus more exclusive than religion and morals derived from being Monotheists.

    Second, the political, economic and social aspects of life are expressed not just in celestial values, but also in earthy practicalities. As I have said, each of these aspects is a part of the whole of national life, but this wholeness is balanced by a division of labor that allows each aspect to fulfill its particular mission and maintain its role according to its specific character and facilitates a complementarity amongst the aspects. Each aspect – political, economic and societal -impacts differently how the leadership, management and labor of institutions and organizations operates according to the function and character of its own.

    Thus, strict constitutionalist government liberates market capitalism by providing law and order (not “regulation”). Market capitalism generates wealth, which liberates filial society and philanthropy to serve all the social needs of the people. Filial society empowers government’s function by forming people to work with others for both individual and common good rather than solely for individual good OR common good.

    Somewhere along the line we have lost all sense of Aristotle’s clear point that politics is the subset of ethics, and not the other way around. In a modified understanding, the social sciences are a subset of ethics, and not the other way around. In practice, the USCCB has done a great deal to promote this confusion under the guise of promoting supposedly authentic Catholic positions in public policy issues. Yet they have promoted “higher” truths and the expense of “lower” ones. In the realm of strategy, tactics and logistics, you find no successful leader who employs strategy that is contrary to logistical realities. This the bishops have done, and become the dupes of the rising socialist order. They fail to recognize this clearly because of their departure from Tradition and their wanders on the paths of vanity and self-service.

    Unfortunately, a good amount of conservatives have also fallen into failure along the path of State because of vanity and self-service. Practicalities are so emphasized, almost to the point so sole-emphasis, that it is almost undiscernible how these practicalities fit into a greater context of a religious and moral nation. In their vanity and self-service, they have obliterated the higher truths in favor of the lower.

    And in each case, an obliteration of either higher or lower truths destroys the truth, which obscures the way we ought to act as a nation, thus diminishing our life to the condition of being a people trapped between two parties advocating ingenuine national lives, either of which will doom us to complete destruction UNLESS THE PEOPLE TAKE BACK THE FULL TRUTH AND LIVE THE WHOLE LIFE the Founding Fathers envisioned.

  • theorist

    Capitalism recognizes that there are problems in this world and that the whole life of man is directed towards solving these problems -whether they be political,moral, or spiritual. That economics therefore deals with all things human, should come as no surprise for it examines human life from the point of view of motivation and action. But since action is universal and cannot be denied without being affirmed, the theory of economics is self-evident and ranges over all action. As such then it takes the conclusions of ethics as handmaidens for serving its more abstract science in illustrating particular conclusions of its more general principles. Then the science of economics is half-practical and half-theoretical since it seeks to answer how abundance may be achieved by seeking to understand higher and more abstract truths like “why do people value anything” and so forth.

    Yet in the same manner, capitalism as a theory is far from impractical, for from general principles it reaches particular conclusions about tax rates, human communication, and even things like friendships and the moral sentiments. From a practical standpoint, capitalism emphasizes that the man on the street has problems in his life, at work, or with his health. At the very least he aims to buy lunch, read a book, or invent and create. At all turns the theory of capitalism asserts that people have problems -motivations, and that among these are the need to find solutions to these problems. This analysis no less leads to the derivation of supply and demand curves than it leads to the answer that the man on the street will try to find food and a comfortable place to read, etc. at the best terms. But as long as people act,the economist knows that this movement and change will occur and so long as people act, there will always be a sort of dissatisfaction or imperfection that man will try to improve and this is the principle difference between the theory of the economists and the other social scientists, and a difference which should not portray the former in a utopian light; namely, that there will always be disequilibrium in everyday life which humans can try to overcome in a more or less efficient way.

    To apply ethics to economics several pro-catholic conclusions follow. For one capitalism provides a just price to suppliers because whoever or whatever is being supplied can have a higher(than average)use-value for the buyer. The fluctuation of use-value in the consumer is what causes price fluctuations and that means that high prices are not unjust but are a reflection of the higher use-values which consumers have for a given quantity of supply. In the same way a just wage is produced. Indeed, the preference for the poor is fulfilled in free trade since the poor-as-consumer is the most willing to pay high prices while those who value the item lower refuse to buy -the hungry man is not interested that the price of yams has increased by 10cents, he is quite willing to pay it while the non-hungry would castigate the seller for his perfidy. While also in fulfillment of CST, the poor-as-supplier would be entitled to be paid a high wage. All of this fits with the ancient moral teaching that “nothing should be sold above its usefulness”.

    Most objections to capitalism then, seem to be against this constant flux and change and seem to confuse the unpleasantness of trying to change for the better (high prices, luxury items), with the problem itself (lack of food, lack of products). But in all truth, the regulation of markets cannot improve markets the reductio being, that if one were to totally regulate markets, than one would perfect markets. But total regulation existed in Russia, and that actually ruined markets -therefore the pro-regulation position is violated and it must be the case that regulation decreases market efficiency. This is why, oppressive governments have always presided over an impoverished people, while the removal of legal restraint, has only been the cause of general prosperity.

    hence there is no use for regulation in any endeavor,except what one would find in one’s family, tribe, and culture -and in fact, a final legislator may be considered as leading to greater immorality than the feared “license” of total liberty.

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