Are Price Controls Permitted?

Responsa of the Week: Are price controls permitted?

A weekly series by Dr. Meir Tamari about responsa regarding business ethics issues.

In order to demonstrate the work of the halakhic system and its moral considerations regarding a variety of issues in business and economics, I will present a number of responsa drawn from the literature. These represent questions addressed either by laymen or by rabbis or communities to rabbinical authorities and their answers. They cover a period of close to 2000 years and reflect Jewish life in all the countries of the Diaspora. Even though the answers may vary and conflict with each other so that one cannot draw behavioral conclusions from them, they demonstrate Jewish thinking and values in this field.

Any ethical or moral system requires communal acceptance and enforcement, in order to be adequately translated into ethical and moral actions. Therefore, any discussion of Jewish business ethics will remain only partially effective without reference to the enactments of the communities in their various countries and of different periods of history. Halakhic decisions, rulings of the Codes and the moralizing of the homelitical literature found their implementation in these enactments. For example, the Shulchan Arukh, echoing both the Rambam’s Mishneh Torah and Yechiel ben Asher’s Arba Turim, rules that it is forbidden to buy anything that has the appearance of having been stolen (Choshen Mishpat, section358).

Then in the communal record book of the Jewish community of Padua in Italy, we find the following decision taken at a meeting in 1580: “This is to ratify a regulation which appeared in the old Pinkas [1562] forbidding the purchase of goods before the end of the prayers. No man or women, young or old, irrespective of who they are, shall buy any goods suitable for sale before the end of the morning prayers, nor after the bell rings to mark the end of the day [referring to the Maariv prayers]. Neither are they permitted to take any of the goods to their homes and keep them there until after the prayers.”

This has nothing to with any halakhic or ritualistic rule regarding the permitted time of prayer, but solely with the halakhically forbidden trade in stolen goods. By forbidding trading in all goods at a time when fewer people are on the streets or in the market or other places besides the synagogues, they simply made the trade in stolen goods more visible and thus more difficult. The communal enactments or any other form of public pressure in economics and business, are not the result of any anti-commercial thought such as characterizes much Catholic economic thought nor are they the result of non-Jewish socialist ideologies. Rather, they flow directly from the very core of Judaism that sees the nation as the vehicle and the purpose of all its teachings.

Rabbi S. R. Hirsch writes that Judaism is not a religion but a nation (Exodus, chapter 6). It is primarily this that distinguishes Judaism from both the other monotheistic religions, that are concerned only with the religious growth or redemption of the individual; after all, there is no Christian or Moslem Nation, only nations that are Christian or Moslem. At the best there is a concept of some amorphous idealized unity, not linked in any way to a common destiny, common land or biological connection. It is this national character that distinguishes Jewish business ethics, like it does all ethics, prayer or rituals of Judaism from all others.

Despite, the destruction of national independence in 70 A.D., Jews have nevertheless maintained varying degrees of sovereignty over their economic affairs. Under Paganism, Christianity and Islam alike, generally speaking they retained the right to enforce halakhah in all matters concerning business disputes while also having the power of taxation over the members of the Jewish community, both for their own social costs as well as for any special taxes levied on the Jews. So too did the communities have the ability to enforce the demands of Judaism in all matters of ritual, charity and personal behavior. On the understanding that, being divine in origin, Torah law must of necessity be moral and just, the decisions of the batei din are an integral part of the Torah ethical system. Communal autonomy and authority make the batei din something more than the mere arbitration that they have become only in the last 1 or 2 centuries of Jewish history. It was these powers of taxation and legal autonomy that made, in effect, these communities independent mini-states. It was only macro-economic issues that lay beyond them.

Sometimes these autonomous units were small communities like that of Suggenheim in 18th century Germany that consisted of some 12 households, others were large towns like Padua in 16th and 17th centuries, while there were the country-wide synods like those of Castile, Franco- Germany and Lithuania. The most powerful and extensive of them all was undoubtedly Va’ad Arba Aratsot that included most of became the ‘Pale of Settlement’ in Eastern Europe from the beginning of the 16th century till the late 18th century. This autonomy continued till modern times; till the beginning of the 19th century in Western Europe, while in the Moslem countries and Eastern Europe, partially until the outbreak of the 2nd World War. Then assimilation, secularism and the nature of the modern state, have made spirituality, religion, morals and ethics into matters of individual and personal choice. Thereby they have denuded Judaism of most of its definitive and special characteristics in all fields, including business ethics.

Be that as it may be, this autonomy was expressed as enactments and communal edicts that form an integral part of Jewish halakhic literature. They were always made with rabbinic sanction and guidance even though they were primarily the work of communal leaders. Combined with rabbinic responsa they constitutes pressure that provide the powers of censure and punishment necessary to make perpetrators bear the cost of transgressing the moral system and so ensure that it worked. In this way, protection is given to those following the Torah’s path against other Jews who are more powerful or greedier. They also provided the peer pressure for those legal but immoral actions that form a large part of business ethical dilemmas, protected the environment and provided the funding for the social and religious obligations inherent in Judaism through tax money as has been the Jewish pattern for over 2000 years and not only through philanthropy as is our modern custom..

We will try and provide examples of all of these over the next few weeks.

Price Control.

Halakhically, there exist restraints on the permissible margins of profit. There is the concept of the ‘just price’, [Ona’ah], regarding variations over or above the market price, without full disclosure (Mishneh Torah, Hilkhot Mechirah, chapter 13). There are restrictions on the chain of marketing of essential goods ( Hilkhot Mechirah, chapter 14; Tur – Shulchan Arukh, section, 231); presumably where these are to the detriment of the consumers. The same codes maintain the moral exhortations to voluntarily limit profits, as halakhah. Furthermore, the community has the obligation and the right to fix prices and control profits whenever the public good demands it. Free market economists correctly argue that any attempts to distort the market mechanism create black-markets as some are willing to pay the higher free price; others unable to meet this price suffer and society suffers morally from the black-marketers as was the case in the U.S.A. during prohibition. It would be argued that if society accepts the social or moral reason for the intervention, there will be no black-market.

“We have been made aware once again of the public outcry concerning the exorbitant fees charged by the dayanim, the exaggerated fines that they levy, and the fact that they ask for fees twice [once at the beginning of the case and once at its conclusion]. So we have decided that they may take a fee only at the conclusion and that is limited to 1 large gold coin” (Va’ad Arba Aratsot, enactment 563 and others).

Rent Control.

Throughout much of Jewish history in Europe, they were tenants of non-Jewish landlords and the supply of housing was severely limited by discriminatory legislation. It was therefore necessary to protect less affluent members of society and to ensure them housing, even if it meant distorting supply and demand.

“This is to ratify our agreement to the enactments in regard to renting houses in the ghetto from the non-Jewish owners. According to that enactment of1540, the herem [excommunication ban] of Rabbenu Gershon Meor Hagolah [Franco-Germany, circa 9th century c.e.] applies to those Jews who try to rent houses that are already rented to other Jews. This means that for three years after a Jew has been evicted from his house, no Jew may offer to rent the house [thus reducing competition and preventing increased rentals]” (Pinkas Padua, 1580).

“Concerning the rich who maintain several empty houses… joining house to house so that the number of houses declines and the poor cannot find places to live…the parnassim [communal leaders] have to prevent this. They also have to supervise and see that the tenancy is fixed and that the rentals should not be allowed to increase too rapidly” (Pinkas Hakesherim shel Poznan, 1621-1835, enactments282, 283,296, 553).

This column presents general principles for approaching business ethics topics. For specific guidelines, please refer to a halachic authority.

Dr. Meir Tamari is the former chief economist of the Office of the Governor at the Bank of Israel, and the founder of the Business Ethics Center of Jerusalem.