I’ve been listening to Murray Rothbard’s Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought, vol. 1, available as a free PDF here or as a free audiobook narrated by the sonorous Jeff Riggenbach here.  Early on, there’s an extended discussion of the idea of the “just price” as developed by Roman jurists, early Canon Law, and Medieval theologians.  And it led me to wonder: what should libertarians think about this idea?

Rothbard holds what I take to be the standard position among libertarians – that a just price is whatever price people are willing to pay in the market without force or fraud.  And he claims to find at least the core of this view in St. Thomas Aquinas.  Aquinas, in his Summa Theologica, II.II, 77, 3, discusses the following example (as presented by Rothbard):

A merchant is carrying grain to a famine-stricken area. He knows that soon other merchants are following him with many more supplies of grain. Is the merchant obliged to tell the starving citizenry of the supplies coming soon and thereby suffer alower price, or is it all right for him to keep silent and reap the rewards of a high price? (53)

Aquinas’ answer, perhaps surprisingly, is that the merchant is not so obligated.  It would be “exceedingly virtuous” of the merchant to provide this information to his customers, but he is not required by justice to do so.  From this, Rothbard concludes that Aquinas views the “just price as the current price, determined by demand and supply” (53), and not as some market-independent fact determined by, say, the “real” value of the object or by the cost of its production.

So is Aquinas defending price gouging?  If the just price is the market price, and the market price shoots up suddenly because of a natural disaster that limits the supply or increases demand for a good like ice, or electrical generators, can merchants justly sell these items for whatever their customers are willing to pay?

Aquinas’ view is almost certainly more complicated than Rothbard’s account presents it to be.  Earlier in the same discussion, for instance, Aquinas states that if one person really needs what you have, and you could do without it, it would be unjust of you to raise the price merely to profit from the situation.  It is fine to to trade goods for a moderate profit, so long as one uses the profit to satisfy necessary or virtuous ends and not mere greed.  But the just price seems much more sharply limited than whatever the market will bear.

I’ve written myself in defense of price gouging.  And I am of course sympathetic to a libertarian perspective on these issues.  But I think a defense of price gouging requires something more robust than mere appeal to “whatever people are willing to pay without force or fraud.”  If you are drowning in a lake and I row by on the only boat in sight, it would be unjust (and exploitative) of me to make my rescue of you contingent upon your willingness to pay me $50,000.  Denying this seems cold-hearted and deeply implausible.  But accepting it seems to require accepting that the just price is not necessarily whatever price people are willing to pay in the absence of force or fraud.