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Scholastic just price versus current market price: Is it merely a matter of labelling?



From an analytical point of view, some aspects of Just Price theory, probably the most famous and lasting scholastic concept, remain controversial: the cost-of-production versus the subjective-utility theory of value is a main controversy as well as the question of whether the natural just price is conceptually the same as the current market price. Strictly speaking, just price isconceptually the same as the current market price. Of concern is whether the meaning behind the label is the same in both scholastic and liberal traditions. There are different interpretations among scholars. One is that the just price is merely the current market price, and common estimation plays the same role as market forces in a competitive context. Another group states that the just price is quite different from the market price; the fundamental reason is that the ethical framework of the scholastic paradigm sets a corpus of principles that greatly differs from the neoclassical homo economicus. Is it possible to speak of a collaborative market price (scholastic tradition) and competitive market price (liberal tradition)? This article tries to dig into such debate and reflects on the morality of the market price.
Scholastic just price versus current market
price: is it merely a matter of labelling?
Fabio Monsalve
If the exchangers are in somewhat comparable bargaining positions and meet in a
spirit of trust and benevolence, they should be able to agree on terms of exchange by
which both consider fair. The Christian ideal of mutual advantage by just, and free,
exchange is one of the finest bequests of the scholastics to economic thought.
(Langholm 1992: 577)
1. Introduction
Scholastic doctors, following the Christian vision of God’s City on earth,
constructed an all-embracing system of ethics rested on the virtue of justice
that provided the ideal framework for a good and harmonious life
among all human beings. The problem arose when this ideal vision was
overshadowed by commercial and financial practices. For more than four
centuries, scholastics devoted their efforts to harmonisation of their ideal
vision of the world with the evolving economic reality. As Langholm (1992:
565) states: ‘By a common denominator we may perhaps describe the
economic doctrines of the medieval theologians as a set of compromises,
codes of economic conduct which must be operational while abandoning as
little as possible of the Christian vision of society’.
It is beyond all doubt that scholastic economics was drawn up from a
perspective of Christian morality. Scholastics’ main concerns were to act
as spiritual guides and to give moral council on economic practices.
Nevertheless, this religious frame of reference should not undervalue their
contributions to the history of economics. As Schumpeter (1994: 190)
stated: ‘the normative motive, so often the enemy of patient analytic work,
Address for correspondence
University of Castilla-la Mancha, Albacete, 02071, Spain; tel.: 902204100-2358, fax:
902204130, e-mail:
This paper benefited from the useful comments of Stefano Solari as well as all who
attended the session at the 13th conference of the European Society of the History of
Economic Thought held at Amsterdam in 2010, where the paper was first presented.
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in this instance both set the task and supplied the method for the scholastic
analysts. Once set, the task was strictly scientific and logically independent
of the moral theology whose purposes were to be served’. The theory of just
price, probably the most famous and enduring scholastic economic
concept (Grice-Hutchinson 1978: 155), epitomizes this view, and it is a
good example of the amalgam of economic and ethical arguments that
marked Scholastic economic theories (Hamouda and Price 1997).
Nowadays, in viewing the epistemological challenges of modern
economics, there is a renewed interest in re-linking ethics and economics
as well as exploring the moral responsibility of human beings in their
economic behaviour. Considering this, just price became an interesting
theory to examine. It was a religious commandment but was regarded as
more than that. In fact, it is possible to ascertain just price theory as a
rational theory relying on the social and moral dimensions of men and
natural law principles (Monsalve 2010). Two major discussions can be
tracked in the analysis of the just price among historians of economic
analysis. The first debate centres on the foundations of value (labour and
cost versus need). The second debate addresses questions whether
scholastic just price can be identified with the current market price or if
it is something totally different. This article is interested in this last
controversy and the ethical implications for human behaviour. Although
the article will focus on the second controversy, some valuable aspects of
the theory of value will be mentioned because of their close proximity to
our main purpose.
The true problem in the scholastic just price and the current market
price debate is not if it is possible to identify both concepts (which it is) but
rather if the meaning attributed to the label ‘current-market-price’ is the
same in the scholastic and liberal visions. My thesis is that the just price is not
merely the market price because of the fundamental moral dimension of economic
agents in Scholastic world vision. According to this thesis, I will discuss a
collaborative market price (scholastic) and a competitive market price
(liberal) to overcome the taxonomic problem.
To probe this thesis, we shall rely on the work of Juan de Lugo commonly
considered the last great representative of the Scholastics (Grice-
Hutchinson 1978: 135; Roover 1970: 36).
Hence, approaching Lugos’
1 Juan de Lugo, son of a member of the Castilian court, was born in Madrid in 1583
but grew up in Seville. He entered a Jesuit school at age five. At 15 years, he
moved from Seville to Madrid. The Seville years marked him deeply, so much so
that he would sign his works as ‘Ioannes of Lugo Hispalensis’, as he is also known.
In 1603, he joined the Society of Jesus and began to study the arts and theology.
In 1611, he was ordained as a priest. He taught philosophy for four years in
Medina del Campo, Monforte de Lemos and Leo´n and theology for six years in
Scholastic just price versus current market price
theory of just price allows us to grasp Scholastic analysis at its high point as
well as at its end. Lugo’s De Iustitia et iure was first published in 1642, in a
context characterised by the complexity of financial and mercantile
practices and the flourishing of other economic traditions (natural law
philosophers, mercantilists, and arbitristas). Lugo noticed the new
scenario, but he remained faithful to scholastic tradition as a valid
intellectual paradigm to understand economic reality and to rule economic
human behaviour.
Salamanca and Valladolid. In 1621, the general of the company summoned him
to Rome, where he held the chair of Scholastic theology and taught for the
following 20 years. In 1643, Lugo was made a cardinal by Pope Urban VII because
Lugo dedicated his treatise De Iustitia et Iure to the pope. After this event, he gave
up teaching and devoted his last years mainly to writing. He died in Rome in 1660.
2 Lugo belongs to the distinguished triad – together with Luis de Molina and
Leonardo Lessius – that Schumpeter refers to as the ‘founders’ of the scientific
economics (Schumpeter 1994: 136). Schumpeter’s view about these late
scholastics stemmed from his doctoral advice on Dempsey’s doctoral dissertation
published under the title ‘Interest and Usury’ (Dempsey 1948). Father Dempsey’s
treatise examined the ideas of the three scholars as a whole, with similar ideas
concerning the topics of interest. After this seminal study, Lugo’s economic ideas
was usually approached either from a general point of view (Brinkman 1957;
Go´mez Camacho 1998; Gordon 1975; Grice-Hutchinson 1978; Rothbard 1995) or
from some specific topics such as, usury (Noonan 1957), money-changes (Dalle
Molle 1954) and just price (Monsalve 2010). Some minor differences have been
pointed out in previous studies but not substantial distinctiveness between Lugo
and the rest of the scholars has been being stated. Hence, a comprehensive study
about the distinctiveness of Lugo’s works or ideas within the scholastic traditions
remains to be accomplished albeit one exception. Lagholm challenged the non-
distinctive reading of Lugo and observed that he ‘makes two important
observations which were devastating to the scholastic doctrine and point forward
to a new era’ (Langholm 1998: 75). The first observation is on the concept of
voluntary, which Lugo seems to disregard in the transfer of ownership of money
paid as usury. The second observation is about the keeping of covenants over the
terms, that is, justice is about the fulfilment of contracts more than the lawfulness
of the terms. These observations lead Langholm to consider Lugo as a bridge
between the Scholastics and the natural law philosophers. A previous paper
(Monsalve and DeJuan 2006) is devoted to both questions. In that paper, we
conclude, firstly, that the will of human agents remains fundamental in Lugo’s
work; and secondly, that Lugo acknowledges the right of people to keep the
covenants (settlements) but also stresses equity (terms of a contract); and third,
that the observations are related to a very singular and specific case. In
conclusion, these observations do not undermine Lugo’s whole work neither
from a juridical nor from an economic point of view; however, they could be
interpreted as inconsistent with the tenets of the Scholastic tradition from a
logical point of view.
Fabio Monsalve
2. Some insights into the concept of just price
2.1. Antecedents and role in scholastic tradition
The concept of just price is usually related to the Scholastics in the history
of economic analysis. However, it was actually a legal formula already pre-
existent in Roman law. The essence of the theory of just price is contained
in the three following texts (Noonan 1957: 82–3): (a) If you or your father
sold property for less than its value, it is just that you should receive it back,
though the authority of the judge upon restoring the price, or that the
purchaser, at his election, should pay you what is lacking according to the
just price (and keep the property). A price is considered too little if one
half of the true value is not paid (Code, 4:44:2). (b) The value of a thing is
based not on the disposition or utility of single persons but commonly
(Digest, 35:2:63); (c) A thing is worth as much as it can be sold for (Digest,
36:1:16). The interpretation of these three statements – to harmonise them
with patristic tradition and Aristotle’s legacy – gives shape to the concept of
just price in scholastic economics. The concept evolved throughout the
centuries with changes in economic and historical circumstances and the
acceptance of new ideas regarding property, contracts and prices coming
from Roman Law.
From the Paris Theological Tradition (early thirteenth
century) to the late Spanish Jesuits (late sixteenth century), just price
theory was affected by subtle changes, which did not alter the very essence
of the concept: to preserve justice in exchange.
The virtue of justice is a moral axiom (cardinal virtue) but also a logical
requirement of living in society, as Aquinas claims:
buying and selling seem to be established for the common advantage of both parties,
one of whom requires that which belongs to the other, and vice versa . .. Now
whatever is established for the common advantage, should not be more of a burden to
one party than to another, and consequently all contracts between them should
observe equality of thing and thing. (Aquinas 1947 [1270] 77:1)
This quotation became a genuine blueprint for scholastics that
channelled their intellectual efforts to elucidate the justice (equality) in
contracts of increasing complexity through the centuries.
3 It should be remarked that Roman law and Aquinas law were competitors until
the Late Scholastics period, which synthesised both visions (Solari and Corrado
2009: 28–30).
4 A challenging and exhaustive survey of early scholastics, labelled the Paris
Theological Tradition, and the way it develops into ‘The vision of a Christian
economy’ can be found in the work of Langholm (1992). Late Spanish doctors
and the suggestive ‘scholastic paradigm’ have been studied deeply by Go´mez
Camacho (1998).
Scholastic just price versus current market price
In short, to guarantee ‘the equality of thing and thing’ is the
fundamental role just price has to play in economic matters, not only as
a moral imperative from a Christian point of view (cardinal virtue of
justice) but also as a logical requirement of the social dimension of men,
who need to live in society and, consequently, to behave fraternally,
following the principles of natural law (Monsalve 2010). Just price also plays
a functional role against economic compulsion (Langholm 1998). Let us
remember that the scholastic economic context was a precapitalist system
characterised by one-to-one transactions, craft production and an old-
fashioned transport system that made local monopolies and merchants
powerful; observation of a just price protected the weakest party in
economic dealings.
2.2. The source of value: cost and need controversy
Two theories of value can be tracked in the scholastic tradition. The first
one is the cost-of-production theory, which links the value of goods with the
cost of production (mainly labour). This criterion ensured a proper reward
to the merchant who supports himself and his family at a suitable level for
his profession. This incentive was necessary to guarantee the supply of
goods in markets and, consequently, the well-being of the republic. The
second theory is the subjective utility theory of value, which links the value
of goods with the estimation of the utility provided to fulfil human needs.
This criterion highlighted human need as the true source of value. Goods
are not valued according to their intrinsic perfection but rather according
to man’s need of them for his own use.
The most common approach among early scholastics was to hold both,
apparently conflicting, theories of value. Hollander (1965: 631–2)
considers that St. Thomas was prescribing certain ‘just’ courses of action,
suggesting that he envisaged the market price to be satisfactory provided
that it did not permit pure profit, on the one hand, and did not lead to
losses, on the other hand. Langholm (1992: 190) states that ‘these two
theories, far from being irreconcilable, from an ethical view point, are
simply tentative and mutually supporting estimates of what a fair price
should be’. Lapidus holds the same complementary thesis, albeit by putting
particular emphasis on the special role played by human beings in
Yet, founding the just price on need, as well as on labour and expenses, is not as
contradictory as it might seem. .. if need, and labour and expenses, do indeed play an
essential role in the determination of the just price, it is in no respect because they are
exogenous factors prefiguring consumers’ preferences and technology, but as
endogenous factors that are themselves determined by a process whose joint results
Fabio Monsalve
they represent. This process depends on the singular place that man occupies in
Creation. Blessed with reason, he is capable of acceding to an understanding of the
common good and of working towards its achievement. Man is thus more than a
simple product of Creation - he is also its agent. (Lapidus 1994: 439)
Although cost was taken into consideration, the decisive factors were the
subjective values placed by each of the exchangers on each of the objects of
the exchange (Langholm 1992: 575). The prevalence of subjective
elements was clearer among late scholastics.
[Fluctuation in natural prices depends] not, certainly, on the intrinsic and substantial
perfection of the object which is being evaluated, but on its utility for human
necessities; not only on this particular utility but on the appreciation of that utility.
For instance, mice are worth less than wheat, although their natural perception is of a
much higher order; a jewel is less useful than wheat or than a house; however,
sometimes it is still worth more (Lugo 1848 [1642] 26:42)
We only mention predominance because late scholastic doctors were
aware of the importance of merchants to the republic and the need for
proper incentives and rewards for their efforts; thus, the cost-labour factor
was still taken into account as already included in the just price.
When a person sells as a regular business (‘ex officio’), as merchants commonly do,
he may for this reason sell at a higher price to make money for his own maintenance
because the fact that they attend to the assembling, storing, and distributing of goods
and the fact that they give up other occupations and sources of gain can be appraised
at a price. . . But strictly speaking this is not selling above the true value, for in
evaluating the common price of goods, attention is paid to these costs and profits
made by merchants and the common and natural price rises for all of these (Lugo
1848 [1642] 26:48).
The most outstanding aspect of the ethical framework of scholastic
economic vision, is that man has a fundamental moral responsibility for the
common good of the society as an agent of Creation, therefore just price
should guarantee both a proper reward to the merchant and a fair price
that prevents the consumer from being deceived or exploited under
economic compulsion.
2.3. The role of the market: just and competitive price controversy
Scholastic just price might be better understood if it is considered as a sort
of intellectual construct: an ideal price that guarantees equality in
exchange. It acts as a standard of measurement. Subsequently, it would
be possible to state whether the transaction was fair or unfair.
Just price is the price that guarantees equality in a transaction. It is the
amount of money that a thing is worth. If we only were to consider the just
price as an ideal price, there would be no major problems with the concept.
Scholastic just price versus current market price
The true problem arises when we try to determine if a real price is fair or
unfair in a particular transaction. How can we know that? Which elements
are involved in setting the just price? In short, what is a just price?
According to Lugo:
Just price is two-fold: the legal and the natural. The rightful or legal price is that set by
law or by decree of the prince or magistrate after taking into consideration the quality
of the object and all other buying and selling circumstances. The vulgar or natural
price, on the other hand, is based upon the common estimation and judgment; not
upon the particular appreciation of someone, but upon the community (Lugo 1848
[1642] 26:38).
The legal price, as far as it was settled by the magistrates, was not a major
concern for most scholastics.
People should respect it; if they did not, their
behaviour would be deemed unfair (moral dimension) and unlawful (legal
dimension). The natural price is based upon ‘the common estimation and
judgement’. Scholastics granted that the price fixed in common, consider-
ing the opinions of prudent and fair-minded men, in a market place is a just
price. Then, it might be said that, under certain conditions, the just price is
actually the current market price obtained in the market. This is completely
true. However, the main problem remains unresolved. Is it possible to say
that the just price is nothing more than the competitive market price?
Some scholars would accept this statement, while others would deny it.
According to Schumpeter, late scholastics identified the just price with
any competitive price.
Wherever such a price existed, it was ‘just’ to pay and to accept it, whatever the
consequences might be for the trading parties: if merchants, paying and accepting
market prices, made gains, this was all right, and if they suffer losses, this was bad luck
or else a penalty for incompetence so long as gains or loss resulted from the
unhampered working of the market mechanism though not if it resulted, for example,
from price fixing by public authority or monopolistic concerns (Schumpeter 1994:
The very same opinion is held by other scholars, such as Baldwin (1959:
76), Grice-Hutchison (1978: 116), Roover (1951: 496), who states that ‘the
just price was nothing more mysterious than the competitive price’ and
5 Luis de Molina (1536–1600) and Melchor de Soria (1558–1643) held an
interesting debate about such questions related to the price of grain. Both doctors
agreed that price controls are in place to prevent speculative behaviour, but they
held different opinions concerning the limits. Soria considers that magistrates
have authority to fix prices out of the just price latitude. Molina points out the
contrary: it is necessary to adjust to the natural price because only prices fixed
within the latitude should be respected in all conscience by individuals (Go´ mez
Camacho 1998, 521–6).
Fabio Monsalve
Gordon (1975: 218–43), who interprets scholastic just price as the outcome
of the operation of competitive market forces. More recently, Chafuen
(2003: 83) has held the very same opinion but from an Austrian
perspective. Just price is the market price but not the perfect competition
market price. He identifies the scholastic idea with the free entry principle.
Elegido (2009) relies on Salamanca School to defends that the price set in
an open market are fair or just.
Go´mez Camacho (1998: 535), appealing to the methodology of Thomas
Kuhn and the changing of a paradigm, breaks with previous liberalistic
interpretations and warns us against the facile identification of the
scholastic common estimation with the liberal free market price, support-
ing the concept of will and its function in economics as a moral science.
Langholm ‘fully agrees’ with this challenge to the liberalistic interpretation,
which suggests ‘that the medieval scholastics simply permitted the forces of
the market to run their course and accepted the resultant ‘‘common
estimate of the market’’ as the just price’.
The modern mechanistic conception of the market as a suprapersonal force setting
the terms to which an individual exchanger must submit was foreign to the medieval
masters. Their frame of reference was a moral universe that obliged any buyer or
seller to act for the common good and agree to terms of exchange accordingly,
regardless of the advantage granted him by the forces of the market. This means that
the common estimate of the just price could not refer indiscriminately to whatever
price might be obtainable under existent market conditions. It was only with the
dissolution of the medieval paradigm, initiated by some of the late scholastics, that a
freer play of market forces was permitted to influence the just price (Langholm 1998:
Langholm’s insightful quotation brings to light a key concept for
understanding the controversy regarding market and just price identifica-
tion. This key concept is not related to the market supply-demand price-
fixing mechanism but instead to the free will of economic agents and their
responsibilities in economic dealings. Overall, we should not identify the
just price with the liberal price without digging into the conception of
economic agents in both frames of reference.
6 Langholm’s interpretation focuses on medieval scholars. In his opinion, ‘the
objection to identifying the just price with whatever price is obtainable in the
market applies above all to the medieval scholastics’ because ‘the School of
Salamanca represents a transitional stage, wherein the doctrine of the medieval
masters mingle with more liberalistic ideas about the role of the market. . .’
(Langholm 1998: 86). This thesis set out an interesting and challenging question,
which deserves further study regarding the comparison between early and late
Scholastic just price versus current market price
3. The collaborative dimension of the just price
3.1. The ethical perspective
Persons are morally ruled beings in the scholastic as well as neoclassical
traditions. This is usually misunderstood because of the altruistic connota-
tions conferred in economics to the word moral. However, strictly speaking,
‘morality can be identified with the recognition of a personal conscience,
which compels persons to take certain decisions and to avoid others,
regardless of their particular interests. It conveys a sense of duty that people
should follow (normative statement) and which, fortunately, most of them
generally do follow’ (Dejua´n and Monsalve 2006: 101). The outstanding
issue is the difference in meaning of morality in both traditions. These
differences can be traced to the constraints of the price-fixing mechanism
process by common estimation, to the social dimension of private property
and, ultimately, to the disappearance of moral responsibility for humans, as
price-takers rather than price-makers.
3.1.1. Common estimation and its role against economic compulsion
The previously quoted statement by Lugo about the definition of just price
includes the statement ‘natural price is based upon common estimation’.
Literally, common estimation means that goods should be valued in
common (communiter). This definition adds no new significance to the
process, and the real meaning of this expression remains to be explained.
What does common estimation really mean? How does this concept work
within a price setting? What lies behind the common estimation concept?
To grasp the deeper meaning of common estimation, we need to bring up
two maxims of Roman law with respect to the price-fixing process. These
maxims are the two most cited principles in scholastic tradition: ‘everyone
is the moderator and arbiter of his own thing’ and ‘the willing man receives
no injury’. These two principles crystallised in the maxim that embodies the
very essence of a free-exchange economy: ‘a thing is worth what it can be
sold for’. Such assumptions – that (1) a price in the market is commonly
fixed and (2) a thing is worth what it can be sold for – drive us directly to a
vision of a free-exchange economy and, consequently, to conclude that a
just price is nothing more than the competitive market price. Nevertheless,
another interpretation makes sense. Langholm has clearly demonstrated
that the previous maxims of Roman law contradicted the ethical premise of
patristic tradition and took away the deeper meaning of just price. Thus,
they were rewritten for inclusion in the scholastic mainstream. ‘Can’ was
substituted for ‘ought’; value was not a question of economic power but
one of moral (social) obligation. The maxim was modified in the following
Fabio Monsalve
way: ‘a thing is worth as much as it can be sold for in the absence of force,
fraud, and deceit, by which the will is removed from the buyer’. This
principle is applied only to necessaries, not to luxuries, which remain free
to find their own prices.
In this modified version, the maxims try to ensure
the willingness in transaction and, on the other hand, to prevent ‘economic
compulsion’, that refers to the state in which a person is compelled to make
a transaction because of utmost necessity (Langholm 1998: 78–82). This
revised maxim and the outstanding role of ‘free and voluntary consent’
gives a new significance to common estimation as a bargaining process that
fixes current market prices.
A second aspect of common estimation to be considered is the common,
not individual, dimension of the bargaining process. Scholastics strictly
reject individual estimation as a determining factor of price. Value ‘rises
and falls not with the valuation of this one or that one but with the common
estimation’ (Lugo 1884, 26: 47). This rejection emphasises the moral
impossibility of individuals selling according to their own appreciation. It
prevents the buyer or seller from taking into account particular circum-
stances to change the just price in a particular transaction. This would be
the case, for instance, if a merchant were to raise his prices as a conse-
quence of a shipwreck or a theft.
A third aspect about common estimation should be brought up.
Scholastic doctors state that common estimation should be ruled by the
opinions of prudent and fair-minded men. This term does not refer to a
7 This point was also controversial. Francisco de Vitoria held that to sell something
above its value is only licit ‘when concern not necessities to humans but things
related to the human curiosity and ornament’ (Vitoria 2006 [1536?] 77:1:7). Lugo
held that it is possible to pay a price above the real value but not without limits:
‘Imagine that a seller instead of asking a thousand shields for a very rare falcon,
had requested a whole kingdom or province. . . would you say that this price can
be demanded lawfully or, on the contrary, would you say that the seller abuses the
excessive liking of the buyer and unjustly plunders it? You recognise then that the
limit needs to be indicated according to the prudent ones’ judgment’ (Lugo 1848
[1642] 26:47).
8 Scotus and Mair argue that merchants must compute all the expenses they incur
in buying, transporting or preserving the goods, as well as the just compensation
for the industry and labour expended and the risk to which they have exposed
themselves, just as if they had been hired for a wage to bring and sell such goods
under their own risk. Nevertheless, this rule falls short, first of all, because if some
merchant should have suffered a great loss by shipwreck or by theft in
transporting goods, he might lawfully demand a higher price for them than
that at which they are sold by others. This is wrong because the goods are not
commonly valued but can be had at a lower price. Second, those who are not
merchants cannot observe that rule but measure the just price otherwise (Lugo
1848, 26:41)
Scholastic just price versus current market price
group of wise people or an institution with a judgement capacity but rather
to the fact that prices have not been established in a lawless and irrational
way. Such rationality has no universal dimension but instead a local
dimension, coherent with a subjective approach to the value of goods. That
is, common estimation can differ among communities, as Lugo clearly
illustrates in the following example.
It could be thought that, if the opinion of prudent men has to be taken into account,
to give trinkets, glass beads or red dresses to Ethiopians in exchange of gold is clearly
unfair. It could be argued that, once all circumstances are known, those kinds of
things are worth certain prices; because one of the relevant circumstances is the
esteem that the good has among people. Hence, gold can be exchanged fairly for
those kinds of things because possessing such goods bestows honour, and for that
reason they are considered as valuables (Lugo 1848, 26:48).
Hence, gold is fairly exchangeable for those kinds of things because
possessing such goods provides honour. Therefore trinkets, glass beads
and red dresses are as highly esteemed by Ethiopians as is gold by
Europeans. The equity in this apparently unfair transaction lies in the
different appreciation of the goods or common estimation inside each
In summary, common estimation is not merely an impersonal force
driven by the egotistical individual’s interests but rather a communal
and prudent process wherein moral responsibility (‘ought’ instead of ‘can’)
and free and voluntary consent play an outstanding role in prevent-
ing economic compulsion. As Langholm (1998: 88) points out, ‘In the
medieval context, it makes more sense to interpret the market estimate
of just price. .. as a means to combat the exploitation of individual
economic needs’. In this sense, just price settled by common estimation will
be something different than the competitive market price. Economic
agents (buyers and sellers) are price-makers with a moral duty (agents of
Creation), not merely price-takers, as liberal traditions seem to claim.
3.1.2. The social bearings of private ownership
Private property was instituted for the common good of mankind.
Scholastic tradition, following Aquinas, defends the division of goods for
social order and economic efficiency (Aquinas 1947 [1270] 66:2).
Nevertheless, this right is not as absolute as the owners were relieved of
helping the truly needy. The first purpose of goods is to be of service to
man in his necessities, and the private ownership of possessions cannot
remove that essential characteristic. Aquinas (1947 [1270] 66:7) defends
this right in a more radical way by considering it lawful to steal due to
stress of need. Scholastics’ vision of the right to ownership tries to
Fabio Monsalve
harmonise considerations of efficiency (private) with the fact that
Creation was given by God to humankind in common. Dempsey has
labelled this particular and radical interpretation as the ‘social bearings
of private property’ (Dempsey 1948: 132). These bearings play a
fundamental role in the price-fixing process. Men are social animals
who need other people to live. From this point of view it is irrational to
take advantage of or exploit the people one needs to live with. The
honest and fair-minded person’s economic behaviour should be guided
others. On the other hand, creation is at the disposal of mankind in
common. This communal dimension has to be taken into account by
private owners in their commercial dealings. This particular vision of
private property leads Domingo de Soto to reinterpret the roman maxim
‘everyone is the moderator and arbiter of his own thing’ in the following
interesting way.
Everyone is the moderator and arbiter of his own thing provided that the thing has
nothing to do with the other one; however, the person who sells something not only
deals with his own thing but also with a thing which is common to both himself and
the buyer. (Soto 1967 [1556] 6:2:3)
3.1.3. Maximization versus moderation
Since Adam Smith’s invisible hand metaphor, the self-interest impulse
has been considered the fundamental motivation of economic human
behaviour. This impulse has been modelled under the principle of
maximisation of both utility and profits. Moreover, the mathematisation
of economic analyses has been drawn over this fundamental principle, and
the pursuit of wealth or money by itself has been considered the rational
attitude per excellence in economic behaviour by conventional wisdom. This
conception of human nature can be condemned from a humanist-ethical
perspective but not from an economic one, following the rationality of
orthodox economics.
Nevertheless, this egotistical vision of human nature ‘is hardly an
invention of modern economics’; moreover, it can be traced back to ‘the
awakening and gradual expansion of this way of thinking among medieval
scholastic theologians addressing economics subjects’ (Langholm 1992:
564). The substantial difference is that scholastics rejected it as the
primordial way of behaviour. Following Aristotle, scholastics considered
money to be merely a means to live, not as an end in itself. Thus, looking
for wealth and properties beyond the point of a proper supporting of the
house is contra natura. Scholastics do not condemn an economic incentive
but rather the disorderly pursuit of it.
Scholastic just price versus current market price
First, it is true, that trade in its proper and rigorous sense is in itself neither morally
good nor bad, but indifferent; the trade could be done well or badly. However,
although it was indifferent in itself, many people usually trade fraudulently, that is the
reason why such practices are usually considered as dangerous and rarely without sin.. .
The danger is behind the oaths, lies, frauds, prices excess and other practices which,
strictly speaking, are vice not of the trade itself but the trader. So, to trade is not only licit
but also useful and necessary to the nation; it could be done pursuing an honest end as
the maintenance of the family or the help to poor people. (Lugo 1848 [1642] 26:22)
This quotation highlights the teleological vision of wealth in the
scholastic tradition.
3.1.4. Conclusion: the vanishing of moral responsibility
The teleological vision of the economy, which compels moderation, the
communal dimension of private property, the common estimation role
against economic compulsion and, finally, the fundamental responsibility
of human beings as agents of Creation set a moral framework that is quite
different from the modern economic one. All of this has to be understood
from within an organic conception of society, where everyone has a role to
play for the whole body to function properly or, in other words, to work for
the common good. This organic vision was substituted by a mechanical one
during the Enlightenment. God set the world in motion and let it run
alone. This mechanical conception stresses the importance of knowing the
working rather than the causal agents. Nature and society were seen as
perfect and harmonious systems. In such a context, human responsibility
vanishes (Go´mez Camacho 1998: 514–515, 528–529).
Do not feel any concern now for our morals or our customs. It is socially
impossible for these not to conform by their principles; it is socially impossible for
men who live under such simple laws (property and the freedom of the market),
than men who, once they have achieved knowledge of absolute justice, have
submitted to an order whose base is by essence justice, and whose limitless
advantages are evident, not to be, humanly speaking, the most virtuous men
(Mercier de La Rivie´re 1910: 536).
Homo iustus (ruled by morality and the self-control of passions in an
organic society context) was superseded by Homo economicus (ruled by
individualism and utilitarianism in a mechanical-social context).
3.2. Equality versus equilibrium
If we consider the just price doctrine as an arbitration procedure focused
on justice, instead of as an economic theory focused on market forces, the
outstanding problem becomes equality in every singular and interpersonal
exchange, not equilibrium in the market. According to this point of view,
Fabio Monsalve
some other minor differences will appear between just price and liberal
market price. We will mention three of them.
3.2.1. Latitude versus accuracy
All economic textbooks underscore that market price is characterised by
unicity and stability. On the contrary, just price is characterised by width
and divisibility.
. . . popular or natural price is not absolute but allows a certain latitude or range.
Inside the margin three prices are usually pointed out: lowest or pious, medium or
moderate and highest or rigorous (Lugo 1848 [1642] 26:39).
To understand this latitude of indetermination of just price, we should
examine the role played by recta ratio (right reason) in scholastic epi-
stemology and the probabilism associated with it. In brief, probabilism means
the impossibility of the certainty of human knowledge, and thus, common
estimation cannot set the just price. It also affects value and prices.
We cannot ascertain what is the mathematical just value of things; some
people think it would probably be 100, while some claim 90 and others 95.
Because all of these opinions are prudent and probable, any of them can
potentially be the just price in practice (Lugo 1848 [1642] 26:40). Latitude
versus accuracy marks a subtle difference between just price and market
3.2.2. Equality ‘out the just price’
The prevalence of equality is also demonstrated by the possibility of making a
fair exchange without respecting the just price in the context of a singular
and particular transaction. Lugo distinguishes between the factors that
change the just price and other circumstances that allow buying and selling
below or above the just price. The former factors are as follows: higher utility
to satisfy human necessities and the subsequent higher estimation, shortage
of goods, greater number of buyers, abundance of money and manner of
sales (retail or offered repeatedly). The latter circumstances are as follows:
the existence of a lost gain (lucrum cessans) or emergent damages (damnum
emergens) for the seller or the buyer (Lugo 1848 [1642] 26:89), the risk of
contract fulfilment (26:90), the purchase of credits at lower prices because of
the uncertainty in payment (26:93), the things commonly sold on credit
because the number of buyers will increase given that they do not need cash
(26:122), in the case of special appreciation of the goods by the seller (26:90)
and when the contract is carried out to favour the other party and some
damages are involved (26:91)
Scholastic just price versus current market price
The outstanding aspect is that these exceptional circumstances turn the
common natural just price into an unfair price.
3.2.3. The ‘equilibrium’ mechanism
From a moral and just point of view, the inequality should be corrected.
Restitution was the mechanism arbitrated by scholastics. This mechanism,
known as laesio aenormies, was ruled by Roman law, which gave grounds for
action only if the deviation from just price was 50% or more. This was
insufficient for scholastics, who argue for restitution in every unfair
contract, regardless of the violation.
It is the common and true opinion between doctors that every wrongdoing against
justice should be considered a serious sin in self-consciousness and restitution will be
obligated. . . The ‘a priori’ reason, following Saint Thomas, is that in buying and
selling equity should be respected which does not happen when the price is higher or
lower than the value (Lugo 1848 [1642] 26:81).
Restitution is not automatic and depends on human will (self-con-
sciousness) or a judge’s sentence under a lawsuit. The lack of automatism
does not prevent it from being a correction mechanism.
A more modern approach to restitution would make it appear as a
senseless concept because of the lack of responsibility in human beings in
modern transactions. Restitution is not morally justified either because to
transact at market prices free agents from moral responsibility in economic
performance; nor is it justified logically because the market equilibrium is
reached automatically via prices or quantities.
4. Conclusions
Just-and-market price controversy does not lie in the just-price-and-current-
market-price-identification, which is ‘so obviously correct as to be almost a
truism’ (Langholm 1992: 580). The real problem is the significance given
to the current market price. Some scholars consider the meaning to be the
same in both scholastic and liberal traditions, focusing on the common
dimension of the price-fixing mechanism and the principle that ‘A thing is
worth what it can be sold for’. Others have denied it, considering the
importance given by scholastics to will and consent.
In this article, I have tried to demonstrate the second thesis, considering
the following arguments: First, the vision of the role of just price, which
converts the dichotomy of cost-versus-need criterions of value into an
harmonious vision, where both criterions are ethically relevant; second, the
ethical perspective, which lies in the scholastic concept of justice
Fabio Monsalve
(equivalence) and human nature (social dimension and agents of
Creation) and compels human beings to act for the common good; finally,
the differences that arise between just price and liberal market price when
we focus on the equivalence dimension of the just price (latitude, fair
transactions ‘out the just price’ and restitution).
All of previous considerations allow us to speak, in the frame of reference
of the scholastic tradition, of a collaborative market price, which should be
considered completely different from the competitive market price.
Economic practices are closely linked with human behaviour; hence, the
economic practices envisaged by scholastics cannot be the same as the
liberal ones because of the substantial difference in the moral attitude that
economic agents were supposed to have in both economic traditions, at
least from a theoretical and doctrinal point of view.
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From an analytical point of view, some aspects of Just Price theory, probably
the most famous and lasting scholastic concept, remain controversial: the
cost-of-production versus the subjective-utility theory of value is a main
controversy as well as the question of whether the natural just price is con-
ceptually the same as the current market price. Strictly speaking, just price
is conceptually the same as the current market price. Of concern is whether
the meaning behind the label is the same in both scholastic and liberal
traditions. There are different interpretations among scholars. One is that the
just price is merely the current market price, and common estimation plays
the same role as market forces in a competitive context. Another group states
that the just price is quite different from the market price; the fundamental
reason is that the ethical framework of the scholastic paradigm sets a corpus
of principles that greatly differs from the neoclassical homo economicus. Is it
possible to speak of a collaborative market price (scholastic tradition) and
competitive market price (liberal tradition)? This article tries to dig into such
debate and reflects on the morality of the market price.
History of economic thought (B11, B12, B13), ethics and justice (Z10),
dominant position (D42), just price
Fabio Monsalve
... Recent works show a stronger focus on the normative dimension of the just price, advantageously reorienting the discussion towards the notion of justice (e.g.Hamouda and Price 1997;Gomez Camacho 1998;De-Juan and Monsalve 2006;Monsalve 2014a;Chaplygina and Lapidus 2016), and sometimes engaging in a normative approach based on Aquinas's own51 Noonan 1957; De Roover 1971; Lapidus 1987 and Langholm 2003; Sivery 2004;De-Juan and Monsalve 2006;Franks 2009;Koehn and Wilbratte 2012;Ege 2014;Monsalve 2014a;Hirschfeld 2018;Santori 2019 Santori , 2020 Santori and 2021 ...
... Recent works show a stronger focus on the normative dimension of the just price, advantageously reorienting the discussion towards the notion of justice (e.g.Hamouda and Price 1997;Gomez Camacho 1998;De-Juan and Monsalve 2006;Monsalve 2014a;Chaplygina and Lapidus 2016), and sometimes engaging in a normative approach based on Aquinas's own51 Noonan 1957; De Roover 1971; Lapidus 1987 and Langholm 2003; Sivery 2004;De-Juan and Monsalve 2006;Franks 2009;Koehn and Wilbratte 2012;Ege 2014;Monsalve 2014a;Hirschfeld 2018;Santori 2019 Santori , 2020 Santori and 2021 ...
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Bien que l'œuvre à portée économique de Thomas d’Aquin (c. 1225-1274) ne représente qu’une petite partie de ses écrits, elle est la plus importante de son temps, tant par son ampleur et par sa diversité que par sa postérité. Ses œuvres de jeunesse ont été peu explorées jusqu’à présent par les économistes. Elles présentent cependant un triple intérêt : des apports uniques dans l’œuvre de l’Aquinate ; des éléments comparatifs permettant de montrer les évolutions par rapport à ses prédécesseurs d’une part et à ses œuvres plus tardives d’autre part ; et des clefs de lecture nouvelles pour comprendre ses œuvres plus connues comme les Commentaires d‘Aristote et la Somme de théologie. Il s’agit donc de mener l’analyse économique des passages du Commentaire des Sentences, la grande œuvre de jeunesse de Thomas d’Aquin, concernant l’usure et l’activité des marchands, du De emptione et venditione ad tempus, court traité sur la vente à terme, ainsi que des écrits qui ne portent pas directement sur les questions économiques mais qui contiennent des situations d’échanges régies par le juste prix. Ces écrits présentent un ensemble de risques, dont cette spécificité que constitue le risque d’erreur d’analyse et de compréhension de l’opération. On peut ainsi en dessiner une cartographie qui donne lieu à une typologie et conduit à dégager une structure générale comportant des risques en amont de l’échange et des risques intervenant au cours de celui-ci. Il en ressort que Thomas d’Aquin porte son attention sur le prix et sur la nature marchande ou non de l’objet échangé comme instruments visibles et objectifs de la justice de l’échange, plus que sur les agents et leur intention.
... Indeed, while the 'just price' as it was viewed by the medieval and modern scholastics -often taken as a whole through reference only to a few major works -does have a certain place in the literature, the evolution of the expression over time in Aquinas's works and even more so the characteristics of its first occurrences in his early work are not the object of specific attention and remain largely unexplored. Beyond the strictly historical aspects, however, the literature has allowed a progressive rediscovery of the primacy of normative justice, which has led to a renewed understanding of the just price (De Roover 1958 andBaldwin 1959;Hollander 1965;Friedman 1980;Lapidus 1986Lapidus , 1987Lapidus , 1994Lapidus and 2021Langholm 1992Langholm , 1998Langholm and 2003Hamouda and Price 1997;Gomez Camacho 1998;Sivéry 2004;De-Juan and Monsalve 2006;Franks 2009;Koehn and Wilbratte 2012;Monsalve 2014a;Lapidus 2016 and2022;Sturn 2017;Hirschfeld 2018;Santori 2019Santori , 2020Santori and 2021Januard 2021b and2022a.) Building on these insights, I first show how the application of the just price to non-tradable goods allows for a delimitation of the trading space (section 2). ...
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The term 'just price' appears only twice in the Commentary on the Sentences, the most important of Thomas Aquinas's early works. Yet these little known and seemingly incidental appearances, related to a non-tradable good and a semi-tradable good, are in fact fundamental and decisive: they offer a new way of understanding the Thomasian just price as an analogy of justice; they highlight the role of price in reducing the risk of lack of information about the justice of exchange; they allow the market to be delimited; and they indicate how, through paying particular attention to the goods, Aquinas implements an objective approach that reduces the subjective risk concerning the agents and their hidden intentions.
... 3 For a study of the text and its history, see foundational works such as Mandonnet, 1910, 116-120;O'Rahilly, 1928;Dondaine, 1979, 381-390, and more recent contributions such as Torrell, 1993, 178-179;Imbach and Oliva, 2009, 21;Porro, 2015, 178-179, 301, 441). 4 In the economics literature we find only a few mentions of it, often brief and allusive, such as in Noonan, 1957, 51, 90, 181;Baldwin, 1959, 77;Bartell, 1962, 373;De Roover, 1971, 58;Lapidus, 1986, 24;1992, 30;Langholm, 1992;2003, 168;Chaplygina and Lapidus, 2016, 22. 5 It is therefore worth mentioning Tawney, [1926Tawney, [ ] 1948McLaughlin, 1939 and1940;De Roover, 1953, 1958Noonan, 1957;Baldwin, 1959;Hollander, 1965;Mélitz, 1971;Lapidus, 1986;1987;Langholm, 1984;Hamouda and Price, 1997;Gomez Camacho, 1998;Friedman, 1980;Sivéry, 2004;De-Juan and Monsalve, 2006;Franks, 2009;Koehn and Wilbratte, 2012;Ege, 2014;Monsalve, 2014a and2014b;Lapidus, 2016 and2022;Sturn 2017;Hirschfeld 2018;Santori 2019;2020 and would be described today in terms of a random variable do exist. 6 On the one hand, it undergoes an evolution in Aquinas's works such that transport is progressively treated in terms of risk through the noun 'danger' (periculum) by a gradual integration of the lexicon of the decretals of Gregory IX (1234); and, on the other hand, the fact that in De emptione the adverbs incaute and imprudenter are used to characterise certain expenses allows us to treat expenses in terms of risk, since the lack of prudence, through the etymology of the terms used and through the intertemporal dimension, refers to a lack of anticipation. ...
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In De emptione et venditione ad tempus, a brief early letter on forward selling, Thomas Aquinas presents a risk of usury inherent in the intertemporal dimension of exchange, but inherent also in licit expenses such as transport, and illicit ones such as borrowing costs or expenses incurred without attention or unwisely, which the merchant may or may not pass on via the price. These expenses appear as risks which are described here for the case of forward sale, but are properly inherent to any commercial activity. While transport is a part of the merchant's activity and represents the paradigm of licit risk, imprudence characterises two stages of failure in his management, namely negligence and mismanagement, and hence leads to illicit risk.
In De emptione et venditione ad tempus, a brief early letter on forward selling, Thomas Aquinas presents a risk inherent in the intertemporal dimension of exchange, but inherent also in licit expenses such as transport, and illicit ones such as borrowing costs or expenses incurred without attention or unwisely, which the merchant may or may not pass on via the price. These expenses appear as risks which are described here for the case of forward sale, but are properly inherent to any commercial activity. While transport is a part of the merchant’s activity and represents the paradigm of licit risk, imprudence characterises two stages of failure in his management, namely negligence and mismanagement, and hence leads to illicit risk.
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Cet essai reprend l'introduction et la conclusion en français d'une thèse de doctorat en sciences économiques soutenue le 23 juin 2022 à l'Université Paris 1 Panthéon-Sorbonne.
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The Latin terms commonly used to signify 'risk' are absent from Thomas Aquinas's economic writings. Instead, Aquinas offers a lexicon of probability, prudence and danger. This ternary lexicon brings with it a triple universalisation of risk: first, a universalisation through activity, including the activity of analysis considered as part of economic activity; second, a universalisation through the agents, since everyone-the observer, the co-contractors, the prince and the population-is affected by the risk; and, finally, a partial universalisation of its definition, since the lexicon indicates a risk which is not yet restricted by calculation, as the modern notion is, although some distinctions are already made by Aquinas. However, the lexicon only describes a risk of loss and does not take into account chance of gain.
Thomas Aquinas’s De emptione et venditione ad tempus is concerned less with usury than with commercial exchange. Cross-referencing the economic aspects of forward selling and the role of the virtue of justice with Aquinas's concepts of sign and analogy leads us to revise our understanding of the just price, drawing a distinction between three different levels of reality (normative, market, and singular exchange), each of which gives rise to analytical, commercial, and strategic risks. This risk-analysis grid offers a basis for a new reading of his later works, notably the Summa theologiae.
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The phrase 'just price' first appears in Aquinas's Commentary on the Book of Isaiah (1252). Interestingly, even in this early work Aquinas introduces the notion of price to comment on a verse, a term which had in fact disappeared with the Vulgate Latin translation, on which Aquinas nevertheless relied, as it had also from the Fathers's commentaries. Aquinas here provides the founding elements of his later analyses: the role of the price in ensuring the justice of exchange, but also the diversity of possible exchange ratios, not necessarily referring to price, in order to account for limit cases within an exchange framework.
The chapter treats money as an important but previously underestimated communicative medium. The changes in the relative social value of monetary signs are explored: beginning with the typical revolutionary desecration of money in late 1910s, Soviet government (followed, to some extent, by public opinion) rapidly succumbs to the equally robust monetary fetishism in the early and mid-1920s, only to rob Soviet currency just a few years later of any informational value: from the late 1920s, the nominal worth of ruble was regulated by the party authorities as tightly as the meanings of key ideological terms (such as “bourgeoisie” or “socialism”) in Soviet discourse. Overall, the discussion is centered upon the growing discrepancy between the stated role of Soviet ruble as the key indicator of Bolshevik societal stability, and its natural volatility in an unstable socio-economical system.