The Justice of Markets

Human nature and the foundation of commutative justice

“Money is the measure of all things” - Aristotle (Nic. Eth., V.5.10)

The concept of money is a fascinating one, specifically when one considers how the modern understanding and use of it seems to differ so radically from the classical and medieval economic theories. Today, while sometimes confused or overwhelmed by it, we are nonetheless accustomed to things like global markets, public stock exchanges, entire industries built on managing and exchanging debt and credit, and so much more. It feels strange to even apply the language of modern economics to premodern socioeconomic circumstances. For example, characterizing the feudal system in terms of land leases, public rights-of-way, joint venture agreements, home equity, and the like, just feels kind of wrong. Likewise, the classical and medieval economic lexicon, leaning heavily on virtue-ethical terms and a narrow understanding of labor as the basis of value seems to be unable to accurately account for the modern system. So, what changed? Obviously, economics itself, understood as the science of how social units create and react to market forces within a political society, has not and cannot be changed, since it is an extension of human nature. But if economics remains unchanged, why the tectonic shift in the language and theory of it?

For the sake of simplicity, let us begin with an easy case of exchanging material goods. Since the dawn of civilization, there is widespread agreement that the barter system, i.e. the exchange of goods without the use of a medium such as money, is inferior to a currency economy. Aristotle even points to the barter system as an indicator that a given people is part of the barbaroi.¹ Besides the obvious physical convenience of money, Aristotle argues in the Nichomachean Ethics that the virtuous mean of justice is determined mathematically in such cases of exchange, and he describes a geometric operation of ratios to determine the relative cost of one product to another.²

This ratio-based conceptualization of how goods and services are evaluated requires a common term (money) that can be divided and multiplied in a way that physical products cannot or should not be. When extended beyond an individual case, this geometric evaluation is an idealization that forms a baseline for future individual exchanges (i.e. it establishes the relative market price between the available goods and services). This is key; rather than applying this model simply to individual exchanges, which introduce the complexity of subjective desires for the products, future thinkers like St. Albert saw this idea for what it truly was, a deep insight into human nature itself, that a marketplace of free actors, through its own internal logic and forces, establishes a unique form of justice that sets the standard for exchanges within the political society. St. Albert used the term “opus in communitatis usum” (roughly translating to “communal worth” or “common utility”) to describe the value determined by this market process of proportional equalization. And he defended this proposition by pointing out that it is the community, and specifically the government of the community, that establishes money, and so naturally the thing that it denotes should be of communal, not purely individual worth.³

It is important to note that all of this theory of value was, for these thinkers, in service of determining with precision the just price that one ought to pay others in order that it could be said that the seller was given his due, and vice versa. The amoral framework we associate with modern capitalism is a result of an unmooring of the scholastic and ancient account from its original grounding in human nature and the pursuit of virtue. Aristotle and his followers throughout the medieval period produced this framework with the precise purpose of countering the position we see so often today associated with capitalism, that a just price is whatever the seller is willing to part with the product for. Cicero posed a classic moral puzzle, asking whether it would be unjust if a merchant with a ship full of grain arriving on a island that was starving, and despite knowing that there were other such ships that would arrive soon, then sold the grain at the vastly inflated “market price” that was driven up in desperation.⁴ Classical thinkers would be able to point to a community’s standard of evaluation of that product, i.e. the price in a free market, that would be called the just price. Critically, that price was still determined by the same market forces that the modern capitalist might use to defend the position of “whatever price the market will bear.” But St. Albert and St. Thomas would be able to strongly defend the position that such a person acts unjustly, taking advantage of a particular exchange not being free, but rather coerced. Without the prior working of a free market to establish an ideal, or a standard, and unless that market were sufficiently large to represent all parties involved in the individual transaction, the argument against “whatever the market will bear” loses much of its force.

But, apart from its unmooring from the moral framework that it sprung out of, is there a real difference between modern economics and its classical roots? Looking at a few examples may help point out the difference. Today we have concepts that seem to arise from a reimagining of debt obligations as tradable or saleable assets. But, when a bank bundles home loans into a mortgage bond, then sells that bond to another party, thereby exchanging long term higher cashflow with some level of risk for a lump sum now to shed the risk, is that really so different from how rulers of medieval principalities may have conceptualized a potential sale or purchase of a town or province? The difference seems to be confined to the type of entities involved, and the technical difference between private and public debt obligations. We can also look at how consolidated industries have become in today’s economy, and in ways that would be unthinkable to a medieval scholar. Such consolidation is primarily made possible by the dawn of engine technology and its effects on everything from transportation to the production and transmission of energy. However, as our reach has increased, so has the extent of the political societies we operate in, and so as regards consolidation, the modern difference from classical/medieval system seems to be one of degree, not of kind. Monopoly is not a concept unique to modernity, and consolidation of market share has always been a tactic for growing businesses. What is different now is the technological advancements have created bigger markets, and so larger companies are possible.

The real tangible difference now appears to be that, due to the same technological advancements that created bigger markets, automation has increased real wealth to the point that essentially everyone in a first world country today has greater real wealth than most medieval monarchs. And so, the financial tools available to the common man have radically increased. The financial mechanisms we associate with modern capitalism seem to be not particularly novel, but their widespread use is, and the fact of their sudden ubiquity has led to a change in the way we talk about them. The unfortunate fact is that the rise in wealth has been coincident with the unmooring of the theory from the moral framework that used to underlie it. The idea that the market is a place of equalization and subsequent establishment of a standard of justice is all but lost on our society. Luckily, market mechanisms themselves, being an extension of human nature, still contain the same latent logic that previously had overtly established the standards of commutative justice. “Two cheers for capitalism” has been a refrain of self-styled conservatives for too long. Capitalism is not to blame for original sin and its effects on human relationships. What is needed is a restoration of the classical understanding that free markets fulfill a necessary moral function of establishing a standard for commutative justice, and three cheers to that!

1. Aristotle, The Politics, Book I, ch. 9.

2. Aristotle, The Nicomachean Ethics, Book V, fig. 1.

3. Joel Kaye, Economy and Nature in the Fourteenth Century, p. 74-75.

4. Cicero, On Duties, Book III, section 12.