Sharing readings about the Just Price

Over the past three decades, the moral legitimacy of the neo-liberal capitalist system, the general equilibrium model, and the associated individualistic market relationships are being contested (Ould Ahmed, 2015). An increasing number of theories, movements and alternative practices have emerged globally and are encouraging large-scale institutional change to achieve greater solidarity and social justice in market relationships, in other words a socially just economy (Alvarado, 2009; Ould Ahmed, 2015). One of today’s prominent examples is the Social and Solidarity Economy (SSE), which proposes an alternative economy defining new forms of exchange that establish fair prices (Ould Ahmed, 2015). In short, “solidarity economy designates all production, distribution and consumption activities that contribute to the democratization of the economy based on citizen commitments both at a local and global level. It is carried out in various forms, in all continents. It covers different forms of organization that the population uses to create its own means of work or to have access to qualitative goods and services, in a dynamics of reciprocity and solidarity which links individual interests to the collective interest” (Allard et al., 2008, p. 6).

In this vein, Woolsey Biggart and Delbridge (2004) have classified systems of exchange according to four types, by taking into account aspects of the economic, social, structural, and cultural approaches to market organization. According to them (2004, p. 36) “the “free market” is but one possible type of economy (…). [They] argue that there may be qualitatively distinct types of socially organized exchange that support substantively different orientations to economic action and, hence, culturally different trading arenas”. Indeed, the authors envision markets as cultural arenas; a view supported by DiMaggio (1994, p. 28; as cited in Woolsey Biggart & Delbridge, 2004, p. 30) who claims that “categories of economic action are culturally variable and socially constructed”.

One of the forms that Biggart and Delbridge (2004) have identified, and which is of interest for this research, is the “moral system of exchange”. Referring to Shanahan and Tuma (1994), the latter argue (2004, p. 39) that moral exchange arenas are based on “a belief in a substantive good or value, such as distributive justice”. In fact, the moral precepts of such exchange systems are rooted in theories of justice and equity that date back to ancient Greek philosophy (H?gg, 1983). In particular, Aristotle discussed the question of value-based concepts such as the Just Price in his works Nicomachean Ethics and Politics. The concept of a just price was further developed during the Middle Ages, when religious values permeated all spheres of life and where the moral worth of actors, products or services was commonly considered (de Roover, 1958). Inspired by Aristotle’s philosophy, the theologian Thomas Aquinas also contributed to a theory of the Just Price in Summa Theologica (Baldwin, 1959). He constrained the pursuit of profit by citing concerns for human well-being and human dignity (Dierksmeier, 2013).

An academic debate is on-going around the idea of a just price (Hagan, 2012; Murphy, 2011; Serrano, 2010). Three interpretations exist. First, some scholars consider that the just price of a product or a service corresponds to its value, which is best indicated by the current market price (de Roover, 1958; Elegido, 2009; Rothbard, 1995). A second interpretation considers that a competitive market price does not reflect an objective value and cannot be considered as just because it is not ethical to charge whatever buyers are willing to pay (Bragues, 2018; Kline, 2017). This group of scholars states that the notion of the Just Price is the sum of all the costs of production plus a moderate profit that would allow the seller to maintain his business and provide a decent life to his family (Steiner, 1976). The third view on the Just Price has been articulated by Koehn and Willbratte (2012) and supported by Hagan (2012). It rejects the previous two theories. These authors argue that a just price is the price that results from an agreement between just persons, who “take into account the well-being of the individual transactors and the good of the entire community (Koehn & Wilbratte, 2012, p. 501).  

An additional contribution to moral systems of exchange reported in the literature is Pope Benedict XVI’s analysis of economics exchange in his encyclical letter Caritas in Veritate (Murphy, 2011). He invites us to think about a just price as more than the value of exchanged goods; he claims that just transactions are about people rather than objects and should benefit all (Wittmer, 2017). This is reflected in the following quote: “in fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. Without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function” (Pope Benedict XVI, 2009, p. 35).

With respect to our current system, and according to Hagan (2012), the reason why Aquinas’ theory of the Just Price is marginally represented in the dominant economic logic is because its emphasis is on achieving justice rather than market efficiency; by no means because of Aquinas’ lack of economic comprehension. That said, several scholars have applied Aquinas’ theory of the Just Price to modern business and management issues (Elegido, 2009; Koehn & Wilbratte, 2012). Moreover, there exist various applied examples of moral systems of exchange in today’s economy. Within the food sector the best known is Fair Trade, which was institutionalized in the 1990s, although it has become controversial over subsequent years (Gendron et al., 2009). In fact, there exists a vigorous debate on the impact of the Fair Trade initiative on certified farmers (Griffiths, 2012). Yet other alternative business structures and practices exist, which provide better ways of doing business and distributing value to all supply chain actors, especially farmers, so that they can have a decent life (George et al., 2012; Jennings et al., 2018). Examples of the actions of these new social economic movements anchored in SSE dynamics are numerous and include equitable forms of organization and governance such as short supply circuits, farmer-owned cooperatives, long-term and transparent contracts, profit sharing and producers’ participation in pricing decisions (Gendron et al., 2009; Jennings et al., 2018; Maignan, 2015).  

These SSE initiatives are perceived as the germinating seeds of Thomas Aquinas’ idea of a business and economic model oriented towards human well-being and dignity. Scholars are calling for an exploration of the role of firms in distributing fair value and its consequences for achieving social equality, fairness and poverty alleviation (Bapuji et al., 2018; Cobb, 2016; Utting, 2007; Werner & Lim, 2016). Indeed, Utting (2007) recognizes that an essential component of equality such as redistribution is lacking in CSR discussions. He recommends identifying elements of a redistributive CSR agenda that would relate to the progressive implementation of income distribution within enterprises and supply chains that would benefit low-income stakeholders, smallholder farmers and in more general terms, poor countries. Looking at food supply chains specifically, Glover and colleagues (2014) highlight the need to explore the role of powerful actors such as supermarkets in developing legitimate sustainable practices. Finally, Oxfam (2018, p. 30) states that “examining the business arrangements and structures that can lead to a more equitable distribution of value in food supply chains has never been more important”. From a theoretical perspective, researchers are calling for the development of management theories yielding a richer understanding of the ethical dimension of economic activity (Bapuji et al., 2018). They encourage the study of the ethical restructuring of the market as well as of the rules of international trade (Gendron et al., 2009). I personally call for more research on equitable value creation, as opposed to value redistribution.

 References:

Allard, J., Davidson, C., & Matthaei, J. (2008). Solidarity Economy: Building Alternatives for People and Planet. ChangeMaker Publishing.

Alvarado, J. (2009). Fair Trade in Mexico and Abroad: An Alternative to the Walmartopia? Journal of Business Ethics, 88(S2), 301–317.

Baldwin, J. W. (1959). The Medieval Theories of the Just Price: Romanists, Canonists, and Theologians in the Twelfth and Thirteenth Centuries. Transactions of the American Philosophical Society, New Series, 49(4), 1–92.

Bapuji, H., Husted, B. W., Lu, J., & Mir, R. (2018). Value Creation, Appropriation, and Distribution: How Firms Contribute to Societal Economic Inequality. Business & Society, 57(6), 983–1009.

Bragues, G. (2018). Theorists and philosophers on business ethics. In E. Heath, B. Kaldis, & A. Marcoux (Eds.), The Routledge Companion to Business Ethics (1st ed., pp. 23–37). Routledge. https://doi.org/10.4324/9781315764818-4

Cobb, J. A. (2016). How Firms Shape Income Inequality: A Rejoinder to Zardkoohi and Bierman. Academy of Management Review, 41(4), 749–754.

de Roover, R. (1958). The Concept of the Just Price: Theory and Economic Policy. The Journal of Economic History, 18(4), 418–434.

Dierksmeier, C. (2013). Scholastic Business Ethics: Thomas Aquinas Versus William of Ockham. In C. Luetge (Ed.), Handbook of the Philosophical Foundations of Business Ethics (pp. 159–178). Springer Netherlands. https://doi.org/10.1007/978-94-007-1494-6_83

DiMaggio, P. (1994). Culture and economy. In Handbook of economic sociology (pp. 27–57). Princeton University Press.

Elegido, J. M. (2009). The Just Price: Three Insights from the Salamanca School. Journal of Business Ethics, 90(1), 29–46. https://doi.org/10.1007/s10551-008-0024-6

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George, G., McGahan, A. M., & Prabhu, J. (2012). Innovation for Inclusive Growth: Towards a Theoretical Framework and a Research Agenda: Innovation for Inclusive Growth. Journal of Management Studies, 49(4), 661–683. https://doi.org/10.1111/j.1467-6486.2012.01048.x

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Griffiths, P. (2012). Ethical Objections to Fairtrade. Journal of Business Ethics, 105(3), 357–373. https://doi.org/10.1007/s10551-011-0972-0

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H?gg, C. (1983). Just Price and Equal Opportunity. Journal of Business Ethics, 2(4), 269–272.

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Kline, W. (2017). Exploitation and Just Price Theory. Business Ethics Journal Review, 22–27. https://doi.org/10.12747/bejr2017.05.04

Koehn, D., & Wilbratte, B. (2012). A Defense of a Thomistic Concept of the Just Price. Business Ethics Quarterly, 22(3), 501–526. https://doi.org/10.5840/beq201222332

Maignan, M. (2015). Innovation sociale et formation du prix juste au sein d’une filière courte alimentaire. Le cas de la SCIC Alter-Conso. Les Cahiers du CRISES, Collection Hors-Série(HS1401), 17.

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Ould Ahmed, P. (2015). What does ‘solidarity economy’ mean? Contours and feasibility of a theoretical and political project. Business Ethics: A European Review, 24(4), 425–435. https://doi.org/10.1111/beer.12063

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