An Essay on Mediaeval Economic Teaching Part 8

-- 3. _The Just Price when Price not fixed by Law_.

When the just price was not fixed by any outside authority, the buyer and seller had to arrive at it themselves. The problem before them was to equalise their respective burdens, so that there would be equality of burden between them, or, in other words, to reduce the value of the article sold to terms of money. In order that we may understand how this equality was arrived at, it is important to know the factors which were held to enter into the determination of value.

The first thing upon which the mediaeval teachers insist is that value is not determined by the intrinsic excellence of the thing itself, because, if it were, a fly would be more valuable than a pearl, as being intrinsically more excellent.[1] Nor is the value to be measured by the mere utility of the object for satisfying the material needs of man, for in that case, corn should be worth more than precious stones.[2] The value of an object is to be measured by its capacity for satisfying men's wants. 'Valor rerum aestimatur secundum humanam indigentiam.... Dicendum est quod indigentia humana est mensura naturalis commutabilium; quod probatur sic: bonitas sive valor rei attenditur ex fine propter quem exhibetur: unde commentator secundo Metaphysicae _nihil est bonum nisi propter causas finales_; sed finis naturalis ad quem just.i.tia commutativa ordinet exteriora commutabilia est supplementum indigentiae humanae...; igitur supplementum indigentiae humanae est vera mensura commutabilium. Sed supplementum videtur mensurari per indigentiam; majoris enim valoris est supplementum quod majorem supplet indigentiam.... Item hoc probatur signo, quia videmus quod illo tempore quo vina deficiunt quia magis indigeremus eis ipsa fiunt cariora....[3]

[Footnote 1: 'In just.i.tia commutativa non estimatur pretium commutabilium secundum naturalem valorem ipsorum, sic enim musca plus valeret quam totus aurum mundi' (Buridan, _op. cit._, v. 14).]

[Footnote 2: Slater, 'Value in Theology and Political Economy,' _Irish Ecclesiastical Record_, Sept. 1901.]

[Footnote 3: Buridan, _op. cit._, v. 14 and 16. Antoninus of Florence says that value is determined by three factors, _virtuositas_, _raritas_, and _placibilitas_ (_Summa_, ii. 1, 16.)]

The capacity of an object for satisfying man's needs could not be measured by its capacity for satisfying the needs of this or that individual, but by its capacity for satisfying the needs of the average member of the community.[1] The Abbe Desbuquois, in the article from which we have already quoted, finds in this elevation of the common estimation an ill.u.s.tration of the general principle of the mediaevals, which we have seen at work in their teaching on the use of property, that the individual benefit must always be subordinated to the general welfare. According to him, it is but one application of the duty of using one's goods for the common good. 'In the same way, in allowing the right of exchange--a right, let us remark in pa.s.sing, which is but an application of the right of property--and in allowing it as a means of life necessary to everybody, nature does not lose sight of the universal destination of economic goods. One conceives then that the variations of exchange are not permitted to be left to the arbitrary judgment of a single man, nor to be affected by the whims and abuses of individuals; that value is defined in view of the general good. The exchange value, as it is in the general or social order, proceeds from the judgment of the social environment (_milieu social_).'[2]

[Footnote 1: 'Indigentia istius hominis vel illius non mensurat valorem commutabilium; sed indigentia communis eorum qui inter se commutare possunt,' Buridan, _op. cit._, v. 16. 'Prout communiter venditur in foro,' Henri de Gand, _Quod Lib._, xiv. 14; Nider, _De Cont. Merc._, ii. 1.]

[Footnote 2: 'La Justice dans l'Echange,' _Semaine Sociale de France_, 1911, p. 168.]

The writers of the Middle Ages show a very keen perception of the elements which invest an object with the value which is accorded to it by the general estimation. In Aquinas we find certain elements recognised--'diversitas loci vel temporis, labor, raritas'--but it is not until the authors of the fourteenth and fifteenth centuries that we find a systematic treatment of value.[1] First and foremost there is the cost of production of the article, especially the wages of all those who helped to produce it. Langenstein lays down that every one can determine for himself the just price of the wares he has to sell by reckoning what he needs to support himself in the status which he occupies.[2] According to the _Catholic Encyclopaedia_,[3] the just price of an article included enough to pay fair wages to the worker--that is, enough to enable him to maintain the standard of living of his cla.s.s. This, though not stated in so many words by Aquinas, was probably a.s.sumed by him as too obvious to need repet.i.tion.[4] 'The cost of production of manufactured products,' says Brants, 'is a legitimate const.i.tuent element of value; it is according to the cost that the producer can properly fix the value of his product and of his work.'[5]

[Footnote 1: Brants, _op. cit._, p. 69.]

[Footnote 2: _De Cont._, quoted by Roscher, _Geschichte_, p. 20.]

[Footnote 3: t.i.t. 'Political Economy.']

[Footnote 4: Palgrave, _Dictionary_, t.i.t. 'Justum Pretium.']

[Footnote 5: Brants, _op. cit._, p. 202.]

The cost of the labour of production was, however, by no means the only factor which was admitted to enter into the determination of value. The pa.s.sage from Gerson dealing with the circ.u.mstances to which the prince must have regard in fixing a price, which we quoted above, shows quite clearly that many other factors were recognised as no less important. This appears with special clearness in the treatise of Langenstein, whose authority on this subject was always ranked very high. Bernardine of Siena is careful to point out that the expense of production is only one of the factors which influence the value of an object.[1] Biel explains that, when no price has been fixed by law, the just price may be arrived at by a reference to the cost of the labour of production, and to the state of the market, and the other circ.u.mstances which we have seen above the prince was bound to have regard to in fixing a price. He also allows the price to be raised on account of any anxiety which the production of the goods occasioned him, or any danger he incurred.[2]

[Footnote 1: 'Res potest plus vel minus valere tribus modis; primo secundum suam virtutem; secondo modo secundum suam caritatem; tertio modo secundum suam placibilitatem et affectionem.... Primo observat quemdam naturalem ordinem utilium rerum, secundo observat quemdam communem cursum copiae et inopiae, tertio observat periculum et industriam rerum seu obsequiorum' (Funk, _Zins und Wucher_, p. 153).]

[Footnote 1: 'Sollicitudo et periculum,' _Op. cit._, IV. xv. 10.]

It will be apparent from the whole trend of the above that, whereas the remuneration of the labour of all those who were engaged in the production of an article, was one of the elements to be taken into account in reckoning its value, and consequently its just price, it was by no means the only element. Certain so-called Christian socialists have endeavoured to find in the writings of the scholastics support for the Marxian position that all value arises from labour.[1]

This endeavour is, however, destined to failure; we shall see in a later chapter that many forms of unearned income were tolerated and approved by the scholastics; but all that is necessary here is to draw the attention of the reader to the pa.s.sages on value to which we have referred. One of the most prominent exponents of the untenable view that the mediaevals traced all value to labour is the Abbe Hohoff, whose argument that there was a divorce between value and just price in the scholastic writings, is ably controverted by Rambaud, who remarks that n.o.body would have been more surprised than Aquinas himself at the suggestion that he was the forerunner of Karl Marx.[2]

[Footnote 1: Even Ashley states that 'the doctrine had thus a close resemblance to that of modern Socialists; labour it regarded both as the sole (human) cause of wealth, and also as the only just claim to the possession of wealth' (_Op. cit._, vol. i. part ii. p. 393).]

[Footnote 2: _Op. cit._, p. 50.]

The idea that the scholastics traced all value to the labour expended on production is rejected by many of the most prominent writers on mediaeval economic theory. Roscher draws particular attention to the fact that the canonist teaching a.s.signed the correct proportions in production to land, capital, and labour, in contrast to all the later schools of economists, who have exaggerated the importance of one or the other of these factors.[1] Even Knies, who was the first modern writer to insist on the importance of the cost of production as an element of value, states that the Church sought to fix the price of goods in accordance with the cost of production (_Herstellungskosten_) _and_ the consumption value (_Gebrauchswerte_).[2] Brants takes the same view. 'The expenses of production are in practice the norm of the fixing of the sale price in the great majority of cases, above all in a very narrow market, where compet.i.tion is limited; moreover, they can, for reasons of public order, form the basis of a fixing that will protect the producer and the consumer against the disastrous consequences of constant oscillations. The vendor can in principle be remunerated for his trouble. It is well that he should be so remunerated; it is socially useful, and is used as a basis for fixing price; but it cannot in any way be said that this forms the _objective measure of value_, but that the work and expense are a sufficient t.i.tle of remuneration for the fixing of the just price of the sale of a thing. Some writers have tried to conclude from this that the authors of the Middle Ages saw in labour the measure of value. This conclusion is exaggerated. We may fully admit that this element enters into the sale price; but it is in no way the general measure of value.... The expenses of production const.i.tute, then, _one_ of the legitimate elements of just price; they are not the _measure_ of value, but a factor often influencing its determination.'[3] 'Labour,'

according to Dr. Cronin, 'is one of the most important of all the determinants of value, for labour is the chief element in cost of production, and cost of production is one of the chief elements in determining the level at which it is useful to buy or sell. But labour is not the only determinant of value; there is, _e.g._, the price of the raw materials, a price that is not wholly determined by the labour of producing those materials.'[4]

[Footnote 1: _Political Economy_, s. 48.]

[Footnote 2: _Politische Oekonomie vom Standpuncte der geschichtlichen Methode_, p. 116.]

[Footnote 3: _Op. cit._, p. 112.]

[Footnote 4: _Ethics_, vol. ii. p. 181.]

The just price, then, in the absence of a legal fixing, was held to be the price that was in accordance with the _communis estimatio_.

Of course, this did not mean that a plebiscite had to be taken before every sale, but that any price that was in accordance with the general course of dealing at the time and place of the sale was considered substantially fair. 'A thing is worth what it can generally be sold for--at the time of the contract; this means what it can be sold for generally either on that day or the preceding or following day. One must look to the price at which similar things are generally sold in the open market.'[1] 'We must state precisely,' says the Abbe Desbuquois, 'the character of this common estimation; it did not mean the universal suffrage; although it expresses the universal interest, it proceeds in practice from the evaluation of competent men, taken in the social environment where the exchange value operates. If one supposes a sovereign tribunal of arbitration where all the rights of all the weak and all the strong economic factors are taken into account, the just price appears as the sentence or decision of this court.'[2] 'For the scholastics, the common estimation meant an ethical judgment of at least the most influential members of the community, antic.i.p.ating the markets and fixing the rate of exchange.'[3]

[Footnote 1: Caepolla, _De Cont. Sim._, 72.]

[Footnote 2: _Op. cit._, pp. 169-70.]

[Footnote 3: Fr. Kelleher in the _Irish Theological Quarterly_, vol.

xi. p. 133.]

It is quite incorrect to say, as has been sometimes said, that the mediaeval just price was in no way different from the compet.i.tion price of to-day which is arrived at by the higgling of the market.

Dr. Cunningham is very explicit and clear on this point. 'Common estimation is thus the exponent of the natural or normal or just price according to either the mediaeval or modern view; but, whereas we rely on the higgling of the market as the means of bringing out what is the common estimate of any object, mediaeval economists believed that it was possible to bring common estimation into operation beforehand, and by the consultation of experts to calculate out what was the just price. If common estimation was thus organised, either by the town authorities or guilds or parliament, it was possible to determine beforehand what the price should be and to lay down a rule to this effect; in modern times we can only look back on the compet.i.tion prices and say by reflection what the common estimation has been.'[1]

'The common estimation of which the Canonists spoke,' says Dr. Ryan, 'was conscious social judgment that fixed price beforehand, and was expressed chiefly in custom, while the social estimate of to-day is in reality an unconscious resultant of the higgling of the market, and finds its expression only in market price.'[2] The phrase 'res tanti valet quanti vendi potest,' which is so often used to prove that the mediaeval doctors permitted full compet.i.tive prices in the modern sense, must be understood to mean that a thing could be sold at any figure which was within the limits of the minimum and maximum just price.[3]

[Footnote 1: _Growth of English Industry and Commerce_, vol. i. p.

353.]

[Footnote 2: _Living Wage_, p. 28.]

[Footnote 3: Lessius, _De Just.i.tia et Jure_, xxi. 19.]

The last sentence suggests that the just price was not a fixed and unalterable standard, but was somewhat wide and elastic. On this all writers are agreed. 'The just price of things,' says Aquinas, 'is not fixed with mathematical precision, but depends on a kind of estimate, so that a slight addition or subtraction would not seem to destroy the equality of justice,'[1] Caepolla repeats this dictum, with the reservation that, when the just price is fixed by law, it must be rigorously observed.[2] 'Note,' says Gerson, 'that the equality of commutative justice is not exact or unchangeable, but has a good deal of lat.i.tude, within the bounds of which a greater or less price may be given without justice being infringed;'[3] and Biel insists on the same lat.i.tude, from which he draws the conclusion that the just price is constantly varying from day to day and from place to place.[4]

Generally it was said that there was a maximum, medium, and minimum just price; and that any price between the maximum and minimum was valid, although the medium was to be aimed at as far as possible.

[Footnote 1: II. ii. 77, 1, ad. 1.]

[Footnote 2: _De Cont. Sim._, 58.]

[Footnote 3: _De Cont._, ii. 11.]

[Footnote 4: _Op. cit._, IV. xv. 10.]

The price fixed by common estimation was therefore the one to be observed in most cases, and it was at all times a safe guide to follow. If, however, the parties either knew or had good reason to believe that the common estimation had fixed the price wrongly, they were not bound to follow it, but should arrive at a just price themselves, having regard to the various considerations given above.[1]

[Footnote 1: Nider, _De Cont. Merc._ ii.: 'Si vero scit vel credit communitatem errare in estimatione pretii rei; tunc nullo modo debet eam sequi; quia etiam si reciperet verum et justum pretium, tamen faceret contra conscientiam.']

It did not make any difference whether the price was paid immediately or at some future date. To increase the price in return for the giving of credit was not allowed, as it was deemed usurious--as indeed it was. It was held that the seller, in not taking his money immediately, was simply making a loan of that amount to the buyer, and that to receive anything more than the sum lent would be usury. Aquinas is quite clear on this point. 'If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury; because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. In like manner, if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is likewise a sin of usury; because again this antic.i.p.ated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand, if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.'[1] If, however, the seller, by giving credit, suffered any damage, he was ent.i.tled to be recompensed; this, as we shall see, was an ordinary feature of usury law. It could not be said that the price was raised. The price remained the same; but the seller was ent.i.tled to something further than the price by way of damages.[2] It was by the application of this principle that a seller was justified in demanding more than the current price for an article which possessed some individual or sentimental value for him. 'In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller.... No man should sell what is not his, though he may charge for the loss he suffers.'[3] On the other hand, it was strictly forbidden to raise the price on account of the individual need of the buyer.[4]

[Footnote 1: II. ii. 78, 2, ad. 7. See _Decret. Greg._, v. 19, _de usuris_, cc. 6 and 10.]

[Footnote 2: Endemann, _Studien_, vol. ii. pp. 49; Desbuquois, _op.

cit._, p. 174.]

[Footnote 3: II. ii. 77, 1.]