Value and Just Price

Value and Just Price, Medieval Economic History

Passing over ideas concerning wealth and industry, which were substantially those mentioned above, one reaches the heart of their economic thought in the doctrine of justum pretium. This doctrine rested upon their notion of value. This concerned exchange value, for exchanges had become more important than in Aristotle's day. But the institutions of an independent domestic economy, and the ideas of production for use, were sufficiently prevalent — and com­petition was sufficiently absent — to make freely determined market values seem "unnatural." Labor was the chief factor in production; the gild master worked at his trade; there was little capital. So the worth of a thing tended to be judged by the amount of labor required to produce it. Briefly stated, the doctrine of "just price" was that every commodity has some one true value which is absolute, and is to be deter­mined and be made objective on the basis of the common estimation of the cost of production, which usually covers labor.

The words, "is to be determined," are used deliberately; ior the doctrines of the scholastics are only to be understood when considered as ethical, — as laying down what should be, rather than scientific conclusions as to what is. To sell a thing for "more than it is worth," was regarded as immoral.

As formulated by Albertus Magnus (1193-1280) and Thomas Aquinas (1227 or 1225-1274), the theory was that value should equal the expenditure of labor and other costs. Thus, according to Aquinas, a man might lawfully charge more than he had paid "either because he has improved the article in some re­spect, or because the price of the article has been changed on account of difference of place or time, or on account of the danger to which he exposes himself in transferring the article from place to place, or in causing it to be transferred." 'This generalization, however, was qualified to the extent that only those costs which were incurred in producing things which satis­fied normal or natural wants were determining. Furthermore, the labor element was weighted according to the social rank of the laborer. This involved the important idea of "status" and fixed rules as to the standard of life for each status, in order that the cost of production — as it was conceived — could be determined.

The value thus fixed was not necessarily expressed in market price, and was independent of the estimate of buyer or seller. It was a question of justice, and it was the duty of the law to step in and fix the price according to the above principles. In short, "just price" was akin to our concept of "fair value," and, as opposed to objectively determined market value, it in-volved a process of "valuation" or "price fixing" It was quite in harmony with this conception that Charlemagne, at an earlier time, ordained "that no man, whether ecclesiastic or layman, shall, either in time of abundance, or in time of scarcity, sell provisions higher than the price recently fixed per bushel."

With the rise of towns and money economy, this notion of value began to be modified, though it dominated the whole period and beyond. Aquinas gave some consideration to utility and to the amount offered for sale, or supply. Buridan (1300-1358) went farther and, following Aristotle, stated that the measure of value is to be found in the satisfaction of wants: the greater the need, the higher the value. And Biel (died 1495), while standing for a necessary equality in value of goods ex­changed, bases it upon their utility for human ends. But when all has been said, the conclusion is that it is broadly true that a conception of value as absolute and based on cost prevailed during the Middle Ages.