Monday, January 09, 2006

talmudic values

During a recent studying session on Tractate Avodah Zara, I came across a dialogue which I think may belie the Talmud's opinion over whether costs determine prices or vice versa. On Daf 7a, the Talmud brings down an argument between Rabbi Meir and Rabbi Yehuda Hanasi (also the author of the Mishnayot upon which the Talmud is based).

The case is where an individual brings a woolen clothing article to a dyer, to be dyed black and the dyer instead dyes it red (or vice versa). No matter if the dyers actions were intended or not, everyone agrees that the dyer is considered a thief and must therefore remunerate the owner; the Tanaic dispute is over the method.

Rabbi Meir says that the dyer only pays the owner the full value of an unaltered cloth, thereby purchasing the article and any improvement. If the dyer believes there is profit to be gained if it's sold, he can potentially profit from his misdeed after selling it on the marketplace.

Rabbi Yehuda Hanasi disagrees and says that the dyer should not gain from his actions. First, he must therefore return the cloth to the owner. Second,
...if the improvement is greater than the expenses, [the cloth's owner] pays [the dyer for] the expenses [of mis-dying it]

And if the expenses are greater than the improvement, [the cloth's owner] pays him for the difference of the improvement [over the value of the original article]...

In the first scenario, the misdyed article will command a premium on the market in contrast to the article they initially agreed upon. Now although the owner was willing to pay X for it to be dyed one color, he finds that he can sell it for a greater sum of Y due to the misdye. In this case he pays the dyer for the expenses of his dying materials, and the labor costs. Even if they initially agreed upon above-market wages for the dying labor, the cloth owner is now only obliged to pay the normal market wages for such labor. (There is hardship on the cloth owner too; he loses time when he goes yet another time to obtain a correctly dyed cloth, he loses time when he has to take the misdye and market it.)

In the second scenario, the commissioned article would command a premium on the market in contrast to the misdyed article that was delivered. Also, the expenses incurred by the dyer exceeded the market price set for the misdyed article. In such a situation, the owner takes the cloth, pays the dyer the difference between the original article and its improvement, thus leaving the dyer to eat the loss for his expenses. (There is hardship on the cloth owner here too; he loses his time when he goes to obtain a correctly dyed cloth, and not only does he lose time in the marketing process, but he is short for the amount that he paid the dyer until the good is sold, and only then does he break even!)

Now what I'd like to know is if this Talmudic passage is implicitly rejecting the Labor/Production Theory of Value (or for that matter any theory that says that costs determine prices) since in both scenarios the Talmud accepts the notion that the price of an article is determined by looking at the marketplace- where transactions will tell us the price of any given consumer good, instead of focusing on the cost inputs of the production process, which in any given case might exceed or fall short of what shall be the market price.

Any thoughts?

1 comment:

Vache Folle said...

I don't know if the Talmudic scholars are engaging in economic theorizing so much as resolving a specified conflict. The question is not "What is value?"; rather, it is "How do we measure value so as to do justice in this situation?"

The parties may have quite different ideas about value, and the wronged may consider his costs and effort an important aspect in his valuation. Presumably, if the cloth is meant for the market, he would not have bothered to produce it if he did not expect to profit.

Where there is a market, there is an objective and disinterested measure of value available to the parties. A different analysis might obtain if the chattels were not meant for the market, eg items of sentimental or symbolic value.