Just Price

History of the Concept

The starting point for most traditional discussions is the Nicomachean Ethics of Aristotle. In his treatment of the larger topic of justice in Book V, he indirectly offers some principles for treating the issue of fair price. The context is a discussion of what he calls “rectificatory” justice, which is that part of justice that concerns transactions between persons and that rectifies or makes equal the situation of the parties to a transaction.

To illustrate the essence of a voluntary transaction, Aristotle chooses the sale of goods. The sale is just when the objects exchanged are comparable in value and unjust when one party receives less than he gives.

Aristotle says little about how the value of objects ought to be determined, but he does recognize that value is not intrinsic to the objects exchanged. Indeed, he insists that the real root of value is human need (chreia) and that money becomes a measure of this. On his account, the fact that a voluntary transaction proceeds is a sign that the parties have satisfied themselves that they are exchanging objects (or money for objects) of equal value.

Therefore, a price, which is the value of an object in an exchange measured in money, is known to be [Page 1232]just when persons who need or desire that object willingly pay the price to receive it. To put it another way, the price is just when it is an accurate measure of the value of the object in that place and time. No one, in Aristotle's view, would voluntarily sell something for less than its value nor buy it for more than its value, in the context of the exchange.

In adopting this view, Aristotle and the just price theorists who followed him, implicitly reject a subjective theory of value as a meaningful concept for analyzing exchanges. What matters is not the value that a particular individual might place on an object in an exchange but the value that would be assigned to it by a market, that is, by the common estimation of knowledgeable persons who have no special interests in the matter. One person may attach a very high value to my house because he or she has pleasant memories of children growing up there—and that person may be unwilling to sell it for that very reason—but the subjective value that person grants to the property has nothing to do with its value in exchange (at least, not for a classic just price theorist).

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