with Jan Gerber

Few economists today ask whether prices are just. This is due in part to positivism and efforts to remain “value-neutral,” but ultimately, economists no longer discuss just prices because advances in economic thinking make such reasoning intractable or irrelevant. For most folks, however, concerns about just prices still matter—especially regarding housing and medical prices, which many think unjustly high, and labor prices that many think unjustly low.

This essay explores the historic debate about what makes prices just and why economists by and large no longer ask that question. To be sure, much has been written on this topic over thousands of years. Here we simply highlight a few of the most important contributions to just price theory; those of Aristotle and Aquinas, the Spanish Scholastics of Salamanca, John Locke, and Etienne Condillac.

Aristotle (4th century B. C.)

Aristotle writes about economics in Book V, Part V of his Nicomachean Ethics and in Book I of his Politics, where he discusses the purpose of exchange, money, and lending. Aristotle argues that wealth, in terms of material goods, contributes to a flourishing life, but the pursuit of wealth does not. The art of acquisition involves gaining material goods for the sake of the household while the art of wealth-getting involves increasing one’s financial wealth for its own sake. The first is “necessary and honorable” while the latter is “unnatural” and “a mode by which men gain from one another.”

  • Aristotle describes just exchange in terms of equal or equitable gain:
  • It is plain that just action is intermediate between acting unjustly and being unjustly treated; for the one is to have too much and the other to have too little. Justice is a kind of mean…. the just man… will distribute either between himself and another or between two others not so as to give more of what is desirable to himself and less to his neighbour (and conversely with what is harmful), but so as to give what is equal in accordance with proportion; and similarly in distributing between two other persons.

An example may illustrate why one art is just and the other is unjust for Aristotle. Suppose you own an olive grove. Your land produces more than enough olives for you and your family to eat. But you lack grain for making bread. The art of acquisition involves trading your olives for grain. Aristotle understands that direct exchange (barter) might be difficult, and so you may sell your olives for money and then use that money to buy grain. This accomplishes the same end, exchanging your surplus olives for grain, more easily.

This action is just because you exchange similarly valuable goods—there is a kind of equity or equality in the exchange. Let’s say you sold a bushel of olives for $20 and used the $20 dollars to buy two bushels of wheat. At the point of exchange, your olives were worth $20 and the wheat was worth $20. Ultimately you exchanged similarly valuable goods using money as a neutral intermediary.

Contrast this with accumulating money through the art of wealth-getting. This art usually involves retail trade. Instead of starting with a commodity, you might start with capital—say $20. You use the $20 to buy a pair of shoes from a neighboring town. Then you sell the shoes in your town for $30. In making a profit of $10, you have acted unjustly. Presumably, the shoes were worth $20 when you bought them, yet you sold them for $30—meaning your profit came at the expense of the person who bought the shoes from you.

Aristotle suggests there is some kind of benefit or gain to be “distributed” between the buyer and the seller. Justice involves finding a fair or equitable way of splitting this benefit. The guides to a just exchange, then, are the market prices which reflect the supply and demand for goods and make them commensurate. The idea that people’s valuation of goods, and therefore their gain in exchange, was entirely subjective was missed by Aristotle and his followers well into the medieval period.

Thomas Aquinas (13th century A. D.)

Aquinas follows Aristotle’s reasoning while making the following innovations.

While it is still wrong to sell something for more than it is worth, it is not wrong to sell something for more than one paid for it. While Aristotle saw injustice in the shoe example, Aquinas recognized that one can do something productive or useful with a good that improves it in such a way that its value is higher, and so a higher price is still just. Transporting the shoes from one town to another represents a kind of improvement, as does any kind of labor performed on the good.

While this is a little more sophisticated than Aristotle’s account, it still relies on an “intrinsic” or “natural” value of goods—with a focus on the costs or input which creates value. Furthermore, Aquinas and other scholastics were also wary of profit. Some profit, a “reasonable” amount, was fine. But excessive profit could only be the result of injustice and exploitation.

For Aquinas, charging more based on the need of the buyer is exploitative and sinful:

  • If the one man derive a great advantage by becoming possessed of the other man’s property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer. Now no man should sell what is not his, though he may charge for the loss he suffers. [emphasis added] (Aquinas, Summa Theologica 2.77.1).

Because a seller does not own the buyer’s circumstances or needs, he cannot set his prices based on the severity of those needs.

So things stand in the 13th century. But by the 16th and 17th centuries, many scholars and philosophers began to challenge the Aristotelian-Thomist account of just prices and just exchange. Their later observations on value as well as the importance of market forces—supply, demand, money, etc.—are much closer to the modern economic way of thinking.

Spanish Scholastics (16th & 17th centuries AD)

Many important objections to traditional just price theory were raised by a group of thinkers known as the Spanish Scholastics or the School of Salamanca. These jurists wrote in defense of the rights of the indigenous peoples of America in light of natural law and introduced economic understanding to the realities and complexities of global commerce.

For example, Diego de Covarrubias writes of economic value:

  • The value of an article does not depend on its essential nature but on the estimation of men, even if that estimation be foolish. Thus, in the Indies wheat is dearer than in Spain because men esteem it more highly, though the nature of the wheat is the same in both places. (Grice-Hutchinson, 115).

Luis Saravia de la Calle has an even more penetrating critique of the just price reasoning we have seen:

  • Those who measure the just price by the labor, costs, and risk incurred by the person who deals in the merchandise or produces it, or by the cost of transport or the expense of traveling… or by what he has to pay the factors for their industry, risk, and labor, are greatly in error, and still more so are those who allow a certain profit of a fifth or a tenth. For the just price arises from the abundance or scarcity of goods, merchants, and money… and not from costs, labor, and risk. If we had to consider labor and risk in order to assess the just price, no merchant would ever suffer loss, nor would abundance or scarcity of goods and money enter into the question. Prices are not commonly fixed on the basis of costs. Why should a bale of linen brought overland from Brittany at great expense be worth more than one which is transported cheaply by sea?… Why should a book written out by hand be worth more than one which is printed, when the latter is better though it costs less to produce?… The just price is found not by counting the cost but by the common estimation. (Grice-Hutichinson, 110-111, emphasis added).

Covarrubias and Saravia, along with Luis de Molina and Martin Navarro argued that the “common estimation” of market participants represented the just price. Another Spanish Scholastic, Domingo de Soto, observed in De Justitia et Jure that if the cost of production determined value, then producers would have no incentive to provide goods more cheaply and efficiently because they could justly charge high prices based upon their costs:

  • It would be a most fallacious rule if, whenever a merchant bought an article, he added on to its price the value of his labour and risk, and then expected to sell it at this increased value. In fact, if a merchant ignorantly buys some article at more than the proper price, or if he suffers ill fortune… he cannot justly extort the costs which he has incurred. On the other hand, another merchant may be more industrious or more fortunate; perhaps he has been able to buy cheaply, or perhaps he has been lucky enough to see the goods come into short supply after he has bought them. (Grice-Hutchinson, 184)

According to thinkers in the School of Salamanca, economic value no longer resides within the object. Instead, value comes from the people participating in the market and can, therefore, vary by time and place (and ultimately personal preference) without any physical or material change to the good itself.

John Locke (17th century AD)

John Locke writes in Venditio, his treatment on morality and market exchange, that the market price (similar to the common estimation view) is the just price. He suggests that markets require many buyers and sellers, and that they are bound to particular times and places—meaning that you could charge different prices for the same good in different markets, or in different years.

But what if there are not many buyers and sellers around? Locke says:

  • But what anyone has he may value at what rate he will, and transgress not against justice if he sells it at any price, provided he makes no distinction of buyers, but parts with it as cheap to this as he would to any other buyer. I say he transgresses not against justice. What he may do against charity is another case. [emphasis added] (Locke, Wootton, 444)
“Locke asserts, against the conventional wisdom of the day, that it is not strictly a matter of justice what price a seller sets for the buyer….”

Locke asserts, against the conventional wisdom of the day, that it is not strictly a matter of justice what price a seller sets for the buyer, even if the buyer is in dire need of the good but of charity, mercy, or benevolence. In short, the market price, or as he calls it the “marchand value,” of a good as opposed to the “natural value” determined by labor, is always the just price. If there is no market to tell the seller what the price ought to be, he may set his own so long as that price does not change from one buyer to the next.

Imagine a man, says Locke, who has a horse but is reluctant to sell it to a traveler. Upon insistence from the latter, the man sets the price at 40 pounds, which happens to be double what the horse would fetch at the nearest market. Since the traveler’s need for the horse was less than 40 pounds, he refuses to pay this price. But the next day, a breathless traveler approaches the same man and begs for the horse because he stands to lose his business “of much greater consequence” to him. Knowing the circumstances and willingness to pay of the traveler, the man sells him the horse for 50 pounds. Locke says this is unjust. Because the man was willing to part with the same horse for 40 pounds before, charging 50 pounds now because of the buyer’s circumstances involves exploitation.

Etienne Condillac (18th century AD)

In the 18th century, Condillac addressed problems with just price theory by going back to the premises of Aristotelian-Thomist arguments—and rejecting them. The problem lay in Aristotle and Aquinas assuming the value of a good was objective or natural, relating to an inherent or acquired quality of the good, as opposed to subjective. Condillac argued that value stems from an object’s utility or usefulness for us. As long as value had some objective qualities, as Aristotle and Aquinas held, prices could be unjust because they were too high or too low in relation to what the good was really worth. Similarly, it was unjust to profit off another’s needs or necessity.

Condillac’s contribution was to disentangle price from value and show that prices reflect what we value, not the other way around. Thus they cannot be judged unjust based on some kind of external standard other than the common estimation. Simply put, the closest approximation of justice in value or exchange the market is in fact the price system itself.

Condillac points out that “to say that a thing has value is to say that it is, or that we think it is, good for some purpose.” He goes on to say,

  • Value is not so much in the object as in how we esteem it, and this estimation is relative to our needs: it grows and diminishes, just as our need itself grows and diminishes…I say therefore that, even on the banks of a river, water has value, but the smallest possible, because there it is infinitely surplus to our needs. In an arid place, by contrast, it has a huge value, which one assesses according to how far away it is and the difficulty of getting hold of it. In such a case a thirsty traveler would give a hundred louis for a glass of water, and that glass of water would be worth a hundred louis.” (Condillac, Eltis, 192; emphasis added)

Going back to Locke, how much is the horse worth? It is indeed impossible to answer that question without asking what the businessman wanted it for. Condillac would say the real value of the horse was how much the businessman valued his business. Though the terms “opportunity cost,” or “marginal analysis” hadn’t been coined, Condillac is thinking like a modern economist.


The idea of subjective value, which is only fully developed or recovered during the marginal revolution in the 1870s, reveals the problems in the overly simplistic Aristotelian account of just price as equitable value in exchange. Returning to the example of exchanging olives for grain, saying that “equal” value was exchanged because each was “worth” $20 is only an accounting fiction. It has little to do with the actual benefit each party received.

We must have valued our olives at less than $20; otherwise we wouldn’t have sold them. Since we had such an excess of olives, we might have valued that bushel of olives at $2. If that’s the case, we gained $18 in value by selling it for $20. Furthermore, we must have valued the grain more than the $20 we paid for it—let’s say at $28. We gained an additional $8. Taken altogether, we have gone from having a bushel of olives we valued at $2 to grain that we valued at $28. Money was only an intermediate step along the way—it didn’t say anything substantive about the intrinsic value of the goods involved or how much we gained.

On the other side of the exchange, let’s say the initial owner of the grain valued it at $15. Selling it for $20 results in a gain of $5. Suppose further that he values the olives at $24. Buying them at $20 would give him an additional $4 of benefit. All told, he goes from having grain he values at $15 to olives he values at $24—a gain of $9.

Although the exchange looks just on the surface—value for similar value—by Aristotle’s own standards this exchange would be unjust! One party has gained $26 in value while the other has gained $9. Is this fair or equitable?

For more on these topics, see the EconTalk episode Michael Munger on John Locke, Prices, and Hurricane Sandy and the Econlib article “The Relentless Subjectivity of Value,” by Max Borders, May 3, 2010.

Consider the complexity, or the impossibility, of taking into account the amount of value one gains from a transaction relative to the other party. Does it really make sense to say we ought to split the value equitably? If so, I think we would find that many prices around us are unjustly low! Consider the difference between how much someone values a loaf of bread or a carton of eggs and their cost. Or how much they value access to the internet versus what they have to pay for it. The benefits to the buyer in these cases is often many times larger than the profit to the seller.

The conclusion to draw here, which also holds true in discussions about usury, luxury, or price gouging laws, is that neither justice, nor virtue, nor vice exist in the objects. It exists in the actions and motives of the people involved. There is no objective economic value, no inherent quality of a good that we could use as a standard to assess whether the price it commands on the market is just or unjust. There are of course objective standards by which we could judge the behavior and motives of the parties involved—but those standards fall outside the economic toolbox and into the realm of ethics and philosophy, of norms and customs. By the end of the just price debate, economics had emerged as a distinct way of thinking and a proper science with its own application and scope, leaving its mother philosophy to ask the broader question of what constitutes just and unjust behavior in the market.


Grice-Hutchinson, Marjorie. (1952). The School of Salamanca; Readings in Spanish Monetary Theory 1544-1605. Oxford University Press: London.

Locke, John. (2003). “Venditio.” In Locke: Political Writings, edited by David Wooton, 442-446. Hackett Publishing: Indianapolis.

Étienne Bonnot, Abbé de Condillac. (2008 [1776]). Commerce and Government Considered in their Mutual Relationship. Trans. Shelagh Eltis. Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis. Liberty Fund: Indianapolis.

Aquinas, Thomas. (1947). Summa Theologica. Trans. The Fathers of the English Dominican Province. 1.65.4.

Munger, Michael C. (2012). “Munger’s Guide to the Merchant of Venditio: A Summary of Locke’s Four Examples on Price.” Duke University.

Rothbard, Murray N. (2006). “New Light on the Prehistory of the Austrian School.” Mises Institute, November 10, 2006.

*Paul Mueller is an assistant professor of economics at The King’s College in Manhattan. He has published articles in the Adam Smith Review, Econ Journal Watch, the Journal of Economic Behavior and Organization, The Review of Austrian Economics, the Journal of Private Enterprise, and the Quarterly Journal of Austrian Economics. He has written a book on the 2008 Financial Crisis published by Cambridge Scholars Publishing. His work has also appeared in popular outlets like USA Today, Fox News, and The Hill.

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