Prices

One of the worst mistakes that ethicists make is that they typically do.n't properly understand economics. Without any uderstanding of economics, it is impossible to determine whether moral and ethical principles that deal with money are helpful or harmful. Since, to the extent that our government is democratic, popular concepts of right and wrong govern us, we need to persuade large numbers of people to adopt moral and ethical values that reflect a reasonably good understanding of economics.

The first point I would like to make on areas where ethicists typically err is that if it is true that prices are determined by the laws of supply and demand, then it is nonsense to hold that they have any moral signifigance. If prices are determined by natural laws, then it makes no more sense to say that they are too high or low than to say that objects that are dropped should fall in some direction other than down.

The assumptions that economists have used in order to come up with results that many find offensive, are not ones that favor one any particular group. In this case, they are simple and highly plausible. If a price goes up, consumers will by less and producers will produce more. If the price goes down, then they will do the opposite. The price will naturally gravitate to the point where the number of willing buyers is matched by the number of willing sellers. At any other price one will exceed the other.

The problem with the way this is usually explained is that economist focus too much on legal limitations on prices without addressing the moral and ethical values responsible for the legislation. Without these harmful moral and ethical values, no one would support the legislation. The moral and ethical values by themselves would produce bad results even in the absence of legislation.

Any moral or ethical restriction on prices can be thought of as a dead-weight loss imposed on people who charge prices that fall outside of a certain range. The amount of this loss can depend on the extent to which the price falls outside of the acceptable range. In order to make the transaction worthwhile, an offending seller will need to increase the price in order to compensate for the blame they are likely to receive from selling. We also need to consider how much we would blame them for running out of merchandise. Perhaps we are setting up a system which punishes venders no matter what they do. This would have the long-term effect of discouraging people from becoming venders in the first place.

The impact of all of this is that moral and ethical restictions will have the impact of either making the prices worse or preventing people from buying and selling the things that they want at prices that they are still willing to accept, even though they fall outside of the range that they have come to expect.

Having said this, it is not consistent with methodological individualism to suppose that people will alter their moral and ethical values in order to benefit society. This is an error that many supporters of free-market economics make. We need to show that these moral and ethical values are harmful to the people who hold them. When you blame others, they are likely to blame you back. We need to point out the unnecessary harm that people are doing to themselves and those that they care about by enforcing these harmful norms and encouraging those around them to do so as well.

People are naturally inclined to expend effort to enforce a norm that makes it more difficult for them to buy and sell the things that they want at prices that would be acceptable to them if they were not considered so offensive as to make them angry. Suppose that a vender knows that an increase in the market price of an item is likely to offend you. Wouldn't that make it less likely that the vendor would help you find out that the item was available at that price? Suppose, alternatively, that the vendor knows that you believe that prices have no moral or ethical signifigance. Now the vendor will not hesitate to provide you with any information about prices that he or she is willing to offer.

The questions that you need to ask when buying and selling are whether you can get a better deal elsewhere, and if it is worth your while to search. If you can do better somewhere else, then getting angry serves no purpose. Simply go there, or if the difference is not great enough to make that pay, do not.