Today, guest scientist Andrew Boyd asks "what's it worth?". The
University of Houston presents this series about the
machines that make our civilization run, and the people whose ingenuity created them.
As a child I once asked my father,
"How much is something worth?" A practical man, he answered
without hesitation: "Something is worth exactly what someone else is willing to pay for it."
Price and worth are different, but they're closely related. "What's it worth to you?"
is a question about how much we're willing to pay, not an appeal for a value judgment.
When we ask, "What price love?" it isn't normally in the context of a negotiation.
The confusion stems from our conviction that price should reflect worth. When this
isn't the case, we feel a sense of injustice.
Aristotle is often credited as the first person to take an in-depth look at the
relationship between price and worth, devoting an entire book of the Ethics to
the justum pretium -- the just price. A remarkable work in its time, the
Ethics was reintroduced to the Roman Catholic Church sixteen centuries later by Saint
Albert the Great and his student Saint Thomas Aquinas. Albert and Thomas in turn
refined Aristotle's argument. Their conclusion? Of moral necessity, price must reflect
Yet how could the just price be determined? The average man or woman couldn't be trusted.
In the eyes of the early Church, the very act of trading was unavoidably wrought with sin.
Mercantile activity was seen as a swamp of immorality, complete with greed, lying, and
cheating. Merchants weren't just tempted to stray from the will of God at every turn;
a degree of moral corruptness was a necessary part of the job. Saint Augustine maintained
that "just as art cannot exist without [misrepresentation], neither can business exist without
fraud." Today, in a world shaped by the invisible hand of Adam Smith, we might simply refer
to these scandalous acts as "haggling".
How, then, could the just price be determined? Should it come from a committee of learned
churchmen? Using what formula? Maybe a range of prices should be chosen instead of a
single price. But then where should the boundaries be drawn? It's a very difficult question.
Ask yourself: should a gallon of gas cost two dollars or three? Why not one? Do we reward
only the labor of pumping and refining? What about the many fixed costs associated with refineries,
pipelines, and oil tankers? Safety and risk need to be accounted for, as does the clean up
after unfortunate but inevitable accidents. Is it fair for a price to be so high that it
doesn't allow us to get where we need to go? So low that it encourages consumption of a
Faced with such complicated questions how do we relate price to worth? Many solutions have
been proposed. What's surprising is that one in particular stands out. A solution so
practical, so obvious, that it really comes as no surprise at all.
In Albert the Great's words, that solution was,
"a price is just [if it reflects] the estimation of the market place at that time."
Simon of Bisignano referred to the
"true value of goods as the price for which they were commonly sold."
And Bernard Botone of Parma said simply that
"a thing is worth as much as it can be sold for."
Apparently the great scholars who preceded my father were able to add little to his
I'm Andy Boyd at the University of Houston,
where we're interested in the way inventive minds
Dr. Andrew Boyd is Chief Scientist and Senior Vice President at PROS, a
provider of provider of pricing and revenue optimization solutions. Dr.
Boyd received his A.B. with Honors at Oberlin College with majors in
Mathematics and Economics in 1981, and his Ph.D. in Operations Research
from MIT in 1987. Prior to joining PROS, he enjoyed a successful ten-year
career as a university professor.
The material in this essay is taken from John. W. Baldwin, "The Medieval
Theories of the Just Price: Romanists, Canonists, and Theologians in the
Twelfth and Thirteenth Centuries," Transactions of the American
Philosophical Society, 49 (4), 1959.
A translation of Book 5 of Aristotle's Nichomachean Ethics can be
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