Economic questions

[aball1035]

I’ve been having trouble with the concepts of free market vs. just price, and how they relate to Catholicism. I would appreciate it if somebody could help me with my questions below.

Thank you!

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.
2. One could however argue that minimum wage hurts the lowest educated and lowest skilled workers. In purely free markets with no minimum wage, it would be alright to pay people with no skills $2/hr. because that’s what they’re worth, economically speaking. Businesses could therefore hypothetically hire 4 unskilled, uneducated people at $2/hr. to flip hamburgers. Instead, they must pay $8/hr. So they’d pick the most skilled and educated person of the group. So instead of hiring 4 people and giving them what you can afford per free market, you are hiring one person at an artificially inflated price. Thus, the least skilled and least educated workers are left jobless. So though minimum wage is supposed to help the poor, it actually only helps the most skilled of the poor, while leaving many of the poorest and most uneducated jobless. For them, being jobless is a much worse predicament than $2/hr. because at least they made some money.
3. There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit.
4. I suppose the whole free market vs. government intrusion debate is a debate of morality vs. economic considerations. It might be right that a nation should first make laws preventing people from taking advantage of the helpless. However, without the free market, you run into problems such as leaving the poorest and most uneducated jobless (example 2), and there’s no incentive to provide for people’s needs (example 3-and I’m talking about monetary incentive only, not moral incentive).

 

[SuperLuigi]

I’ve been having trouble with the concepts of free market vs. just price, and how they relate to Catholicism. I would appreciate it if somebody could help me with my questions below.

Thank you!

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.
2. One could however argue that minimum wage hurts the lowest educated and lowest skilled workers. In purely free markets with no minimum wage, it would be alright to pay people with no skills $2/hr. because that’s what they’re worth, economically speaking. Businesses could therefore hypothetically hire 4 unskilled, uneducated people at $2/hr. to flip hamburgers. Instead, they must pay $8/hr. So they’d pick the most skilled and educated person of the group. So instead of hiring 4 people and giving them what you can afford per free market, you are hiring one person at an artificially inflated price. Thus, the least skilled and least educated workers are left jobless. So though minimum wage is supposed to help the poor, it actually only helps the most skilled of the poor, while leaving many of the poorest and most uneducated jobless. For them, being jobless is a much worse predicament than $2/hr. because at least they made some money.
3. There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit.
4. I suppose the whole free market vs. government intrusion debate is a debate of morality vs. economic considerations. It might be right that a nation should first make laws preventing people from taking advantage of the helpless. However, without the free market, you run into problems such as leaving the poorest and most uneducated jobless (example 2), and there’s no incentive to provide for people’s needs (example 3-and I’m talking about monetary incentive only, not moral incentive).

1. It does, and we see that in places like Detroit. I’m not opposed to a minimum wage at this point, but what bothers me is those who advocate for raising it (as in nearly doubling it) are or act oblivious to the consequences which suggests they are not well informed on the issue or are acting on behalf of an agenda.
2. I don’t like labeling people as evil. The man could have been more generous. The example, however, was a classic case of price points along supply and demand curves. More demand, so-so supply = high price.
3. No free market = no iphones, no facebook, no moon landing, and starving masses and high/undesired unemployment.

 

[Jelrak_TB]

I’ve been having trouble with the concepts of free market vs. just price, and how they relate to Catholicism. I would appreciate it if somebody could help me with my questions below.

Thank you!

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.
2. One could however argue that minimum wage hurts the lowest educated and lowest skilled workers. In purely free markets with no minimum wage, it would be alright to pay people with no skills $2/hr. because that’s what they’re worth, economically speaking. Businesses could therefore hypothetically hire 4 unskilled, uneducated people at $2/hr. to flip hamburgers. Instead, they must pay $8/hr. So they’d pick the most skilled and educated person of the group. So instead of hiring 4 people and giving them what you can afford per free market, you are hiring one person at an artificially inflated price. Thus, the least skilled and least educated workers are left jobless. So though minimum wage is supposed to help the poor, it actually only helps the most skilled of the poor, while leaving many of the poorest and most uneducated jobless. For them, being jobless is a much worse predicament than $2/hr. because at least they made some money.

The consideration in our factory has always been about paying a fair wage. Though one difficulty is the one to which you have already alluded, another is in raising the ceiling across the board. For in choosing to pay an individual $15 an hour while the minimum wage is $7, a company is making a statement about its priorities towards its staff. If the minimum wage is raised to $15, now that company is no longer appearing at all generous. Further, a company will typically pay according to the difficulty of the work at hand. Artificially inflating the base wage necessarily requires that all other wages increase by a similar margin in order to keep pace with the required differences (for if an experienced office worker might potentially end in earning the same wage as a child working at a fast-food restaurant why might said office worker not simply slide over into the easier position…? Finally, with so many wages necessarily increasing at once, must not inflation certainly see a dramatic uptick…?

1. There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit.
2. I suppose the whole free market vs. government intrusion debate is a debate of morality vs. economic considerations. It might be right that a nation should first make laws preventing people from taking advantage of the helpless. However, without the free market, you run into problems such as leaving the poorest and most uneducated jobless (example 2), and there’s no incentive to provide for people’s needs (example 3-and I’m talking about monetary incentive only, not moral incentive).

 

[exnihilo]

The free market is the most efficient system for delivering goods to consumers. Any interference means less goods to consumers. It seems to me morality is on the side of more goods for the consumers. All social justice calls are about more goods for consumers. You could draw a distinction between wants and needs. Needs would be water, food, shelter and clothes. Anything more would be a want. You could say that a special ethic applies to needs. But still even here the market is the best system.

I disagree that raising water prices is evil. In a disaster you have a limited local supply of water. If the prices rise then it will make it cost effective to import more water to that region. High prices also causes people to ration their supplies. Price ceilings always result in a shortage. Prices just reflect the current relative value of goods. There is nothing good or evil about a price.

It may be that people think it is better that some people have more of specific goods then they do at the moment. If so the best way for the person to get that good is for it to be purchased by the man in need or gifted to him. But what is not ever helpful is to interfere with the prices. That is like trying to change the temperature by interfering with a thermometer.

 

[Theo520]

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.

I’m not familiar with the “just price” concept in the Middle Ages but the idea is to use market competition to keep prices low, a fair price would include some profit for the seller but it’s hard for the Govt to set that price and reflect real market dynamics that drive costs. Typically, gouging (unjust prices) occur when there is a lack of competition, which is why prices charged by monopolies are highly regulated (power & water)

1. One could however argue that minimum wage hurts the lowest educated and lowest skilled workers. In purely free markets with no minimum wage, it would be alright to pay people with no skills $2/hr. because that’s what they’re worth, economically speaking. Businesses could therefore hypothetically hire 4 unskilled, uneducated people at $2/hr. to flip hamburgers. Instead, they must pay $8/hr. So they’d pick the most skilled and educated person of the group. So instead of hiring 4 people and giving them what you can afford per free market, you are hiring one person at an artificially inflated price. Thus, the least skilled and least educated workers are left jobless. So though minimum wage is supposed to help the poor, it actually only helps the most skilled of the poor, while leaving many of the poorest and most uneducated jobless. For them, being jobless is a much worse predicament than $2/hr. because at least they made some money.

Yes, the theory is valid. However, the real market is quirky and much more complex. Our higher wages attract many illegal foreign workers that in effect dampen the market response to increase wages. An unlimited supply of low wage workers disrupts the market.

1. There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit.

The theories apply well over time but I think are problematic in the midst of a crisis. In such situations the threat of legal action for price gouging may dampen the action of maximizing profits. In a crisis it can be useful to attenuate the fluctuation while the market is responding.

1. I suppose the whole free market vs. government intrusion debate is a debate of morality vs. economic considerations. It might be right that a nation should first make laws preventing people from taking advantage of the helpless. However, without the free market, you run into problems such as leaving the poorest and most uneducated jobless (example 2), and there’s no incentive to provide for people’s needs (example 3-and I’m talking about monetary incentive only, not moral incentive).

I don’t think anyone claims there isn’t a role for some level of market regulation, especially where monopolies are involved.

The real problem is that over regulation can limit genuine competition that would reduce costs. Lobbyists for major concerns frequently promote regulations that favor themselves yet hamper smaller competitors.

 

[aball1035]

I disagree that raising water prices is evil. In a disaster you have a limited local supply of water. If the prices rise then it will make it cost effective to import more water to that region. High prices also causes people to ration their supplies. Price ceilings always result in a shortage. Prices just reflect the current relative value of goods. There is nothing good or evil about a price.

I’d point to St. Thomas Aquinas teaching sellers to not ask for a higher price simply because of the condition of the buyer.

If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price: because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition: no one ought to sell something that doesn’t belong to him.[1]
— Summa Theologiae, 2-2, q. 77, art. 1

I’m all for the free market, however I do know that St. Thomas advocated a just price, and in the Middle Ages it was more common.

en.wikipedia.org/wiki/Just_price

With that in mind, I want to get to the bottom of having a just price yet also have free market principles.

 

[Zoltan_Cobalt]

I’ve been having trouble with the concepts of free market vs. just price, and how they relate to Catholicism. I would appreciate it if somebody could help me with my questions below.

Thank you!

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.
2. One could however argue that minimum wage hurts the lowest educated and lowest skilled workers. In purely free markets with no minimum wage, it would be alright to pay people with no skills $2/hr. because that’s what they’re worth, economically speaking. Businesses could therefore hypothetically hire 4 unskilled, uneducated people at $2/hr. to flip hamburgers. Instead, they must pay $8/hr. So they’d pick the most skilled and educated person of the group. So instead of hiring 4 people and giving them what you can afford per free market, you are hiring one person at an artificially inflated price. Thus, the least skilled and least educated workers are left jobless. So though minimum wage is supposed to help the poor, it actually only helps the most skilled of the poor, while leaving many of the poorest and most uneducated jobless. For them, being jobless is a much worse predicament than $2/hr. because at least they made some money.

Simple answer…a minimum wage always hurts the “lowest educated and lowest skilled workers”. Therefore it is evil.

There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit.

Think about this for a minute.

How is this individual going to sell water for $30 a bottle to people who have just been flooded out of their homes…??? They probably only have change in their pocket. How many bottles do you think that that guy sold at that price???

Bad example…and bad story.

1. I suppose the whole free market vs. government intrusion debate is a debate of morality vs. economic considerations. It might be right that a nation should first make laws preventing people from taking advantage of the helpless. However, without the free market, you run into problems such as leaving the poorest and most uneducated jobless (example 2), and there’s no incentive to provide for people’s needs (example 3-and I’m talking about monetary incentive only, not moral incentive).

A free Market without government intervention has (historically) provided the highest level of prosperity and living conditions for all.

 

[Tomdstone]

I
3. There was a story I read about how after Hurricane Katrina struck, somebody bought packs of bottled water and sold them for like $30 per bottle to the thirsty victims. Obviously this guy is an evil man, and was taking advantage of free market principles. To play the devil’s advocate however, if there was no free market, but a just price for bottled water, yes, he could not have screwed over the thirsty victims, but then they would not have gotten any water. So simply because there was a free market for water bottles, he found that he could get money out of the deal, and the victims could get water. With a just price, nobody gets anything because the man has no incentive to help them out because he can’t make a profit…

Which is better no water at all at a price of 50 cents per bottle or all the water you want at a price of $30 per bottle? If there is a shortage of water and it is difficult to bring water into the area, the high price will act as an incentive for the sellers to overcome those obstacles. Why is it evil if people work hard to bring water to people so that they will not die of thirst?

 

[aball1035]

Which is better no water at all at a price of 50 cents per bottle or all the water you want at a price of $30 per bottle? If there is a shortage of water and it is difficult to bring water into the area, the high price will act as an incentive for the sellers to overcome those obstacles. Why is it evil if people work hard to bring water to people so that they will not die of thirst?

But like I wrote before, St. Thomas Aquinas would consider this immoral.

 

[Tomdstone]

But like I wrote before, St. Thomas Aquinas would consider this immoral.

But the high price may be necessary to get people to make the effort to bring the water to the people?

 

[St_Francis]

But like I wrote before, St. Thomas Aquinas would consider this immoral.

Which question of his are you referring to? I found one that might be it, but would not put that interpretation on it.

 

[Zoltan_Cobalt]

But like I wrote before, St. Thomas Aquinas would consider this immoral.

Many of St Thomas’ “considerations” are arguable and some are wrong. It is best not to use St Thomas as an ultimate moral authority

 

[aball1035]

Many of St Thomas’ “considerations” are arguable and some are wrong. It is best not to use St Thomas as an ultimate moral authority

I do not consider him the ultimate moral authority, but as a prominent authority. Besides, it’s extremely unwise to not take him seriously in every aspect of what he writes. Pope Leo XIII wrote about the saint’s “singular honor” and authority in Aeterni Patris.

I’m frankly surprised that you immediately mention that the saint was many times arguable and wrong. It shouldn’t be the first thing that pops into your head if you disagree with something he writes.

 

[aball1035]

Which question of his are you referring to? I found one that might be it, but would not put that interpretation on it.

I’m not sure which question it pertains to, but it is below. This would seem to pertain to my third point about charging Katrina victims $30 for a bottle of water.

“If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price: because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition: no one ought to sell something that doesn’t belong to him.”[1]
— Summa Theologiae, 2-2, q. 77, art. 1

 

[JurisPrudens]

I’ve been having trouble with the concepts of free market vs. just price, and how they relate to Catholicism. I would appreciate it if somebody could help me with my questions below.

Thank you!

1. There was the “just price” concept in the Middle Ages. Could this be comparable to a minimum wage? Sort of a “just price” on wages.

.
.

).

As far as I know just price meant a market price. The Point was to prevent The party from receiving super profit.

 

[St_Francis]

I’m not sure which question it pertains to, but it is below. This would seem to pertain to my third point about charging Katrina victims $30 for a bottle of water.

“If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price: because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition: no one ought to sell something that doesn’t belong to him.”[1]
— Summa Theologiae, 2-2, q. 77, art. 1

Ok, the full text is:
(1) Secondly we may speak of buying and selling, considered as accidentally tending to the advantage of one party, and to the disadvantage of the other: for instance, when a man has great need of a certain thing, while an other man will suffer if he be without it. On such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller. And thus it will be lawful to sell a thing for more than it is worth in itself, though the price paid be not more than it is worth to the owner. (2)Yet if the one man derive a great advantage by becoming possessed of the other man’s property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer. Now no man should sell what is not his, though he may charge for the loss he suffers.
So I would say that Aquinas is talking about things apart from their market value, so in unusual circumstances.

In the part I labeled (1), he talks about a situation in which one man has something which another needs. However, the seller also has need of it. This could be something like a wheelbarrow. The seller will face a great loss, having transport things by the shovelful rather than in the wheelbarrow, but the buyer is willing to compensate him *for that loss *as well as for the wheelbarrow itself.

In the second case he mentions, (2), the seller has no particular need of the wheelbarrow–he bought it when his circumstances were different or whatever. In this circumstance, the seller should *not *sell for more than it’s worth on the basis that the buyer has great need for it.

So wrt the water at Katrina, if the water was transported at great risk and cost, teh seller can charge more for it, but not a ridiculous amount more just because the people are in desperate need.

Say that he was instead a person with a generator that cost $10/hour to run. He could not charge $20 to charge a phone just because the people there are desperate to contact loved ones; he could charge a little bit over the $10/hr because rhe price of gas to run the generator will cost more to replace, but he can’t charge $20 for $1’s worth of electricity (those numbers are all made up–I have no idea how much it costs to run a generator or even to charge a cell phone!).

I hope I have made this clear.

 

[runningdude]

But like I wrote before, St. Thomas Aquinas would consider this immoral.

“Just Price” requires that the price be fair to both buyer and seller. Saint Thomas would not consider immoral if the $30 per bottle fairly reflected the seller’s cost.

Consider the distance from the nearest city unharmed (ex Houston to New Orleans, 350 mi one way). If a flatbed truck could hold 90 cubic feet (5x6x3)and get 12 mpg, it could carry approximately 2250 one liter bottles for a one way cost of $70 (gas at 2.50/gal).

Now, let assume that it is a 5 hour drive each way, plus 2 hours to purchase and load the truck, plus 5 hours to sell all the water in New Orleans before heading home. That is a 17 hour day!

To be parsimonious, he will pay himself 7.50/hour, plus overtime (1.5 for hours after 8). This results in 21.5 hour equivalents of work, for a total of $161 dollars in wages. Plus gas driving to and fro: $301. Now, if he paid $0.25 a bottle, his total costs for the trip is $865.

Now, there is risk involved. He is driving through a disaster zone, and his truck could be damaged. If his truck cost had a $500 deductible for insurance, then he is at risk for $1365, when he can only expect to earn $160 that day. Further, his truck will be tied up for maybe a week, so he would loose up to another $800 in personal wages by being unable to deliver water to New Orleans! On any given day, he risks loosing $2100, but only might earn $160, mind your, for a SEVENTEEN HOUR workday, delivering water at minimum wage to city and selling it at cost.

Further, assuming he does this full time, he will need to pay commercial insurance on his truck, at perhaps $5000 annually, plus payments for the cost of the buying the truck, perhaps another $5000 annually, plus wear and tear maintenance of another $5000. Thus 5 days a week, the daily cost of the truck alone is at least $60.

So his daily costs are at least $925; this amounts to $0.40 a bottle. Now, if each citizen needs 3 liters of water a day, they would be each spending $1.20 a day, and 750 people could be served by this one truck. A family of four would pay $4.80 a day for water.

However, the driver’s personal wage is only $160, he is working for 17 hours each day, and he risks loosing a weeks worth of wages if something goes wrong. The economics are not in his favor.

Raise his wage to $2000, and water is still only being sold for a dollar a bottle, and he could earn up to $52000 a year. However he would be working 70 hour weeks delivering a vital service. Double his wage again, and water is still only $2 a liter.

If it is a 5 gallon jugs that he is selling, then the cost comes in at about $40 a jug.

If the individual is charging $30 for a one liter bottle, that would be usury. If it were a 5 gallon jug, then it is a bargain.

 

[Tomdstone]

But like I wrote before, St. Thomas Aquinas would consider this immoral.

Did St. Thomas also say that it was a mortal sin to charge interest on a loan?

 

[Theo520]

Here is a great video on this topic, by Walter Williams

youtu.be/fJr2RO7g7jI

 

[St_Francis]

Did St. Thomas also say that it was a mortal sin to charge interest on a loan?

St Thomas, as the Church still does, said it was wromg to charge *usury. *Interest is a charge reflecting what the owner of the money looses by not having use of his money and the risk he takes in lending it to the person, points which fit in well with what St Thomas wrote in the section I quoted above.