Whatever Happened to “Just Prices?”

Robert Hockett – 

Are prices the sort of thing that can be fair or unfair? It seems to be common to assume so. Health care is said to cost too much, unhealthy foodstuffs to cost too little. Air and water, we say, should be free. Maybe college and health insurance should be as well?

Yet while we frequently hear and say such things in informal settings, many in more ‘serious’ company appear to concede that prices can no more be fair or unfair than the number seven can be yellow or green. There are only individual preferences – my wish to pay less, your willingness to pay more – and market prices that all of us ‘take’ and don’t ‘make.’ In this foundationally critical matter, so closely bound up with the way we meet needs in a market economy, it seems we are most (if not all) of us neoclassical economists now.

But do we really have to give up the idea of fair prices? In a forthcoming paper, Roy Kreitner and I say, Not so fast. We interrogate and rehabilitate the idea of fair prices in part through a critical look at its recent history, and in part through a look at the ways in which prices are actually determined in contemporary economies. We abjure, however, any attempt to link this inquiry with ‘just price’ theory of the sort that flourished, in a number of forms, before the so-called ‘marginalist revolution’ of the late 19th century – the revolution that purported to slay what we used to call ‘political economy’ and birthed ‘economics.’

In this post I aim to fill-in that gulf and trace some connecting lines. For it turns out that our attempt at a ‘just price’ revival has a venerable and unjustly forgotten pedigree in hardcore just price theory of the pre-marginalist variety.

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