Knowledge Problem

Michael Giberson

Unfair Prices

Daniel Little, at Understanding Society, asks about “Fair Prices?“  In exploring the topic he draws some upon E.P. Thompson’s studies of the English working class:

E. P. Thompson’s work on early modern Britain reminds us that there was a “moral economy of the crowd” that profoundly challenged the legitimacy of the market; that these popular moral ideas specifically and deeply challenged the idea of market-defined prices for life’s necessities; and that the crowd demanded “fair prices” for food and housing (Customs in Common: Studies in Traditional Popular Culture). The moral economy of the crowd focused on the poor — it assumed a minimum standard of living and demanded that the millers, merchants, and officials respect this standard by charging prices the poor could afford. And the rioting that took place in Poland in 1988 over meat prices or rice riots in Indonesia in 2008 are reminders that this kind of moral reasoning isn’t merely part of a pre-modern sensibility.

This kind of fairness reasoning addresses only outcomes.  But in the case of $4/gallon gasoline last year in the United States, he found other kinds of moral reasoning involved:

And what about that other necessity of life — gasoline? Public complaints about $4/gallon gas were certainly loud a year ago. But they seem to have been grounded in something different — the suspicion that the oil companies were manipulating prices and taking predatory profits — rather than an assumption of a fair price determined by the needs of the poor.

Reasoning about unfair prices

Sarah Maxwell sums up a great deal of work from marketing, psychology, and economics about fairness in pricing in her book The Price is Wrong.  Generally speaking, she observes that when people are faced with a price that violates expectations in a way disadvantageous to them (a consumer faced with an unexpectedly high price, a producer faced with an unexpectedly low price), they feel distress which motivates inquiry into the reasons for the unexpected price.

In Maxwell’s telling, this inquiry leads to evaluation of the social fairness of the price, first to consider the fairness of the outcome and if that isn’t satisfying then to consider the process which lead to the outcome.  This two-step process then considers issues of distributional fairness then procedural fairness.

Returning to Little’s comments, the first quoted cases seem directed at distributional issues, while the gasoline example draws attention to procedural issues.  That is to say, gasoline consumers confronted with $4 gasoline reacted by suspecting that somehow someone cheated – violated fair procedures – and that the cheating resulted in an unfair price.  Little mentions oil companies as targets of suspicion but speculators and other investors also got prominent mention at the time.

Little observes that contemporary Americans seem willing to accept a relatively broad range of prices and wages despite the varying distributional outcomes.  For many Americans, for example, so long as wages seem somewhat connected to market-based reasoning – for example, what companies need to pay to attract top talent – then the wage is at least tolerated even when very high.

[Admittedly the compilation of evidence is not systematic, and bears examination, but it comports with my prior beliefs.  I'd welcome pointers to systematic inquiry on this topic.]

Moral Progress?

So, and here I know I’m trampling over a host of problematic issues that ought to be examined carefully, I wonder whether this recourse to procedural rather than distributive reasoning in reaction to distressing prices is evidence of moral progress.

I realize the concept of moral progress itself is problematic.  For my own thinking on the issue, I find Jesse Prinz’s discussion of the concept in his book The Emotional Construction of Morals to be reasonably satisfying.  To quote just one line out of his final chapter (Ch. 8, “Moral Progress”), “We can assess moral systems by asking how well they are suited to providing lives that we would find desirable.”  (p. 299)  This isn’t a knock-down argument in favor of  the idea of moral progress, just one line out of a chapter summing up a book-length examination of morality.  The point is only that moral beliefs can by examined and judged, determined to be better or worse, and therefore moral progress can be assessed.

My question, then, is this: “Does recourse to procedural rather than distributional reasoning when confronted by distressing prices signal moral progress?”

(HT to Mark Thoma for the link to Little.)