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September 08, 2005
A Very Nice Chat
(Jimmy Akin)
Yesterday over on ChroniclesMagazine.Org Scott Richert posted a comment in which he said that I'd attributed someone else's words to him and that he'd asked me to correct it and that he assumed I would. Thing was, I never got the e-mail and so figured he might be using an old or otherwise bad address for me. Since I couldn't find his e-mail, I called him, because I wanted to make sure that I got any misattributions corrected. He told me that, on further examination, he saw that I hadn't misquoted him.
The two of us had a very nice chat. Mr. Richert was a real nice guy, and he said that, although he hadn't meant his post the way it was taken, he could see why someone would take it that way. I therefore consider that aspect of the matter closed, and no hard feelings.
He also said he looked forward to seeing my interaction with the rest of his post so . . . onward!
(BTW, I want to apologize for the excessive wordiness of what follows. Since I said I'd try to have this today, I wrote it in a hurry, and it covers some fairly technical ground. Looking over it this morning I see that it really needs to go on a word-reduction diet, but I don't have time to trim it before work.)
In his post, Mr. Richert took exception to a number of things I wrote. After quoting the conclusions in my original post, he affirms my first conclusion, which is drawn from the Catechism, and then says
His [Akin's] second and third points, however, simply come out of the blue, and both hinge on Akin’s term “natural price point”—a term that is not used in the Catechism, nor in any of the Church’s social encyclicals (not even in Centesimus annus, often seen as more “pro-capitalist” than, say, Rerum novarum), nor, as far as I can tell, in the writings of any of the Fathers or Doctors of the Church.
I'm not sure why Mr. Richert says some of my conclusions come out of the blue since there is a long section in my post developing and explaining them. He may simply mean that they are not stated in the Catechism or other documents of magisterial, patristic, or "doctoral" (to coin a usage) character.
Unfortunately, the Catechism writes with such brevity that it often doesn't answer all the questions you want to ask. When that happens, as it did here, you've got to do the best you can to take what the Catechism states and relate it to the real-world situation that led you to consult it in the first place. That often means going beyond the langauge of the Catechism itself.
It's true that "natural price point" is not found in recent encyclicals on economics, such as Centesimus Annus, but then you can't expect a technical term to be used in documents that don't address the question ou are trying to answer (sharp price spikes in the wake of natural catastrophies). Indeed, when it comes to how prices should be set, it's hard to find anything in recent magisterial documents more than a general endorsement of some kind of free market.
And it would be unreasonable to expect a contemporary technical term to crop up in works of any nature that were written before the term was coined.
The "this term isn't found in the Catechism, the encyclicals, the Fathers, and the Doctors" objection thus is not that weighty on its own. You might as well fault a person who is considering whether a theistic version of punctuated equlibrium is consistent with Church teaching on the grounds that the Catechism, the encyclicals, the Fathers, and the Doctors don't use the term "punctuated equilibrium" in their discussions of evolution.
Of course, if there is an established terminology that the Church uses in handling such questions then the thing to do is use it, and Mr. Richert next seeks to build a case that I have neglected such a terminology, writing
What is used in the social encyclicals and in the writings of such doctors of the Church as St. Thomas Aquinas is the term “just price,” and anyone who has read the encyclicals or Aquinas knows that the “just price” is not simply another way of saying the “natural price point.”
Whatever the merits of the notion of the just price concept, I don't see an obligation for a contemporary interpreter to use this concept when trying to solve the question I was answering.
Regardless of how prominent the just price concept may have been in the past, developments in the Church's social teaching have been so extensive that, out of the thousands of documents on the Vatican web site, there are exactly four that use this term. Of those, it's not clear that all of them are using it in scholastic sense.
For example, in Centesimus Annus, John Paul II refers to "a just price, mutually agreed upon through free bargaining." That sounds more like using the market mechanism as the dominant factor in determining price rather than the strict guild-and-prince price control system that undergirded the scholastic just price concept.
The term, at least in the desired sense, thus does not seem to appear in the most recent economic encyclicals. It fails to appear altogether in the Catechism. And an examination of the Compendium of the Social Doctrine of the Church fails to turn it up (though I couldn't search this electronically since it's not online).
However important the just price concept may have been in the past,
the economy and the Church's economic thinking have changed so much
that it seems that the Church doesn't regularly use this concept in its authoritative documents.
If an individual interpreter wishes to use the concept, that's fine. But the fact that the Church has had so much to say about economics in recent years and has used this concept so little (if at all) in authoritative documents suggests that there is no positive obligation for the interpreter to use this concept.
(NOTE: For those wanting a brief discussion of the history of the just price concept, SEE HERE and HERE.)
It thus seems to me that there is considerable liberty on this point. The Catechism indicates that one cannot morally "forc[e] up prices by taking advantage of the ignorance or hardship of another," and I can think of at least one circumstance in which that can happen that is relevant to the question I was answering (i.e., restricting supply that is in high demand due to a disaster). But--and here's the important point--the principle that the Catechism is articulating is not spelled out in sufficient detail (in CCC 2409 or elsewhere in the work) to mandate that the interpreter use any particular price-setting mechanism in his overall view of economics.
Thus an interpreter is at liberty to use the natural price point
concept or the just price concept or some other concept. At present the
Church is only articulating general principles in this area and leaving
it to individuals to work out the practical consequences of this on the
concrete level. In other words, the Church does not mandate an overall
economic theory any more than it mandates an overall scientific theory
or an overall philosophical theory. It sets general parameters for
legitimate Catholic belief, but within those parameters there is
considerable latitude.
It seems to me that the concept of the natural price point is an
important one that is relevant to the situation of post-disaster price
spikes. By the term "natural price point," I mean that price for a good
or service that (a) the market will tend to converge on, (b) in a
particular, concrete economic situation, (c) though the market
mechanism, (d) without government-mandated price restrictions in place.
(At least that's a first pass at what I mean. I reserve the right to
revise and extend my definition if further thought or discussion makes
me see a need to clarify it.)
This is not quite the same as Mr. Richert's summary of the concept
of the natural price point as "the going rate" since the going rate may
be affected by things like government-mandated price restrictions, but
it's close enough that we can let that pass.
Mr. Richert goes on to say:
[F]or the Christian gas-station operator or grocer or motel owner, setting his price at the going rate may not, in fact, be the moral thing to do.
True. I can think of situations where that is the case. He may be
charing the going rate out of an inordinate desire for money, or he may
be charing the going rate for something he ought not be selling at all
(e.g., abortions, prostitution services).
Nothing in Catholic social teaching indicates that he is obliged to sell at a loss,
Under normal circumstances, no, but in certain circumstances, maybe.
The Catechism indicates that there can be situations in which the right
of private property is to be regulated or suspended altogether, and in
such circumstances it might be morally obligatory to sell at a loss
(e.g., your town is an economically isolated unit; you paid a bunch of
money for grain to put in your granary; then a famine hits; the town
does not have enough money to keep you from selling at a loss; it thus
becomes morally obligatory to do so or even to give the food away).
but he is required to exercise moral restraint in determining his level of profit.
Here we run into a significant difficulty. In a competitive market, no seller determines his level of profit. He can set his prices where he hopes
they will make him a certain amount of profit, but if he guesses wrong,
he's out of luck. Despite his best efforts, he may make negative profit. That's why there's so many business failures, both
large and small.
There's still a genuine insight here, but it needs to be
significantly reformulated in order to be true. I think that I see how
that can be done, but it'll have to wait for a future post. Perhaps Mr.
Richert would care to try as well.
That competitors may be reaping greater profits than you are is not moral justification for mimicking their behavior.
True. If they are motivated by bad desires or doing bad things then you certainly are not justified in imitating them in these.
Assuming that's not the case though, it is not immoral to charge the going rate.
Because, sometimes, people just plain get greedy, and avarice is one of the seven deadly sins.
Yes. This is quite true.
In the wake of Katrina, gas-station owners in Georgia raised their prices dramatically. One station owner in Stockbridge, Georgia—almost 500 miles away from New Orleans—jacked his prices up as high as $6.079.
Okay, though I don't know if that was due to greed or not. It might have been due to fear. The guy may have had an inordinate fear of disruptions in his supply chain. He may have feared that there would be runs on all the local gas stations and they'd all be sucked dry and then there would be no new gas arriving due to the hurricane damage.
Or maybe he wasn't greedy (i.e., motivated by a disordered desire for money). Maybe he was motivated by a perfectly ordered desire. Suppose his wife is going through chemo and he's got three kids in college and he took a loss the last two quarters on his business and is desperate for cash in order to make ends meet.
Or maybe he was partly motivated by greed and partly by fear and partly by a genuine need to raise cash.
I dunno.
Seeing an overnight tripling of prices certainly raises the question of greed in one's mind, but since I can't read his mind, I don't know for sure. To the extent he acted on a motive of avarice, that was sinful.
Interestingly, when Georgia “Gov. Sonny Perdue signed an executive order authorizing state sanctions against gas stations that gouge consumers,” prices dropped back down to the three-dollar level (about where they were everywhere else in the United States)—even though no one was cited under the order.
Libertarians might claim that the drop in gas prices is simply proof that businessmen are so afraid of government that they will commit economic suicide rather than face governmental sanction.
I'm not a libertarian, but I think that is a quite plausible explanation, at least in part.
In the combox of his blog, Mr. Richert suggests that such gas
station owners may have dropped their rates because they were ashamed
and knew they had done wrong. That also may be true in part.
I'd also offer other reasons that may have played a role: (a) social
pressure was put on them by the media and their customers, who objected
to this, (b) friends and relatives told them how bad it looked and how
they didn't want to hurt their business long-term by alienating their
clientele, and (c) they just misestimated what the market would bear and as soon as they found out nobody was willing to buy $6 gasoline, they dropped the price.
Catholic apologists, however, might better consider that the three-dollar rise in gas prices was (like the looting in New Orleans) proof of the doctrine of Original Sin.
Since Mr. Richert has indicated that this should not be taken in the
snarky way it is phrased, I'll pass that by and simply note that this Catholic apologist does recognize the evidentiary value that sudden price spikes may have for original sin.
Reportedly, Thomas Sowell used to have a bet with his students where he'd give them an A if they could find any place in The Wealth Of Nations
where Adam Smith had good things to say about capitalists. None of his
students were ever able to do so, for Smtih, like Sowell--and like me
for that matter--recognized all too well the businessmen can have
disordered desires for profit.
Posted by Jimmy Akin in Economics | Permalink
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Comments
Kudos to you and Mr. Richert, Jimmy, for resolving the issue amicably... Whatever disagreements you may or may not have on economic issues (and I wouldn't mind seeing more back and forth in thinking through these issues), I'm glad to see them not degenerate into unnecessary unpleasantness.
FWIW, I think that you're both worth arguing with! :)
Posted by: Steven D. Greydanus | Sep 8, 2005 11:03:50 AM
Excellent article and commentary !
The role of wages and prices in a Nation State are very important to the conditions of the General Welfare of the population.
Each Nation State should have a "Gross National Happiness" rating which indicates the adequate provision of such things as :
Safety; Food; Water; Shelter; Mobility; Work; Rest; Play; Companionship; Guidance; Education; Health; Clothing etc.
There is a healthy balance for a nation's economic system between the cancerous extremes of Communism and Predatory Free Market Capitalism.
Maimonides talked about "Walking the Golden Mean" in all things. Economic systems should reflect this same philosophical position.
Posted by: Adam Neira | Sep 12, 2005 10:49:57 PM
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