Markets, Productivity, and Happiness in a Historical Perspective

The Duality of prices, Morality and Natural Liberty: The dual role of prices in the history of economic analysis

Witztum Amos , LSE

Natural liberty has been a powerful idea about social order. However, it has also been a misguided one in the sense that it did not produce the expected outcome yet there was something about it which blinded people’s ability to realise this. We use the analysis of economic interactions throughout history to identify where the fault line may lie between an order that fulfils social expectation and one that does not. We claim that throughout history, those who wrote about economics distinguished between two concepts of prices. The first is the price that would emerge in markets and the second, a price that would fulfil social expectations. For simplicity’s sake, we call the former prices and the latter values. By looking at some historical milestones, we examine the duality of prices in pre-enlightenment thinking (we focus on Aristotle with a note on St Thomas) where the purpose of economic organisation was to uphold morality. We then examine the role of duality in post-enlightenment thinking focusing our attention on Smith (with a note on Mill and Marx). Finally, we look at this question in the evolution of modern economics by examining the implicit duality of prices in Walras and the way in which it has been understood by empiricist modern economists. In general, show that when prices equalled values, the functions of market interactions—perceived as a natural phenomenon—coincided with social expectation. When they deviated from one another, it meant that the actual working of market interactions violated social and moral expectations. When applied to natural liberty, we would expect the idea of natural liberty to be rolled back if it can be shown that values and prices will never coincide. We also point to the possibility that this will not happen because of the presence forces that corrupt morality and social expectation to allow the support for natural liberty to linger.


Keywords: Values, Prices, Natural Liberty, Aristotle, Smith, Walras