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Fairness in the Market

How, in a market setting, can you be assured that you are getting a good deal? We all know people who distrust every price, believe that most business people are concealing something important, and have a vague suspicion that every enterprise is a racket.

These people might have a bias, but they do serve a market function. Business must always be aware that its promotionals and marketing plans must be balanced against the need to inspire trust always. It is a business asset like no other, and those who foster it thrive, while those who do not lose out.

But we need to be aware that the price of goods on the market is not fixed by some eternal law but rather by fluctuations based on supply and demand. There is nothing in the structure of the universe that makes paper towels pennies a piece, dish towels a dollar, and linen tea cloths as high as fifty dollars. These prices are a result of the item's relative scarcity and its relationship to the intensity of consumer interest.

What is a good deal? It is the point at which buyer and seller agree and exchange property titles. That is all. That is why the medieval theorists who looked into this matter concluded that the “just price” and the “just wage” are identical to the market wage provided there has been no force or fraud and good faith is being shown by all parties.

Consider what the old classical economists termed the “diamond-water paradox.” Why does water, which is necessary for life, sell for so much less than a diamond, which is not necessary? It has to do with their relative abundance, for the situation would be completely reversed in a desert where water is hard to come by.

To be sure, we make a grave error if we conflate the value of something with its price. Some goods and services of infinite value sell for a very low price (I'm thinking here of some books of prayers I've found in thrift stores for pennies!) while some high-price items have very low value when considered in a moral sense. But the job of the market is not to provide an objective measure of moral worth, but merely to produce and allocate demanding goods and services with an eye to efficiency.

The price provides us a signal to conserve resources. We waste resources that are low in price, while we conserve resources that are high in price. We don't often think about the extent to which our lives are managed with such signals in mind. But if you travel to less developed countries, you find that what Americans routinely toss out sells for a very high price in poor countries.

Does this make Americans wasteful or even immoral, as many commentators claim? Not as a general rule. What is conservation and what is waste can only be measured by the price system in a market setting. As economies develop, the prices of necessities fall, provided the system is working as it should.

Actually the Bible is filled with stories that involve fluctuating prices. I'm thinking of the parables of the laborers in the vineyard, the pearl of great price, and the treasure in the field. All involve surprising turns of events reflected in price changes.

The market economy is driven by dynamic change and innovation, and this can sometimes be destabilizing to our way of life. It becomes all the more important, then, that our sense of what is right and true be fixed with an eye to eternal concerns. It is morality that is our Rock of Gibraltar in a changing world.