The man on the Clapham omnibus has yet to digest the laws of supply and demand. There is no inherent price to any good or service, merely what people are willing to buy and sell them for on the open market. If the prices are too high, simply refuse to buy: you can take your business elsewhere or forgo the experience altogether. No-one is obliged to buy for a particular price, just as no one is obliged to sell.

Very few people actually think like this – I rarely do. Instead, I carry around a rough ledger of how much things “ought” to cost. This ledger is earthly and homely: it is the intuitive sense of a ‘fair bargain’ deployed by the peasant or child. I refuse to pay for a sandwich costing £11; the idea of a pint for £7 makes me physically ill; the notion fast food could match the cost of a dine-in meal merely 5 years ago is insulting; and so on. Behind my casual, back-of-the-brain accounting, there is a swirling mixture of intuitions.

Some are reasonable: the cost of rent, for example, is artificially high because of restrictions on the construction of houses. In a real sense, houses do cost more than they should (or could). Others are ideological – I baulk at the cost of a bottle of water regardless of its price because I believe water should always be free (and because I suspect vending machine companies conspire to remove water fountains/coolers). Often the intuition is outdated, sometimes hopelessly so. I naively assume that if something costs £x today, it ought to do so tomorrow, at least for the time being. The notion of real cost relative to wage inflation is alien to my casual accounting.

But there is one important sub-category – a cultural one – which is probably the oldest, most pervasive, and economically significant. This is the idea of what things ought to cost based on some idealised notion of collective life. How this ideal applies depends on what is for sale. In some cases, this idealised picture is quite explicit. Take the outrage at price gouging for basic essentials during hurricanes. How exactly prices ought to be set in such a scenario is somewhat fuzzy. I think the general pattern is this: if the cost to the supplier of providing the service is constant, demand is merely higher for a brief, temporary period, then prices ought not to rise unless this is necessary for increasing supply. The idea that a disaster will both produce a windfall for suppliers – who provide nothing prosocial in return – and that supplies will be allocated based on wealth rather than need - is repugnant to the average person. If the price of the service or goods rises however – such as the difficulty of getting food to a remote location – then intuitions are fuzzier. At one extreme, this is not a special case but merely a good example of why capitalism works. At the other, we expect businesses to donate their time, money, resources etc to help those in need. This is a combination, I believe, of (a) special civic responsibilities for corporations given their perceived special civic privileges (the local storeowner’s burden); and (b) the more straightforward idea that everyone needs (and frequently does) chip in during a crisis, and that those with greater means ought to give more extensive charity.

This brew of sentiments is the product of uncertainty over the exact social role – the rights and liabilities – of the business owner. We ask: do they receive special privileges of some kind, requiring special duties? Are they to be expected to engage in the same kind of humanistic behaviour as the average person, or can they be (or should they be) encouraged to pursue profit exclusively? At a deeper level, are they responsible for producing a pattern of social life, even if this comes at a cost to their profit margin?

These unresolved questions lie behind many of our intuitions about how much things should cost. Bread ought not to cost above £x, otherwise we would be stuck in a world in which no-one is able to eat bread. More realistically, pints ought not to exceed a certain price because this would render the essential British Cultural Practice of regularly going to the pub financially impossible. The same intuitions lie behind our distaste for transport price gouging: we have a sense - rightly or wrongly – that airplanes, taxis, buses are a sub-species of public transport, and that their prices should not exceed a certain egalitarian point. It is behind the sense of betrayal when products of our childhoods have their prices increased, and the sense of loyalty to those companies which anachronistically keep their prices steady. Fundamentally, it is a belief that businesses act as a social guardian – or at least central cultural participant – and that they should give up their profits to make these desirable forms of life possible.

Countries differ in the extent to which consumers hold these views. In Japan, for example, prices are conspicuously ‘reasonable.’ Going to a park restaurant, or taking a pedalo ride, eating out in the city centre, buying a burger, the cost of baseball tickets, or having a beer during the game – the kinds of activities which one expects to be unpleasantly, disproportionately expensive in America or Britain (and arguably are so, since the profits are rarely used to increase supply or improve the service), are all more or less reasonably priced. This deeper cultural norm is ubiquitous in Japan, so much so it produces, at a macro level, steady prices in exchange for stagnant wages. In Britain, this attitude can still be found – the fixed price of strawberries at Wimbledon, the steady admission fee of traditional swimming pools, the cost of a bacon roll at a caf – but is weakening. Even in the United States – surely the most sophisticated and mature home of vulgar economic thinking - people expect prices to be at a certain level. Further, that in both, and many other countries, such an expectation produces enough social cohesion that consumers can resist price increases through outrage alone, the ensuing flak then cowing the corporation into keeping prices steady.

We can explain away the prevalence of this earthy view on any number of psycho-social grounds: it is the long shadow of centuries of price-regulation at local fairs and markets; it is the prevalence of simplistic System 1 thinking; it is a testament to the poor level of economics understanding in the wider populace, and so on. A more interesting question is whether or not, at least in some cases, this view is reasonable. I believe (conveniently, given my intuitions) that it is, albeit on entirely unsupportable and illegible grounds, the most reasonable thing in the word. Here are two reasons. First, if we want the social world to look a certain way – for it to be rich, compelling, comfortable, familiar, etc – then corporations probably do need to act for reasons other than profit. It is well-known that money-grubbing alone does not guarantee excellence in products – as attested by the general degradation of consumer products across the world relative to the 1960s. Equally, it is clear if we want certain kinds of social life, then corporations need to act pro-socially– they need to participate, for example, in local holidays and festivals beyond what consumer pressure would induce them to, they need to engage in altruism to assist those in need; and engage in the kinds of projects (such as those organised by Timpsons, Rowntree, or Cadbury) which are commercially dubious but morally valuable.

On a more sophisticated level, we could also suggest that business owners, at least across the west, figuratively have us by our balls. This is because of a simple, unavoidable market failure: if these businesses stop providing their services, or increase the cost, no competitors will arise. No competitors will arise because – and pick your poison carefully – there is anticompetitive behaviour by the big, existing players (“the tentacles of monopoly!”), because government regulation is preventing proper competition (“the state screws us once again”), or because culturally people simply do not want to start businesses. There are not enough people who want to, or know how to, start businesses. For this final, slightly odd cultural explanation, we might say that the relative undesirability of starting a business (due to risk, effort, time, paperwork, state interference etc), has placed too great a social responsibility on the existing business-owners. A responsibility we can expect them to bear, but probably cannot realistically believe them to actually follow, given the great opportunities for a bounty of wealth and their frequent existence not as a ‘reasonable local’ but as an inhuman amalgamation of shareholders and corpos.

What is to be done? The obvious answer is “smash the monopolies!” (if they exist), “deregulate the market!” (if there are too many regulations), and “get the kids to start businesses!” (if they need encouraging). Because of my parochial, human-sized brain, I long for a world in which businesses are embedded in the local socio-cultural milieu: where they can be trusted to contribute and help maintain the practices which give life colour and meaning. Equally, I recognise cultural pressure is no longer strong enough to guarantee such behaviour – if it ever was – and that competition, of a fierce variety, is what is needed. For this kind of competition however, we need energetic new business owners to emerge, and for that, we probably need a new culture altogether.