Introduction
The advent and proliferation of ride-sharing services such as Uber have reintroduced into the public consciousness the phenomenon of surge pricing or, as some would call it, price gouging. This is where, in response to a natural disaster or an event involving significant demographic shifts, a surge in demand or a lack of supply for certain good and services results in their prices appreciating sharply. In a laissez-faire neo-liberal economic market, such dynamism in pricing represents nothing more than the invisible hand of market forces reacting to a surge in demand and a shortage in supply by raising prices to restore market equilibrium. This, it is argued, incentivises suppliers to increase or redirect output to where it is needed the most. Yet, in terms of the nature of the service provided, nothing has changed. The question raised by such circumstances is whether a surge in pricing to deliver what is effectively the same service is justified by conditions extraneous to the nature of the product or service provided. Furthermore, how does one arrive at a price which is just and reflective of the value of a good or service provided in such circumstances? This paper will attempt to answer such questions by appealing to the economic philosophy of St. Thomas Aquinas and, more specifically, his understanding of commutative justice. What is justice in exchange? What does price measure? And how does one arrive at a just price by navigating through a dynamic economic system with its varied labour and capital inputs, on the one hand, and the subjective needs and desires of consumers, on the other?
1. Justice as Proportionality
Justice is inextricably linked to the notion of rights. Something is owed only to those to whom it is due. What is due to a person is in the first order owing to the benevolence of divine providence which in justice grants to each being what is required for the perfection of its nature. In the state of original justice all that was necessary for human flourishing was provided for in abundance. As Aquinas says in respect of the subjugation of the Earth to the first man: “This state was granted to man, not as to a private individual, but as to the first principle of human nature, so that through him it was to be handed down to his descendants together with human nature.”Footnote 1 Owing to the Fall, however, a just distribution of the Earth's resources has become more difficult to achieve because the human will, wounded by avarice and greed, now struggles to render to each person what is due to them. The privatisation of property ownership served to mitigate the effects of original sin by providing an incentive for each individual to “procure what is for himself alone than that which is common to many or to all: since each one will shirk the labor and leave to another that which concerns the community.”Footnote 2 Thus, whilst Aquinas held to the community of goods as a tenet of the natural law, he did not think that the natural law dictated that all things ought to be possessed in common. The division of possessions arose from human agreement and the enactment of positive laws not as contrary to the natural law but as an extension of it.Footnote 3
Aristotle was of the view that a just exchange is brought about by reciprocal proportionality. In terms of distributive justice (that which is owed to private individuals by the community), justice is achieved not by way of equality between thing and thing, but according to proportion between things and persons.Footnote 4 It is based upon what Aristotle calls “geometrical proportion” rather than a strict quantitative distribution. The provision of public housing or healthcare to those unable to afford them would be examples of this. In commutative justice, however, the status of the recipient is not considered except insofar as it causes a diversity of things.Footnote 5 Justice here is achieved through the equation of goods and services exchanged. In the Nicomachean Ethics, Aristotle holds that exchanges will struggle to occur without such an equation:
Therefore, as many sandals must be exchanged for a house or a quantity of food in proportion as the builder contributes more than the shoemaker (or the farmer). If this is not observed, there will be neither exchange nor sharing. But this reciprocation will not be possible unless things are equated.Footnote 6
The effect of such an equation is that neither party will be unduly disadvantaged by the exchange. Any gain or loss made by either party will not see them in a markedly different financial position following the trade than as before. Aquinas reinforces this in his commentary:
Buying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and vice versa … Now whatever is established for the common advantage, should not be more of a burden to one party than to another, and consequently all contracts between them should observe equality of thing and thing.Footnote 7
Thus, the barometer of justice in commutative exchanges is the common advantage accruing to each party in virtue of the exchange. This advantage takes the form of equality between the objects exchanged.
2. Pricing Proportionality
The measure of such equality is the price agreed upon to facilitate an exchange. In a service economy, this equation of “thing and thing” is not always readily evident. How does one equate the advantage derived from a taxi service to the fare demanded? In this respect, and as Boland points out, justice does not necessarily mean each party must be equalised in exchange so far as the benefit derived but that each be left in at least the same position as regards possessions following the exchange as before.Footnote 8 Commutative justice pertains to equality of thing rather than equality of utility. The latter goes beyond strict justice and veers into the realm of liberality and friendship. This is why Aquinas allows for a particular loss or for the need of the seller to be considered in the determination of price while at the same time disallowing advantage or utility to the buyer:
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 another man will suffer if he be without it. In 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.Footnote 9
By allowing these circumstantial considerations to affect the determination of just price, Aquinas looks beyond purely cost considerations and goes beyond a strictly labour theory of value. A corollary of this is the possibility that the market price will account for factors apart from capital and labour inputs. The determination of just price would therefore consider not only what is exchanged but also when, where, why and how the exchange takes place.
It must be said, however, that Aquinas sees these considerations as only accidental to the more substantial consideration of the proportionality of the actual goods and services exchanged. Thus, the example of a sandal-maker trading with a builder is essentially premised on the respective contribution made by each party to the procurement of those goods. For Aristotle and Aquinas, the single greatest contribution made to the value of a good or service is the amount of effort required to bring that good or service to market. Indeed, this appears to be the primary criterion of proportionality for Aristotle:
This is done in such a manner that as the farmer (whose work is raising food for men) excels the shoemaker (whose work is making sandals), in the same proportion the work of the shoemaker exceeds in number the work of the farmer, so that many sandals are exchanged for one bushel of wheat …Footnote 10
Since the labourer is owed a just wage, commutative justice principally consists in ensuring that neither party lose out on attaining a just recompense for the fruit of their labours. In the context of a ride-share service, the fare should roughly be commensurate with the time and labour that has been invested in procuring the service. Such considerations of time and labour should not be limited to the just wage of the driver but also account for the labour which has gone into the capital of the exchange (in this case, the motor vehicle). This is reflected in the price the driver paid for the use and maintenance of the motor vehicle. If the driver were hiring the vehicle for work as a taxi driver, then a pro-rata apportioning of the cost of the car hire and its fuel would be a legitimate consideration in determining the fare to be paid over and above the cost of the driver's labour. Of course, such retrospective considerations into the capital input of a carrier service are difficult to factor into the price equation particularly since the quality and cost of vehicles vary widely. In such circumstances, an averaging of the costs of motor vehicle inputs in the setting of the base cost of a fare is the best that one can hope to achieve. Services such as Uber do make provision for larger vehicles which cost more to purchase and maintain. These vehicles are classified as a separate category and command a higher base fare. There is also another category for luxury vehicles. These represent an attempt to account for the variable cost of the motor vehicle input. Within these categories, however, it would be left up to each driver to determine if the average fare offered for that category is justified given the value and maintenance expenses associated with their motor vehicle. Here, as it were, is the problem of the one and the many played out in an economic context. How does one arrive at a unifying price given the sheer multiplicity and diversity of capital and labour inputs? This exemplifies why Aquinas holds that the just price can only ever be a common estimation of what is equitable.
What seems paramount for Aquinas is that the results of an exchange do not see the parties left in a markedly detrimental condition as compared to the situation prior to the exchange. In this respect, the primary reference point for the bargaining power of a party in a transaction can be nothing other than the labour side of the just price equation which seeks to arrive at a just recompense for the efforts expended in bringing a product or service to market. Such compensation must ensure that each party is left in at least the same position as regards possessions as prior to the exchange.Footnote 11 This, to adopt the terminology of Aristotelian causation, represents the formal cause of adapting objects to bring them to a point where they are capable of alleviating need.
3. Human Needs and Demands
The final cause (or objective) of an exchange is the alleviation of human need which incentivises the labourer or producer to bring the goods or services to market:
Articles are not valued according to the dignity of their nature, otherwise a mouse, an animal endowed with sense, should be of greater value than a pearl, a thing without life. But they are priced according as man stands in need of them for his own use.Footnote 12
Aquinas follows Aristotle in holding that the convention of money arose to reflect the phenomenon of human need:
(Aristotle) states that for this reason it is possible to equate things because all things can be measured by some one standard … But this one standard which truly measures all things is demand. This includes all commutable things inasmuch as everything has a reference to human need.Footnote 13
Aquinas ties value so closely to the concept of human need that he makes it the primary driver in the entrepreneurial decisions about the allocation of labour and capital. The advocates of demand-driven pricing argue that even though the service delivered is the same, its value is rendered greater by circumstantial considerations which heighten need or demand at any particular time. Such a spike in subjective value placed upon a carrier service can be put down to the difficulty in accessing public transport at such times owing to the mass demand placed upon such services at the completion of significant public events. Furthermore, they argue (in a similar vein to Aristotle) that a surge in prices creates an incentive for suppliers to direct their time, labour and resources to meet that specific demand. In the context of ride-sharing services, an increase in prices during periods of high demand creates an incentive for drivers to travel to those areas and log-on to take advantage of the higher fares. It compensates them for the time and fuel spent in driving to those areas of higher need as well as the greater likelihood of accidents given the sheer number of people and cars likely to be encountered in those areas. Of course, if enough drivers take up the offer, the demand for rides will quickly be met thereby eliminating the need for surge pricing.
In a similar vein, the event of a natural disaster tends to see an increase in pricing to reflect the greater human need for human essential products. This creates an incentive for suppliers to increase their output or redirect it to those areas. Aquinas, however, disallows a surge in pricing simply to reflect the greater need for a product:
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.Footnote 14
Thus, in an ideal world, Aquinas holds that the incentive of surge pricing would not be needed. This is because property is private only in respect of its use. No one person has absolute dominion over property. The virtue of liberality should operate to ensure that people mindful of the common good provide from their abundance to those in need.
Aquinas also looks at this issue in the context of his consideration of the question of whether it is legal to steal through stress of need. Here, he qualifies the right of private property arising from human law to the fundamental natural law right of sustenance and shelter inherent in human nature:
Things which are of human right cannot derogate from natural right or Divine right. Now according to the natural order established by Divine Providence, inferior things are ordained for the purpose of succouring man's needs by their means. Wherefore the division and appropriation of things which are based on human law, do not preclude the fact that man's needs have to be remedied by means of these very things. Hence whatever certain people have in superabundance is due, by natural law, to the purpose of succouring the poor. For this reason, Ambrose [Loc. cit., Article 2, Objection 3] says, and his words are embodied in the Decretals (Dist. xlvii, can. Sicut ii): “It is the hungry man's bread that you withhold, the naked man's cloak that you store away, the money that you bury in the earth is the price of the poor man's ransom and freedom.
Since, however, there are many who are in need, while it is impossible for all to be succoured by means of the same thing, each one is entrusted with the stewardship of his own things, so that out of them he may come to the aid of those who are in need. Nevertheless, if the need be so manifest and urgent, that it is evident that the present need must be remedied by whatever means be at hand (for instance when a person is in some imminent danger, and there is no other possible remedy), then it is lawful for a man to succour his own need by means of another's property, by taking it either openly or secretly: nor is this properly speaking theft or robbery.Footnote 15
Aquinas situates this question within his treatise on justice in the Secunda Secundae. Its justification arises from the natural law right to life and sustenance which precedes any qualified right to private property.Footnote 16 Thus, if exchange premised on need forms the basis for exchange, the underlying cause of this need should always qualify what is considered to be a just price in this context. Sellers have no right to take advantage of a situation which has left buyers in a state of desperation.
However, in a fallen world prone to sloth, human beings require tangible incentives to rouse them from their slumber and take on risk for the sake of assisting others. Consequently, Aquinas does provide some concessions here. Whilst he would still disallow surge pricing for products and services offered as a response to peaks in demand, he does allow the application of various surcharges to account for the extra time, labour and risk associated in redirecting production schedules to service areas of high demand:
Not everyone who sells more dearly than he buys is engaging in business, but only the one who buys for this purpose: to sell. If, on the contrary, he buys not for sale but for possession, and afterwards, for some reason wishes to sell, it is not a trade transaction even if he sells at a profit. For he may lawfully do this, either because he has bettered the thing, or because the value of the thing has changed with the change of place or time, or on account of the danger he incurs in transferring the thing from one place to another, or again in having it carried by another. In this sense neither buying nor selling is unjust.Footnote 17
Thus, for a ride-share, the sacrifices entailed by drivers in logging on outside of their ordinary working hours as well as the cost and risk of driving to congested areas would justify an increase in pricing. There is also the risk that by the time a driver arrives in a surge area, the area would be so saturated with drivers that surge prices would end. Drivers should also be compensated for this. This, as it were, reflects the supply side of the surge equation arriving at a meeting point with the greater demand from riders.
Related to this is the scenario posed by Cicero of a grain-carrying merchant servicing a famine-stricken area with the knowledge that other merchants with more grain supplies are following. Is such a merchant obliged to inform the starving citizenry of the impending increase in supply? Aquinas, in considering such an example, concluded that justice does not require this:
… the goods are expected to be of less value at a future time, on account of the arrival of other merchants, which was not foreseen by the buyers. Wherefore the seller, since he sells his goods at the price actually offered him, does not seem to act contrary to justice through not stating what is going to happen. If however he were to do so, or if he lowered his price, it would be exceedingly virtuous on his part: although he does not seem to be bound to do this as a debt of justice.Footnote 18
Rothbard argues that there is no starker example of Aquinas’ opting for the just price as the current price, determined by demand and supply, rather than the cost of production.Footnote 19 However, this appears to be too hasty a conclusion. First, a base price needs to be set to compensate a merchant for the acquisition of grain from farmers. The activities of the merchant have then added value to the grain by placing it within the reach of those in need. This should also be reflected in the price. The level of demand would have an impact on the scope and direction of the merchant's activities. However, its impact on price would only be indirect insofar as it is the catalyst for the time and risk premiums applied to the more substantial considerations of the labour and capital inputs. It is principally these factors which determine the bounds of what is conscionable pricing arising from the commutative equality of “thing and thing”. In this context, demand should be indicative rather than determinative of value. Product pricing models may therefore utilise demand as a barometer of value, but ultimately it is the scarcity of natural endowment together with the value-adding efforts of labour and capital (adjusted for temporal and spatial variables) which are constitutive of the value of a thing. This would also explain why Aquinas does not bind in justice the seller to reveal impending increases in supply.
4. The Valence of Commutative Exchanges
A corollary question which arises in the determination of the just price is whether the market price adequately reflects this polyvalent understanding of value. Aquinas’ teacher, Albert the Great, held that the just price equals the value of goods sold “according to the estimation of the market place at that time.”Footnote 20 Fabio Monsalve argues that for the scholastics the just price is not merely the market price because of the fundamental moral dimension of economic agents in a scholastic world vision. According to his thesis, an equilibrium may be reached by taking account of a collaborative market price (scholastic) as well as a competitive market price (liberal) to overcome the taxonomic problem:
… common estimation is not merely an impersonal force driven by the egotistical individual's interests but rather a communal and prudent process wherein moral responsibility (‘ought’ instead of ‘can’) and free and voluntary consent play an outstanding role in preventing economic compulsion. As Langholm (1998: 88) points out, ‘In the medieval context, it makes more sense to interpret the market estimate of just price … as a means to combat the exploitation of individual economic needs’. In this sense, just price settled by common estimation will be something different than the competitive market price. Economic agents (buyers and sellers) are price-makers with a moral duty (agents of Creation), not merely price-takers, as liberal traditions seem to claim.Footnote 21
In the scholastic model of collaborative market price, suppliers ought to recognise a moral duty to come to the assistance of those areas where need is greatest. If such assistance comes at significant cost (in the way of labour, risk and transportation costs), then Aquinas would see the market price as justly factoring in a premium on the base price of those products. According to De Roover, Aquinas considered the market price as indicative of the just price but that this would “tend to coincide with cost or to oscillate around this point like the swing of a pendulum.”Footnote 22 Since the just price is not a precise science but a rational estimation of proportionality, this is the best that may be hoped for in the endeavour to place a value on the provision of a good or service. Applied to the case of ride-sharing services, riders would see this common estimation reflected in the fare estimates supplied by the phone application prior to booking a fare. They would then have the option to accept or decline such an estimation.
Concluding Remarks
It is evident that the determination of just price is a complex exercise incorporating a plethora of factors both inherent in and circumstantial to the quid pro quo exchange of goods and services. Pricing models will only ever be able to approximate a common estimation of what is just. This is evident in Aquinas’ treatment of the subject whilst addressing certain questions about trade and economics within the broader context of commutative justice. Such considerations may be roughly divided into stewardship issues which underlay every economic transaction (matters intrinsically linked to the provision of a good or service), and extrinsic circumstantial matters which have an influence upon the value attached to the provision of a good or service in a particular context.
The universal stewardship of human goods means that no one person has absolute dominion over property and possessions. The accumulation of private property must always be subject to the common good. The common good is sought by way of a just allocation of scarce resources. The greater the scarcity the greater the value placed upon such goods and their just distribution. Such distribution is made by way of endowment from the governing authority of the day (distributive justice) and is sustained by way of mutually beneficial exchanges between individuals and organisations within the polity (commutative justice).
Within these commutative exchanges, Aquinas looks at how such exchanges satisfy human need and then accounts for the labour employed to bring a product or service to market to satisfy such a need. These matters go to the heart of an economic transaction and the value attached to it. Spatial, temporal and demographic factors also have a bearing upon need. In these circumstances, demand operates as a barometer for value, not its determinant. Just pricing models, for Aquinas, should adequately compensate a supplier for the cost of capital and labour whilst simultaneously accounting for the impact of extraneous factors upon the value of a product or service. This multi-faceted approach to price determination will always mean that pricing can only ever be a prudential estimation which is commonly accepted by rational economic agents. This estimation opens the door to negotiation and bargaining. Yet such bargaining, for Aquinas, is not an adversarial laissez-faire endeavour designed to profit from the disadvantage of the other party but rather a mutual search for the truth. As Brown says:
We are still free to bargain, but bargaining is not conceived as a zero-sum game, each of us trying to outwit and defeat the other and enrich ourselves without limit. Bargaining is in fact a search for the truth: in haggling over a purchase we are trying to discover the true value.Footnote 23
If this represents the modus operandi of trade talks, then the occurrence of a natural disaster or other emergency would not be seen as an opportunity for profiteering or price-gouging but rather as an opportunity for aid animated by the principles of liberality and solidarity. It is not only governments that have a bounden duty to provide aid and disaster relief, but the citizenry also bears a responsibility. This duty is coterminous with the right of the needy to appropriate bread without the need for consideration or restitution. In modern liberal economies, such rights have given way to laissez-faire concepts of supply and demand inherited from Locke and Adam Smith who would leave it to the invisible hand of self-serving economic agents to arrive at economic equilibrium. For Aquinas, such equilibrium does not always arrive at a just and equitable outcome.
