Starve all the lawyers: four theories of the just price

Abstract

The only “sense in which we can meaningfully talk about just wages or just prices”, said Friedrich Hayek, is for wages and prices “determined in a free market without deception, fraud or violence”. Conversely, after reviewing three theories of the just price, this paper proposes a classical liberal theory of the just price, called the “catallactic” theory, according to which our understanding of just prices must account for the background institutions of markets. Some transactions could not happen in a market without a certain theory of just prices and such transactions will feed into our understanding of markets, hence making just prices a de facto reality.

Keywords:

• Classical liberalism
• Friedrich Hayek
• just price
• market capitalism
• scholasticism

JEL CODES:

• B11
• B12
• B13
• B25
• D46
• D63
• K10

Acknowledgements

I presented an early version of that paper at the 14th Pavia Graduate Conference in Political Philosophy, 13 September 2016, under the joint patronage of the Italian Society for Political Philosophy (SIFP) and the Italian Society for Analytical Philosophy (SIFA), at the Department of Political and Social Sciences, University of Pavia. I am grateful to the participants and to professors Ian Carter and Andrea Sangiovanni for their comments. I also wish to thank Andrew Lister, Jennifer London, two anonymous reviewers, and the editor Richard Sturn for insights that greatly improved this paper.

Disclosure statement

No financial interest or benefit has arisen from the direct applications of this research for the author.

Notes

1 The classical liberal tradition emerged in the pioneer writings of John Locke, and it was later developed during the Scottish Enlightenment by Adam Smith, David Hume, and Adam Ferguson. Classical economists like David Ricardo, Thomas Malthus, and Jean-Baptiste Say also shaped the economic views of such a tradition, and they were followed, for example, by Carl Menger, Henry Sidwick, and Alfred Marshall. Many philosophers and political theorists, such as Jeremy Bentham, Alexander von Humboldt, Alexis de Tocqueville, and Bernard Mandeville, were likewise among the founding fathers of such a liberal tradition. In this paper, I focus on twentieth century classical liberals, like Friedrich Hayek, Milton Friedman, Ludwig von Mises, and Richard Epstein. The basic principles of classical liberalism have remained unchanged – individual freedom, market capitalism, limited government, and the rule of law. These four pillars are necessary components of any classical liberal theory.