For the just price arises from the abundance or scarcity of goods, merchants, and money… and not from costs, labor, and risk.

From NYC vs Shopkeepers by Alex Tabarrok.  Quoting an article from The Economist demonstrating that their is much ruin in great cities.  In this case New York City.

The story of your correspondent’s local corner shop offers a cautionary tale.

This type of shop was once familiar in New York, but has largely been squeezed out by chains and bank branches. The owner is an immigrant who opens early and closes late. In crises the shop stocks the products that customers need. When flooding from Hurricane Sandy caused a blackout in 2012, it sold batteries, torches, candles and board games. During the pandemic it has been piled high with boxes of sanitiser, bleach, masks and gloves.

Stocking up comes with risks. Acquiring inventory is costly. Demand drops off when normality returns—unwanted board games linger in the back of the shop. And this time, the rules changed. In March a woman bought a box of masks (each mask costing $2), and then said she was from the city’s office of consumer affairs, and charged the shopkeeper for violating new price-gouging rules. Two days later, says the shopkeeper, another inspector charged the shop again, this time offering guidance on the right prices. Masks should cost no more than $1; gloves selling at $19.95 should sell for only $14.95. Each package marked above the permitted price would be fined $500. There were many packages.

…Shortly before a rescheduled hearing, the shop’s proprietor received an offer to settle the first charge for a little over $7,000. That is much more than his monthly profit, he says from behind the plastic screen now distancing him from customers, looking glumly at a stack of legal papers on his counter. But the fines would be ruinous….The shopkeeper will settle…Justice in the Big Apple has been opaque and costly—and raises the question of who precisely is being gouged.

Incompetent city government to the point of being capriciously evil.  

And part of that capricious evil is the constant default to Marxist thinking.  In this case, Marx's Labor Theory of Value.  Economically it has always been an empirical dud.  Morally, administrators everywhere love it.  It is if they hate the profit motive, do not understand risk premiums, do not understand demand, and do not understand that price flexibility, whether you call it gouging or not, is an inherent part of market signaling.  The capacity to increase profit by increasing production due to excess demand is a powerful signal which uneducated bureaucrats suffering a surfeit of moral preening are always seeking to subvert.  They seek to do bad by appearing to do good.  

Tabarrok offers a coda to the Economist article which I really appreciate.  Apparently there was a whole Spanish School of Economics which addressed Marx's labor theory of value - 300 years before he advanced it.  The School of Salamanca (rising in the 16th century in Spain) represented a marked evolution of thinking across a wide field but included specifically philosophical treatment of property, money, value, price and interest.  

Marjorie Grice-Hutchinson was a British scholar with an original academic focus on Spain but with a later PhD in economics.  She published in The School of Salamanca: Readings in Spanish Monetary Theory 1544-1605 in 1952.  It gained attention in that narrow field of economics.  Joseph Schumpeter brought attention to the economic teachings of the School of Salamanca in the 1950s.  

There is a wonderful passage in Grice-Hutchinson's book from Luis Saravia de la Calle, Instruccion de mercaderes, Medina del Campo, 1544, Chapter 2, Of the Just Price, pp. xxvii-xxviii.  His explication of value in 1544 predates Marx by 300 years and is markedly clear.  

Those who measure the just price by the labor, costs, and risk incurred by the person who deals in the merchandise or produces it, or by the cost of transport or the expense of traveling… or by what he has to pay the factors for their industry, risk, and labor, are greatly in error, and still more so are those who allow a certain profit of a fifth or a tenth. For the just price arises from the abundance or scarcity of goods, merchants, and money… and not from costs, labor, and risk. If we had to consider labor and risk in order to assess the just price, no merchant would ever suffer loss, nor would abundance or scarcity of goods and money enter into the question. Prices are not commonly fixed on the basis of costs. Why should a bale of linen brought overland from Brittany at great expense be worth more than one which is transported cheaply by sea?… Why should a book written out by hand be worth more than one which is printed, when the latter is better though it costs less to produce?… The just price is found not by counting the cost but by the common estimation. (Grice-Hutichinson, 110-111, emphasis added).

 Woof.  Glad to make the acquaintance of the works of Grice-Hutchinson and Luis Saravia de la Calle.  And it is regrettable that, like privet or Kudzu or English Ivy, the cognitive pollution of discredited Marxist thinking such as labor theory of value, no matter how many times overturned, perniciously continues to creep into public policy, undermining human well-being.

UPDATE:  A nice precis on just prices down through the ages.  What Is a Just Price? by Paul Mueller.