Aristotle's 'Natural Limit' and the Economics of Price Regulation Lowry, S Todd Greek, Roman and Byzantine Studies; Spring 1974; 15, 1; ProQuest pg. 57

Aristotle's 'Natural Limit' 
and the Economics of Price Regulation 

s. Todd Lowry 

I N LIGHT OF contemporary concern with price stability and in­
flation, it is interesting to consider the approach to this problem 
found in Aristotle's Politics (1256b40-1258a20).1 

Economists who have studied Aristotle's writings, as well as the 
classicists they have influenced, have generally construed Aristotle's 
dictum that «retail trade is not a natural part of the art of getting 
wealth" (1257a15-20) as a moral repudiation of commercial activity 
lacking analytical significance. This interpretation has tended to 
reinforce the notion that Aristotle never developed an analytical 
formulation of the commercial process, but rather limited himself to 
ethical prescriptions and descriptions of administrative policies. The 
historian of economic thought J. A. Schumpeter, for example, 
asserted that Aristotle «was primarily concerned with the <natural' 
and the <just' as seen from the standpoint of his ideal of the good and 
virtuous life,"2 although he did acknowledge Aristotle's contributions 
in the areas of value theory, interest and money. Aristotle's theory of 
money, he wrote, His the basis of the bulk of all analytic work in the 
field."3 M. I. Finley contended that Hnowhere in the Politics does 
Aristotle ever consider the rules or mechanics of commercial ex­
change" and that Hhis insistence on the unnaturalness of commercial 
gain rules out the possibility of such a discussion ... Of economic 
analysis there is not a trace."4 Both Schumpeter and Finley failed to 
recognize the clearly reasoned analysis of economic relations found in 
this passage from the Politics. 

All that is required to understand the elements of Aristotle's 
theoretical sketch of the problems inherent in retail trade is that the 

1 Quotations from Aristotle's Politics are from Jowett's translation in The Works of 
Aristotle, ed. W. D. Ross, X (London 1921). 

2 J. A. Schumpeter, History of Economic Analysis, ed. E. B. Schumpeter (New York 1954) 
60. 

3 Ibid. p.62. 
4 M. 1. Finley, "Aristotle and Economic Analysis," Past &- Present noA7 (1970) 18. 

57 



58 ARISTOTLE'S 'NATURAL LIMIT' 

material be read with careful attention to the logical coherence so 
typical of Aristotle and without the naturalistic bias of nineteenth­
century economic theory which most economists have brought to 
their interpretation of it. First, "retail trade is not a natural part of the 
art of getting wealth." This statement is clearly explained to mean 
that items produced for human use properly fit into the natural 
scheme of things only when used for the purpose for which they are 
intended. Thus, when an item produced for use is temporarily 
diverted into the exchange process as a digression from its intended 
purpose, it is not being used naturally. However, if the sole purpose 
of the exchange is to obtain other goods which are to be used naturally, 
it is part of "the necessary art of wealth-getting ... different from the 
other [the purely digressive] and ... [is] a natural part of the art of 
managing a household, concerned with the provision of food, not ... 
unlimited, but having a limit" (1258a15-20). 

Second, Aristotle assumes a society of self-sufficient households as 
the functional basis of economic life. Exchange thus "arises at first 
from what is natural, from the circumstances that some have too 
little, others too much" (1257a15-20). Thus a reciprocal pattern of 
complementary surpluses and shortages results so that A, long on 
grain and short on wine, finds it convenient to trade with B, who is 
reciprocally long on wine and short on grain.5 This is, of course, 
nothing more or less than the format of barter underlying the theory 
of comparative advantage to be found in the chapter on international 
trade in any modern sophomore economics textbook. Aristotle uses 
his theory of barter to explain the basis of village life, specialization, 
and the mutual benefits of interdependence which draw people to­
gether. His doctrine of mutuality is developed as a rationalistic 
explanation of marriage and master-slave relations, the binding 
force of the household in which both parties reciprocally benefit by 
mutually complementing each other (1252b, 1260a5-b15). His ex­
clusion of the artisan from this natural governance (1260a35) deserves 
further examination in terms of his concept of a natural limit. 

Third, where barter exchange occurs, goods move directly from the 
5 The mathematical significance of the ratios in Aristotle's theory of reciprocity con­

tained in his discussion of justice and exchange in the Ethics was analyzed in the author's 
"Aristotle's Mathematical Analysis of Exchange," History of Political Economy 1 (1969) 
44-69, which, due to delays in publication, appeared Simultaneously with Finley's 1970 
article cited above. Both Schumpeter and Finley confessed difficulty with understanding 
the meaning of the ratios between the producers in Aristotle's exchange formulation. 



S. TODD LOWRY 59 

producer to the consumer. Trade thus limited by natural need Aristotle 
regarded as a natural use of goods consistent with economic wellbeing, 
although he did not consider trade per se as natural. Wealth-getting 
by exchanging goods for money to facilitate the flexible use of the 
trading potential of one's commodities he considered a part of "the 
necessary art of wealth-getting" and, when limited by the objective 
of satisfying natural needs or wants, a "natural part of the art of 
managing a household." It was the diversion of goods from their 
natural purposes by middlemen, whose role was made possible by 
the use of freely circulating money, that Aristotle condemned. 
With the introduction of money-exchange between the producer­
consumer and the middleman or retail trader, a different form of 
wealth-getting became possible, namely the accumulation of coined 
money by the retailer. This motivation for exchange is not limited by 
the natural satiation of desire for goods which regulates the con­
sumer and, by implication, the producer, whose objective is also the 
direct satisfaction of wants or needs. Aristotle made this point again 
in reference to international trade when he wrote, "Those who make 
themselves a market for the world only do so for the sake of revenue, 
and if a state ought not to desire profit of this kind it ought not to 

have such an emporium" (1327a25-35). It would follow that, in the 
absence of natural restraints, the retailer's acquisitiveness should be 
limited by the state. 

To illustrate the <digressive' potential of money in the barter pro­
cess, assume that A sells a bushel of grain to a retailer for three 
drachmae and that the retailer sells the same bushel of grain to B for 
four drachmae. Assume further that B sells an amphora of wine to 
the retailer for three drachmae which the retailer in turn sells to A for 
four drachmae. The normal barter process has been served by these 
transactions, but the retailer has picked up two drachmae. Since the 
bargains between A and B and the retailer would be prima facie fair if 
freely and voluntarily entered into under the Greek law of sale,6 the 
retailer's revenue is limited neither by the traditional rules of bar­
gaining nor, as is the case with the consumer, by the constraints of his 
personal needs for goods. 

What, then, is to prevent the retailer from using the exchange pro­
cess to acquire excess wealth in the form of coined money? In the 
absence of a natural limit to his wants and needs which the use value 

6 See Fritz Pringsheim, The Greek Law of Sale (Weimar 1950) 130, 137, 168. 



60 ARISTOTLE'S 'NATURAL LIMIT' 

of commodities would impose, the retailer is able to take advantage 
of the secondary or exchange use of goods (their non-natural use) for 
the unlimited pursuit of wealth. As long as goods are used for their 
natural purposes, natural satiation limits their accumulation. Retail 
trade, however, sets up the conditions for the secondary use of goods 
as items of exchange for money as an end in itself and thus requires 
administrative restraint or artificially imposed limits in the absence 
of any natural restriction. 

Newman dealt with this problem in terms of the limiting effect of 
natural use as discussed above. However, he seems to lose the thread 
of Aristotle's argument regarding the importance of a natural limit. 
He defends the profit of the retailer [the 'intermediary'] as "payment 
for a social service, not something filched from his neighbour," citing 
Plato, Laws 918B-E, for a "truer way" of construing this social func­
tion.7 The question of whether the retailer has valid expenses which 
deserve reimbursement is, however, irrelevant to the basic issue of 
whether there are natural restraints, such as satiable physiological 
desires, upon his interest in accumulating money above and beyond 
any reasonable payment for services. Part of the problem is that 
Newman associated the natural limit with a concept of virtue de­
duced from the hypothetical good life. He is conscious of some incon­
sistencies in Aristotle's views as he interprets them, but he fails to 
explore the possibility that Aristotle's explanation of the limits on 
social and economic activity was in naturalistic and materialist rather 
than in moral terms. One might even say that the careful develop­
ment in the Politics of the physiological preconditions for family and 
village organization has a distinctly Atomist flavor.s 

There is some evidence that the question of the existence of natural 
limits to human desire and the need for legislative regulation in their 
absence was a well developed issue in classical economic policy. 
Aristotle quoted from one of Solon's poems, "No bound to riches has 
been fixed for man." He disagreed,9 and asserted, "But there is a 

7 w. L. Newman, The Politics of Aristotle I (Oxford 1887) 131. 
8 See, generally, Thomas Cole, Democritus and the Sources of Greek Anthropology (AP A 

Monograph 25, Cleveland 1967), and David J. Fudey, Two Studies in the Greek Atomists 
(Princeton 1967). It is of interest to recall that the major thrust of Adam Smith's contribu­
tion to political economy was his projection of the natural propensities of the individual 
into a theory of a system of natural constraints which provide the otherwise absent limits 
on the behavior of the participants in the market economy. 

9 It should be noted that Aristotle is here discussing the physical bases of riches and not 
money wealth. Newman, op.cit. (supra n.7) 138, commented that Aristotle "appears to 



S. TODD LOWRY 61 

boundary fixed, just as there is in the other arts" (1256b30-35). Else­
where he noted that the laws of Solon had coped with the problem by 
setting limits on the acquisition of land (1266b15-20). The issue was 
also elaborated in abstract terms in Plato's Gorgias (493-94), where 
containers are used as an analogy in a discussion of the problem of 
naturalliITlit. As long as rnoney is sought only for the object of buying 

goods to be used, the constraints of the natural limit of desire operate. 
Wealth-getting of this nature Aristotle did not deny to be a valid 
pursuit of the household manager. The desires of the retailer, how­
ever, which are not tied to the ultimate consumption of his acquisitions 
(namely coin), are subject to no such limit. 

Nineteenth-century economic theory dealt with this problem by 
extending the concept of natural control with the aid of Adam Smith's 
theory of natural competitive price. Natural price, enforced by 
natural competition, presumably kept the retailer from charging 
more than the bare minimum necessary to cover the costs of servicing 
the needs of his customers regardless of his motives. Where this was 
not the case, higher price as a short-run anomaly was presumed to 
serve as a stimulant to expand production and improve distribution. 
The retailer, responding to the higher price, would try to stock more 
of the goods and would be inclined to offer higher prices to their 
producers. Under these conditions, a flexible price would stimulate an 
expansion of supply which would quickly reestablish the price­
limiting restraints of the natural competitive market. 

In Aristotle's day, when virtually all commercial activity was in the 
hands of metics, no such natural market process seems to have been 
recognized, and the common practice among municipal governments 
was apparently to resort to public regulation, particularly of the 
flows of staples such as corn upon which the people depended.10 

With regard to the agora, Andreades wrote: <The existence of the 
market ... greatly facilitated the collection of internal revenue, and 
that of the kykloi made the collection of special taxes ... a com­
paratively simple matter."ll It may even be that markets in ancient 

understand better the true nature of wealth than the laws of its production or the office of 
capital." See also the author's "The Classical Greek Theory of Natural Resource 
Economics," Land Economics 41 (1965) 203--08. 

10 See Lysias, Or. XXII, Against the Corn Dealers. 
11 A. M. Andreades, History of Greek Public Finance, trans!' C. N. Brown, I (Cambridge 

[Mass.] 1933) 295. Andreades documents (pp.238-46) the fact that percentage taxation was 
often levied in ancient Greece in the absence of a market transaction. Unfortunately, he 



62 ARISTOTLE'S 'NATURAL LIMIT' 

Greece, rather than being a natural outgrowth of private economic 
activity, were organized by municipal authorities primarily for pur­
poses of regulation and tax collection. Several scholars12 have called 
attention to the significance of the role of me tics in the commercial 
life of classical Greece and of the importance of this fact in interpreting 
ancient economic discussions. Because of the anomaly of a commercial 
life dominated by foreigners with alien values, one would expect 
theoretical explanations such as Aristotle's 'natural limit' to have 
been advanced in support of the need for restrictions on the activities 
of the non-citizens. 

The highly individualized nature of bargaining and the lack of 
uniformity in most goods in ancient times would have made it easier 
to conceive of trade as an accumulation of separate transactions rather 
than as elements in a comprehensive, self-regulating market system. 
This would explain why Aristotle did not develop a Smithian view of 
the market despite his naturalistic explanation of human motives. 
Such individualized market processes still characterize the handicraft 
economies of less developed countries today. 

Under modern conditions, however, variations in packaging, the 
extremely large number of different items bought, and the long 
intervals between purchases of similar items all tend to reduce the 
consumer's sense of competitive market price. This tendency is re­
inforced by the practice among sellers of emphasizing factors other 
than price in their advertiSing. The potential of the modern market 
process to regulate price is thus eroded, and we face the paradoxical 
dilemma of rising prices on the one hand and unemployment and 
surplus productive capacity on the other. The traditional assumption 
that prices rise only when unsatisfied demand bids up the price of 
scarce goods and that this process stimulates expanded production 
(and lower prices) is mitigated by forces similar to those Aristotle 
could observe: namely, fragmented and discontinuous buying and 
selling, as well as monopoly power. Cost-push inflation resulting 
from administered prices in both ancient and modern times has been 

does not examine the appraisal system by which goods were valued for tax purposes. Such 
public appraisals may well have dominated market price in many areas of trade, instead of 
vice versa. 

12 See M. I. Finley, The Ancient Economy (Sather Lectures 43, Berkeley and Los Angeles 
1973) 60-61, 144-45, and J. Petirka, "A Note on Aristotle's Conception of Citizenship and 
the Role of Foreigners in Fourth Century Athens," Eirene 6 (1967) 23-26. 



S. TODD LOWRY 63 

an outgrowth of manipulative slack in the hands of economic inter­
mediaries. In a society where self-interest and wealth-getting are 
presumed to be consistent with the public interest, the otherwise 
unlimited private power to administer prices in one's own interest is 
an understandable source of inflation and private accumulation. 

If the analysis in the Politics is viewed as an explanation of the need 

for the regulation of retail trade necessitated by the absence of any 
natural forces adequate to protect the citizen of the Greek city-state 
from the possible predatory accumulation of coined money by the 
useful but suspect metic population, it emerges as a theoretical 
justification for administrative policy rather than mere ethical com­
mentary. In this light, Aristotle's concept of a natural limit meets 
1\1. I. Finley's criteria for "a concept of the economy," namely that it 
deals with relevant "laws" (or "statistical uniformities").13 

Although Aristotle had no occasion to account for the complexities 
of modern industrial production, the market problems he dealt with 
and those we face are somewhat similar. He believed that any surplus 
resulting from mutuality in exchange beyond the natural needs for 
survival rightfully belongs to "the offspring" (posterity) and that 
such surpluses should not be diverted to what he considered sterile 
accumulation by an intermediary (1256blO, 1258a35). In our society, 
where an individual's total output is sold and his total consumption 
must be purchased, the role of intermediaries makes it impossible 
for the producer and consumer directly to divide the benefits of 
mutuality, as may be done in a barter economy. Despite the inter­
mediary's important historical role of capital accumulation in the 
expansion of our industrial economy, there is growing concern 
among economists14 (and environmentalists) as to whether the un­
limited production of material goods is as pressing today as it was in 
the nineteenth century.I5 

WASHINGTON AND LEE UNIVERSITY 

August, 1973 

13 M. I. Finley, op.cit. (supra n.4) 22. 
14 See, for example, Paul W. Barkley and David Seckler, Economic Growth and Environ­

mental Decay: The Solution Becomes the Problem (New York 1972). 
15 The author, an economist, gratefully acknowledges support received from the 

American Council of Learned Societies while this paper was in preparation.