If markets are to function effectively, prices need to be agreed and respected. However, confidence in the ability of free markets to allocate resources efficiently through the price mechanism is in decline. Minimum wages are accepted despite evidence that they price the unskilled out of work. The manifesto of the newly elected mayor of New York, Zohran Mamdani, includes a $30 minimum wage, rent freezes and city-run grocery shops.
For those from a Common Law background, price is generally, in the absence of fraud, as agreed between buyer and seller. However, not only is there a long tradition of thinking about whether a price is ‘just’, and if not, how to remedy it, those principles survive in contemporary legal systems.
The idea of a just price, while owing something to Aristotle and Roman law, was developed by Scholastic theologians who believed that commutative justice required that the items being exchanged should be of equal value. For Thomas Aquinas, justice required that in an exchange one should be concerned to ensure that the counterparty receives what is due to them. While for Hayek this was a ‘futile medieval search’, the concept allowed, by the application of the Roman law principle of laesio enormis, land transactions at less than half their ‘true’ value to be void so that the seller recovered their property. In common law systems that concept has been dismissed as contrary to the principle of the autonomy of the contracting parties, while elements of this thinking survive, for example in Germany and France.
While Just Price Theory and Just Price in the Markets cover similar ground, with the latter, by Charles R. Geisst, focussed on the history of the idea and Joaquin Reyes using it in the former as the basis for a reassessment, they make a stark contrast. Though Reyes is markedly less accessible, he seeks to explain the ideas behind a ‘just price’ and argues that it deserves renewed attention. By contrast, Geisst writes at greater length, but to less effect. His previous work on usury may not be unconnected to significant material on that subject being included here which is only, at best, tangentially relevant. He includes material on well understood subjects from monetary theory in the seventeenth century, to the development and problems of mercantilism and public markets in the eighteenth and the gold standard and anti-trust legislation in the twentieth, although the connection to the concept of a just price is far from clear. Much of his material is not only largely irrelevant but underlines the lack of originality. Neither Hayek nor Collingwood feature in the bibliography or index. Errors – including on the nature of feudalism – add to the impression of existing material being recycled without anything new to say.
Reyes sets out the various ways that the idea of a just price have been regarded as misleading. In the view of free market critics, it is impossible in a free market to sell an item for more than its worth, as its value is that which someone is willing to pay for it. The idea of a just price undermines the ability of an individual to make a contract. The sovereignty of the individual requires that he is able to exercise autonomy in agreeing a price. It may transpire to have been a mistake to agree that price, but the individual had the freedom to make that decision. For others, the concept of a just price fails to recognise the efficiency with which market prices provide signals to buyers and sellers which ensure demand is met efficiently.
While recognising these counterarguments, Reyes suggests that the concept deserves to be reconsidered on the understanding that the price agreed reflects an imbalance of power between buyer and seller. He explores the tension between the autonomy of the individual and the risk of injustice. His purpose is to demonstrate that market economics are unjust by favouring the rich. While confused by a style which prefers complexity over clarity, at its heart his view is that ‘prices are the product of choice and power’, tending to reinforce inequalities of power. There are arguments to be made for more equal distribution of resources, but Reyes’ attempt to argue that disparities of wealth mean that market pricing is unfair is undermined by a lack of credible analysis. His examples tend to the extreme; the person obliged to sell their organs or markets characterised by extortion.
He quotes R.G. Collingwood who described a just price as a ‘contradiction in terms’. Collingwood also noted that it is reasonable to demand a higher wage if it is lower than it should be due to circumstances which ‘ought not to exist’. Collingwood makes the point that this is not an argument for legislation controlling wages, but for it to prevent exploitation of workers. For Collingwood ‘a wage fixed by any but economic considerations ceases to be a wage’. Reyes misrepresents the argument by suggesting that Collingwood’s characterisation of a just price is contradicted by his support for a freely organised labour market. He claims that Collingwood ‘did not really believe that the idea of the just price was contradictory, although he believed that he did’. Reyes’ argument in support of this contention is obscure and does not deal with Collingwood’s analysis.
While noting that people will not work as hard without wage differentials, he suggests that a virtue based approach ‘allows us to challenge this assumption by noting that this is merely a contingent feature of our current society’. No detail is given of the alternative arrangements, ‘shaped by a more egalitarian ethos’ which would avoid this problem. Animal Farm is not referred to.
While his work is characterised by the repetition of chains of logic, this does not prevent Reyes from making suggestions with no obvious support. Having quoted Adam Smith suggesting that wealth is power, he moves without comment to suggest that that the rich impose prices on the poor. He gives no examples of public markets that function in this way but argues that market economics can only operate efficiently ‘if equality of wealth obtains.’ This leads to the conclusion that ‘in societies in which wealth is unequally distributed, … very few (if any) of the prices that we pay and receive are just’. His purpose is to suggest that, to use a much favoured word, ‘normative’ pricing, dependent on ‘virtue’, should replace prices set by free well-functioning markets. In making this argument he suggests that contract law should recognise ‘distributive justice’ by setting prices which lead to greater equality of wealth. The autonomy of the individual to make a contract is only partially accepted.
A book reviewed by Richard Turnbull illustrates the sustained interest in this area. Richard’s comment that the content was ‘shrouded in a mystical academic language of a rather obscure discipline’ can equally be applied to Reyes. That review provides case studies where attempts to replace market prices were resisted by those with less resources than the counterparty.
One might dismiss this line of thought as ignoring generations of experience. From attempts to limit wages after the Black Death to the wages and prices policies of the 1970s or the experience of eastern Europe after 1945, the attempt to replace a market by prices controlled by executive action has been both damaging and ultimately unsuccessful. However, the interest in the idea of a ‘just price’ demonstrated by these two books underlines the fact that for many this is an attractive idea. If the voters of New York elect a mayor who thinks that state controlled grocery shops will reduce prices, it would be a mistake to dismiss this line of thought as redundant. Many simply do not trust market economics. Academics like Reyes seek to provide credibility for distributive justice as a replacement for the operation of the market and they have a receptive audience. Making the argument for the central importance of market economies in generating the wealth needed to provide prosperity and reduce poverty is a priority for a generation attracted by the idea that ‘justice’ can be achieved by replacing the freedom of individuals with direction by the state.
‘Just Price Theory: A Reassessment’ by Joaquin Reyes was published in 2025 by Bloomsbury (978-1-509-96354-6). 256pp.
‘Just Price in the Markets: A History’ by Charles R. Geisst was published in 2023 by Yale University Press (978-0-300-26833-1). 280pp.
Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. Since retiring from PwC he has completed a master’s in history at Oxford and is hoping to undertake further research. He is also a trustee at the London Handel Society and the Open Spaces Society.