Paul Jaminet (of the Brothers Judd Blog) sent in a very thoughtful email in reply to what Mark Sargent wrote in this space about Catholic social thought's just wage doctrine. Since I liked Paul's email a lot, but he said he wasn't going to post it over at Brothers Judd, I asked if I could reprint it here. He kindly consented:
Some years back I read a fascinating review of medieval just price theory by some leading economic historians of the 1930s. (Alas, I didn't take notes and can't cite sources.) Apparently, Aquinas and his successors were free marketers in the sense that they thought, as a general rule, that mutually agreed prices should not be interfered with by authorities, but they also felt a need to address the moral process of price determination. (Just price theory, like just war theory, also involves moral & prudential considerations, not just questions of right or legitimacy).
In the medieval economy, most merchants were monopolists, and there was routinely a wide range of mutually agreeable prices -- the buyer (or seller) would willingly pay (accept) a much higher (lower) price than the merchant could profitably sell (buy &dispose of the good). Just price theory was meant to provide some guidance for buyer/seller and merchant, helping them to reach agreement and avoid giving all the profit to the merchant.
It seems to me there's much less basis for a just price or just wage theory today, when most bargaining situations are competitive. Prices/wages are constrained on both sides -- the would-be employee by other job opportunities, the would-be employer by the need to remain competitive; so a just price theory for wages, even if both parties believe in it, can only slightly alter the bargain. Meanwhile, if just wages are mandated by law, they risk harming both parties by outlawing the mutually acceptable terms and destroying the possibility of a bargain. If the prices involved are wages, this leads to unemployment, as Professor Sargent notes. On the other side, advocates of mandates can point to some existing 'just price' regulation, e.g. for electrical utility rates and telephones, which are arguably beneficial.
If the goal of modern just wage theory is to give every household an income that 'enables a parent to stay home with the children,' then eliminating poverty is what we are after; and this is a very different goal than Aquinas's. If eliminating poverty is the goal, then other means beside price regulation (or price moralizing) are necessary. And this modern goal will only be accomplished by proving Jesus wrong!
Boy do I love having really smart readers. I don't have a dog in this fight (yet), as I am still sorting out for myself both the theological and prudential aspects, but I am enjoying providing a forum for the discussion and I'm learning a lot!