Michael Munger on John Locke, Prices, and Hurricane Sandy

Locke's Essay

Michael Munger introduces John Locke's lesser-known essay, "Venditio," which offers a rare glimpse into Locke's economic thoughts. This essay, written in 1660 and published in 1695, challenges the traditional notion of market pricing by questioning when it is permissible to sell at market price. Locke's perspective contrasts with Thomas Aquinas's just price doctrine, which questions the morality of selling above an item's worth. Munger highlights Locke's radical claim that market price is determined by voluntary transactions, not intrinsic value, challenging the idea of a single market price 1 2.

The market price means that I will sell it to anyone for that price. I don't look at them, I don't look at their particular condition.

--- Michael Munger

This perspective suggests that market price is not fixed but varies based on circumstances and voluntary agreements 3.

   

Market Logic

Locke's essay delves into the logic of market prices, emphasizing the importance of context and voluntary exchange. He argues that market price is not a static figure but a reflection of current conditions, including the number of buyers and sellers. This view aligns with modern economic theories of competitive equilibrium, where market price is determined by supply and demand dynamics at a specific time and place 4.

The market price is the right guide to what is just and equitable. But you have to define it carefully.

--- Michael Munger

Locke's insights challenge the notion of price gouging, suggesting that high prices can be justified if they reflect genuine market conditions rather than exploitation 5 6.

   

Voluntary Exchange

The discussion on voluntary exchange highlights Locke's belief in fairness and morality in market transactions. He argues that exploiting a buyer's desperation by raising prices beyond one's initial willingness to accept is immoral, even if legally permissible. This distinction between willingness to pay and willingness to accept underscores the ethical considerations in pricing 7.

Locke's opening line of the essay is that he's concerned with two things: equity and justice.

--- Michael Munger

Locke's views suggest that while market transactions should be voluntary, they also carry an obligation to fairness, akin to the moral duty of saving a drowning person with a life ring 8 9.