Communities and finding a 'just price'

When did a system based on a fixed price and a shifting measure turn on its head—and what does this mean for community business?

Gen Maitland-Hudson

Head of Impact and Evaluation

It seems quite natural to us that the cost of our weekly shop should change with fluctuations in the market.

Last week we saw much coverage in the press of the cost of courgettes and the price of fish. This week we have been treated to a 25% Brexit price hike from the streaming service Sonos. We understand a margin to be the level of monetary profit added by a retailer to a wholesale product. As costs go up, so do prices.

Much of this may feel unjust, and it hasn’t always been the case.

For hundreds of years, prices changed very little. The cost of a loaf of bread, and of many other staple products, was relatively fixed. Instead of the price, it was the size of the loaf that fluctuated in accordance, largely, with the harvest.

There were some small shifts in price, but the bulk of the exchange value of goods was in the way they were measured. It was relative amounts that changed, while the ‘just price’, remained fixed. This meant that the bushel of wheat bought from the farmer was measured differently to the bushel at the river bank prior to shipping, and differently again to the bushel sold at the market. The margins were in the volume. The price of the bushel stayed the same, it just wasn’t the same bushel. It was heaped or levelled or shaken down, according to a set of rules that kept the wheat moving from field to store to mill to bread oven, and made each man’s role in that chain worthwhile by providing him with a sufficient extra measure of grain to compensate for his effort.

There are different theories as to what happened to change a system based on a fixed price and a shifting measure, to a fixed measure and a shifting price. One version of this story is that increased trade makes the varied measures particularly hard to monitor effectively. A range of ways of measuring requires an embedded system of knowledge and behaviour that guarantees fairness. Standardisation of weights and measures, by contrast, allows for regulation that isn’t dependent on familiarity and custom. It frees up movement not only of goods, but of people. The knowledge of a standard can be learned, and can travel.

The old system was dependent on both the recognition and the careful transmission of a code of measurement, kept in place by rigorous and informed oversight. That kind of system makes it difficult to move away. It’s the same tight weave of knowledge, trust and oversight that existed in communities characterised by their strong ties. In Robert Roberts’ memoir of Salford, ‘The Classic Slum’, he notes that: ‘A man’s work […] usually fixed the place where his family dwelt; but lesser factors were involved too: his links, for instance, with local kith and kin. Then again, he commonly held a certain social position at the nearby pub, modest perhaps, but recognized, and a credit connection with the corner shop.’

That kind of monitoring and good credit is the side of trust dynamics that we don’t say so much about when we discuss ways of reinvigorating our waning trust today. It’s the side that made sociologist Robert Putnam a little uncomfortable when he investigated community level trust. Static, homogenous societies with rich monitoring of behaviour and carefully guarded measures of, and prices for, their staple goods, depend on trust, and they invest in maintaining it. Early co-operative societies, often responding to injustice in weights, measures and pricing in a market dominated by private interests, set this out as part of their guiding principles. This kind of maintenance is, equally, not so very different from the set of eight principles defined by Eleanor Ostrom in her theory of the management of common pool resources. Here, too, there is an emphasis on justice through monitoring and sanctions, even if price is absent.

This kind of cohesive resource management keeps its notions of value very close. To get back again to notions of cost, it’s hard to see how this model could tolerate the kind of cost inflation explored in Slate Star Codex’s latest blog post. It is far too closely bound up with the direct experience and management of goods. Trust is made visible, and is experienced directly through both credit and sanction. In a community share issue, to take a current example, the share price is nominal, not speculative, and the rate of interest discretionary. Every shareholder has an equal vote as a member of the society issuing the shares, regardless of size of shareholding. This is no doubt one of the reasons why local organisations seem to support the renewal of trust, they invest in visibility and in the direct connection between price, value and – potential – sanction.

Power to Change’s investments in communities work their way into some of these complicated systems of trust and value. Community shares intertwine investment and direct community involvement through their governance structure. We may yet find that community shareholders not only lend credit but, under certain circumstances, are also willing to sanction according to the communal notion of value enshrined in the share issue documents. Indeed, we have to hope that they will, since the monitoring and sanction by shareholders is the mechanism that ensures that the ‘just price’ of any share is maintained as a direct reflection of the profitability of the business.

This isn’t a new idea, it’s a very old one. But it has the potential to be far more disruptive than many upstart technological innovations. It may also be more just.