Saturday, June 07, 2008

The Late Scholastics vs. the Austrian School on the Just Price

The view of the Austrian school, exemplified by Mr. Jeffrey Tucker -- What are Just Prices?

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 or accept 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 price is 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 resources. 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. Higher prices signal the need to conserve — and without unworkable mandates from government. And from a producer 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 land owner 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 what 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.

Dr. Chojnowski, Corporation Christendom: The True School of Salamanca

A number of Libertarians have felt the need to trace their ideas back to the established thought of Catholic Christendom. We can only speculate as to their motives. However, what is clear is this, within the second half of the 20th century and, even, into our own, there have been some Libertarians who identify nascent Capitalistic ideas (I simply identify Capitalism here as the economic form of Liberalism – not to be confused with American Leftism) as existing within the corporate organism that was Christendom, prior to the dawning of the Enlightenment. There are some more reckless Libertarian thinkers who would even state that, not only are there Liberal anomalies within the paradigm of historical Christendom, but rather, that Liberalism is the Christian civilizational paradigm itself. The recurrent focus of such Libertarian dreaming is the late Renaissance Spanish School of Salamanca and Sts. Bernadine of Siena and Antonino of Florence. The main issue, although not the only one, is the one of the just price. Can it be that the later Scholastics, as represented by the School of Salamanca, along with the two Renaissance saints known for their sermons on economic concerns, should be identified as early advocates of Liberal Capitalism due to their, supposed, insistence that the just price which must be upheld by Church, State, and Society at large, is simply the one which is assigned to a product due to the interplay of producer supply and consumer demand? If economic justice, at this most basic and essential level, is simply a matter of adhering, faithfully, to the laws of supply and demand, we can say that the view of these Catholic thinkers could, indeed, be characterized as an example of Early Economic Liberalism. If there were something more to justice than the simple end result of the interplay of the free will of producer and the free choice of the consumer, than their thought could not be denominated as a early form of von Misesian Neo-Liberal/Libertarian conceptions.

...

Our task can, also, be simplified if we can demonstrate, using the research of the Neo-Liberal scholars themselves, that the later Spanish Scholastics of Salamanca, along with the two above-mentioned saints, were fully within the great intellectual, social, and economic tradition of Catholic Christendom most particularly concerning the question of the just price. If the just price is formulated in a way, which allows for many factors other than the exigencies of supply and demand (i.e., whether there is a social and moral aspect of the determination of price) and, especially, if there is a role for the prince in the determination of market prices, than we can safely reject the notion that these Catholic scholars of the past accepted a paleo-Capitalistic conception of the determination of price and, hence, of the entire economic life of society.
...

F) Bernadine of Siena and Antonino of Florence: Saints Misconstrued

We ought be very much surprised when we find a Neo-Liberal scholar like Raymond de Roover focusing our attention on two great saints, St. Bernadine of Siena and St. Antonino of Florence. It is, first of all, surprising to see that they are termed, "The Two Great Economic Thinkers of the Middle Ages," when they lived their lives square in the heart of the blossoming Italian Renaissance. That these thinkers are acclaimed as far-sighted prophets of the goodness of Liberal Capitalism is also surprising, since their attitude towards economics itself could not be farther away from the mentality of a von Mises, who would hold the laws of private property and the "free-marketx to be adverse to the xheterogeneousx moral claims made by the divine and natural law. Here it would be useful to recall von Mises statement that, "In urging people to listen to the voice of their conscience and to substitute considerations of public welfare for those of private profit, one does not create a working and satisfactory social order [emphasis mine].x The only thing which the two great saints under consideration intended by their preaching and writing on economic issues was to xurg[e] people to listen to the voice of their conscience and to substitute considerations of public welfare for those of private profit.x They, also, held that only if such things were done, would a just and satisfying civil order be attained.

When we consider the moral teachings of St. Bernadine (1380 – 1444) as these relate to economic issues, what we are analyzing are 14 sermons, which are part of a larger collection of sermons entitled De Evangelio aeterno (Concerning the Eternal Gospel). These Latin sermons, as opposed to his Italian ones, were meant to be read rather than preached. Here we can see the continuation of a long tradition, echoed in our own age by men like Heinrich Pesch, S.J., of including economic questions within the larger framework of ethics. In these sermons of St. Bernadine (a Franciscan and the great apostle of devotion to the Holy Name of Jesus), we find the general teachings of the Church as regards economic life repeated anew. As de Roover himself admits, the condemnation of usury was a prominent theme in St. Bernadinexs writings. Just as was the case with the other Scholastics, St. Bernadine was "preoccupied with another set of problems [as opposed to questions of xhow the market operates"]: what is just or unjust, licit or illicit? In other words, the stress was on ethics: everything was subordinated to the main theme.x Both St. Bernadine and St. Antonino (Archbishop of Florence from 1445 to 1459), both frown upon acquisitiveness as leading to sin and eternal perdition. St. Antonino deals with the whole topic of market transactions in section of his Summa moralis that deals with the sin of avarice. Moreover, economics was discussed within the framework of contracts, as Roman law understood these. The virtues that regulated the individual and collective economic actions of men were the virtues of distributive and commutative justice (i.e., the State giving to its citizens "their due" and citizens "giving to each other their due"). Let us face it, the only xduex that the Libertarians allow is the absolute claim that each man has to have the government and his fellow citizens respect his, already demarcated, private property right. They forget what the Distributists remembered quite well, all men have a certain right to private property. Those who uphold the Social Teachings of the Catholic Church, better than their Libertarian antagonists, understand the role of private property in personal and familial fulfillment.

When we study de Rooverxs book on these two, putatively, innovative saints, we find ourselves at a loss to find a significant teaching that is not firmly rooted in the wisdom of the Catholic past or one which is not clarified, in a purely traditional way, by the later Scholastics of the School of Salamanca. As de Roover himself recognizes, St. Bernadine, like the Medieval Scholastics before him, understood price determination to be a social process. Price is not set by the arbitrary decision of individuals but collectively by the community as a whole. St. Bernadine makes this explicit when he states, xthe price of goods and services is set for the common good with due consideration to the common valuation or estimation made collectively by the community of citizens [emphasis mine].x According to de Roover, in the writings of St. Bernadine, there was xonly minimal analysis of changes in demand or supply as this affects prices.

With regard to the above question of price, as we found earlier with his analysis of the economic thought of St. Thomas Aquinas, de Rooverxs portrayal of the intellectual xinnovationsx of St. Bernadine is very forced and often involves the use of statements that do not at all prove his point, in fact, they often contradict it. One example is his citation of a single sentence, from the xsermonsx of St. Bernadine, which seems to indicate that the saint held to an idea of the xjust pricex which was convertible with the idea of xmarket valuation.x In support of this view, he cites St. Bernadino as defining the "just pricex as, xthe one which happens to prevail at a given time according to the estimation of the market, that is, what the commodities for sale are then commonly worth in a certain place."

As we have seen, however, with regard to this determination of price based upon "supply and demand" and "market conditions," there was a solid moral tradition, passing into late Scholastic times, in which it was considered perfectly reasonable that prices of certain inessential items were allowed to "float" freely, their value being determined by how much someone, who did not absolutely need the item, was willing to pay. De Roover himself seems to recognize that the language of "just pricex as "prevailing market pricex refers to just this situation and to these kinds of goods. And yet, that de Roover wants to insinuate that St. Bernadino equated the "just price" with the xone that happens to prevail at a given time according to the estimation of the marketx in all cases, is clear. With his usual hesitant definitiveness he says, xThis statement [about just price and prevailing market price], it seems to me, is so clear that it does not admit any other construction.x

If, as he seems to say, St. Bernadino equated just price with market price, all prices should, for justicexs sake, be subject to the free flow of market forces – any interference would be, according to this view, an interference in the market's setting of the "just price." That this is not St. Bernadinexs view is made clear, again by de Roover himself, when he admits that the Franciscan taught "prices may be fixed for the common good." Society, then, is in charge of setting prices. Who does not hear the echo of the entire economic ethos of Christendom in St. Bernadine statement that, prices may be fixed for the common good, "because nothing is more iniquitous than to promote private interests at the expense of general welfare."
Are the late Scholastics, being Catholic theologians, more in accord with the Catholic moral tradition or with the Austrian School?


Related:
Thomas Woods, Catholic Social Teaching and Economic Law: An Unresolved Tension
(An unresolved tension only for Catholics who are professed adherents to the Austrian School.)

From the Eunomia archives: Richert-Akin Debate on Pricing and Just Price
Ignatius Press: An Introduction to Catholic Social Teaching.
What is Catholic Social Teaching? | Mark Brumley | IgnatiusInsight.com
Neo-Conservatism: New Insights into Catholic Social Teaching, or ...
Brief Introduction to Catholic Social Teaching
Practical Distributivism: The Just Wage vs. The Just Income
The ChesterBelloc Mandate: Opposing the Austrian Heresy

THE JUST WAGE, 1750-1890 : A STUDY OF MORALISTS FROM SAINT ALPHONSUS TO LEO XIII / BY JAMES HEALY. The Hague : Martinus Nijhoff, 1966.

Georgetown University Press: Modern Catholic Social Documents and Political Economy, Albino F. Barrera, O.P.

CE: St. Bernardine of Siena
Bernardinus of Siena.; Sancti Bernardini Senensis ordinis ...
Sancti Bernardini Senensis ordinis seraphici minorum Opera omnia ...

No comments: