Exchange

The core of neoclassical economics is the interaction of supply and demand. Aristotle discussed each separately but never explained or supported the market-clearing price. What he strongly defended was justice in exchange even where the negotiation was devolved and dyadic. Exchange increases the felt welfare of both parties precisely because the division of labour tracks the differentiation of talents. Specialisation improves proficiency and wellbeing. It allows activity to be its own justification in the sense of Sen on capacity. Yet the ratio must be fair. Aristotle is torn between (Ricardo’s, Marx’s) labour embodied and (Jevons’s, Gossen’s) demand-led utility. If his final verdict is not clear, one reason is that, like Marshall, he is aware that the time periods are not the same. Production is in the past but sale is in the present. The two parties never have equal power. The most equitable solution is for a traditional, fixed price to be selected or even for the state to impose a response.