Fair Value: A Torah Requirement

For the last presentation in this series, I wanted to speak a bit about ona’ah, the end of our chain of prohibitions connected to taking money improperly without trying to stay anonymous while so doing (one of the revelations of this series, I hope, has been the profound difference in halachah between hidden stealing and taking money openly).

The simplest translation of ona’ah is mispricing—the buyer or seller secures a price for the item that is out of line with its “fair value.”  Today, that basic idea seems difficult, because we tend to assume items are “worth” whatever the market will bear.  We will have to consider that further at the end of this discussion; for now, let us assume that there is such a price as the “fair” price of the item. Ona’ah will be charging more for it.

Is There Ona’ah For Real Property?

A Mishnah in Baba Metsia 56a lists land among those items that “don’t have ona’ah.” Ramban to Vayikra 25;14—the source of the prohibition—notes how odd that is, since the verse is smack in the middle of a discussion of buying and selling land. The Torah was discussing yovel, the requirement to return all land to its original owner. As a result, the Torah says, when you sell items to each other, don’t overcharge, charge according to the number of years left until yovel. Yet the Mishnah says there is no ona’ah for land!

Tosafot to Ketubbot 98b already argued that the Mishnah’s rule only applied until double the land’s value, but at that point there would be ona’ah. Ramban adds the claim—based purely on his reading of the verses, as far as I can tell—that overcharging for any item is prohibited by Torah law. What the Mishnah meant to tell us was that the legal responses to different levels of ona’ah, only applied to movable property.

Those responses are: if the mispricing is less than a sixth of the fair price, it is ignored (usually, this is explained as an assumed mechilah; Jews are not so exacting with each other about monetary items); if it is exactly a sixth, the extra money is returned; and if it is more than a sixth, the sale can be nullified by the aggrieved party. Ramban argues that all of that is what the Rabbis meant to exclude in the case of land, but the mispricing itself does violate the Biblical commandment.

i>Sefer haChinuch, Mitsvah 337, suggests that since land exists forever, people are more likely to forego and forgive the extra they were charged, because they figure they’ll eventually get that much value out of it.  Writing three hundred years later, Keli Yakar also focuses on land’s greater lifespan, except that he attaches it to the question of value. He says prices rise and fall over time, so there is no inherent value of an item (that itself is, I think, an idea the  Gemara and Sefer haChinuch might not have recognized; Keli Yakar is commenting on the fluctuation of prices over time, whereas Sefer haChinuch had attributed it to the length of time the person would have to extract value from the land).

For Keli Yakar, since land will be around forever, it will at some point be worth what the buyer paid for it.  Movable property, though, is more ephemeral, and might not survive that long, so the sale cannot be seen as having found some right valuation of the item.

Buyers and Sellers

A Mishnah on Bava Metsi’a 51a, says that ona’ah applies both to buyers and sellers (meaning: it’s as prohibited for a buyer to underpay knowingly as it is for a seller to overcharge).  In explaining why the verse needed to make that explicit, the Gemara says that had the Torah only prohibited it for the seller, we might have thought that buyers know the items less well and cannot be blamed for underpaying. Had the Torah only prohibited buyers explicitly, we might have thought that sellers only sell out of desperate need; if so, whatever price they get might be good enough for them (we’ll see this reasoning again in a second, when we move from merchants to people selling personal items of use).

Rashi encapsulates the anti-selling ethos assumed by the Gemara. He interprets the phrase the Gemara uses for the attitude of a seller as being that selling an item is always a loss, since the money earned will be spent (wasted).  The Gemara assumed, in other words, that holding on to property, of all kinds, was better than accumulating cash. Cash was what you spent on needs, property was what held value. I note and stress this because it reminds us of the economic workings of that society, which can be relevant to figuring out how to apply this to our own times, as we can see in the next case.

Which Buyers and Sellers?

The Gemara on 51a exempts a ba’al habayit, an ordinary person selling his personal items of use, from the prohibition of ona’ah.  Rambam, Laws of Sale 13;2, assumes that the Gemara means that even if the seller overcharges, it is not ona’ah, since he would not be willing to part with his item for less.

In explaining this, Ritva compares it to another way one can avoid the problems of ona’ah.  If a seller openly says, this is what I’m willing to sell this for, and I am selling it on the condition that you cannot complain to me about the ona’ah involved, that is allowed. Since private people (in the Talmudic context) did not sell their personal property except for reasons of great need, Ritva says the seller is implicitly conditioning the sale on the buyer foregoing or forgiving whatever ona’ah is involved. (This idea also renders ona’ah  almost meaningless, if the market becomes a place where everybody implicitly says that—the camera store on 5th Avenue that charges triple what you’d pay for it on the West Side is saying, “this is what we want for it,” and will add in issues of greater rent, greater convenience for the shopper, etc. See below for more discussion).

Shittah Mekubetzet, after noting that Rashba and Ran also assume that the seller would only have sold for that much and therefore ona’ah is not to be invoked, notes a different view in Ri Migash.  Ri Migash argues that even if the seller was the one who got the worse end of the deal, there would be no ona’ah, because we’d have to assume that s/he was so desperate, he was willing to part with the item even for less than it was worth.

This again articulates the leeriness of selling personal items the Gemara assumed. It would raise the question, I would think, of whether we would apply this Gemara to a private person today who decides to put his used books on Amazon, or other items on eBay. In some sense, this is a ba’al habayit, since many such people are not professional merchants. On the other hand, with the expansion of the marketplace, with people’s wealth leading them to have more items than they know what to do with, it seems to me that we could equally argue that sales on such websites are, by their very nature, a sign of that person being a merchant and not a private individual.  The Gemara might have meant only when the person is selling personal items he or she was still using, which would align with the sense of desperation and/or of insisting on a high price that the rishonim discussed.

How Much is Ona’ah?

That connects to the question of pricing, since even a person who goes on eBay might only want to sell something if he or she can get x dollars for it.  Wouldn’t that make the person a ba’al habayit rather than a merchant? I think it might depend on what we mean by fair pricing. Ona’ah is defined as a percentage in excess of the “right” price, but how do we calculate that?

Sefer haChinuch seems to think that any amount over the cost of the item to the seller is already ona’ah, because he says that below a sixth (16 2/3%), Hazal permitted it for the seller, so that he or she can make a living. (As we saw above, other formulations have it that Jews simply are not so exacting with each other, and will forgive an overcharge of up to 1/6).  If Sefer haChinuch is right, the cost of the item is the price, and anything above or below it is already ona’ah; there is permissible and impermissible ona’ah, but it’s all ona’ah.

Even that is not as clear as we might want, since it is increasingly difficult to evaluate the cost of an item.  Before I elaborate on that, let’s record Meiri’s claim.  He notes that Baba Metsia 40b refers to a merchant having the right to a profit margin of up to a sixth, and therefore argues that all the ona’ah discussions assume the merchant has marked up the item; it’s only when the price is above even the legitimate markup of one-sixth that we begin to think about ona’ah. (So it would take a sixth more, according to Meiri, to be sufficient overcharging to require returning the item or the cheated party having the right to nullify the sale).

The Murkiness of Market Value and of Cost

This standard—cost plus a sixth is allowed—is not that much clearer than what I think we usually think of as the fair price, the market value. Market value can be blurry, because there are so many factors. For unique items, like houses, the general market, even in a certain area, might still not capture aspects of the particular house in question. Even for more generic items, sellers can claim they operate in a different market based on ever more sensitive factors.

Cost as well can be a blurry issue. When a pharmaceutical company sets a price on a medication, which of its costs is it allowed to factor in—the cost of producing the pill itself, the overhead of the business spread out over all its products (and does that have to be proportional to each product’s percentage of the company’s sales), the R & D costs to produce this drug, or even, perhaps, a share of the R & D costs of all the failed drugs that didn’t make it to market? What about advertising costs?

All of these factors make the laws of ona’ah difficult to apply practically, and pose a barrier to any general and categorical statements. What we can say is that the Torah asserts a concept of fair value, however it is calculated, and prohibits selling an item above or below its fair value, where one of the parties does not realize the true value.  (And that, according to Meiri, margins would seem to be restricted to a 16 2/3% profit; even that gets hard in an environment where leaving extra pricing on the table will simply lead to scalping, such as in sporting events—even if the stadium charges a “fair” price of cost plus 1/6, why should they forego the profits then reaped by those who buy up the tickets at that low price and sell it for more to willing buyers?  This suggests that the “price” isn’t only the “cost” plus a sixth.  Again, for ona’ah to be translatable into our terms, we’d need a clear pricing mechanism).

Series Conclusion: The Greater Challenge of Socially Accepted Misappropriation of Money

There is more to be said about each of the prohibitions we’ve discussed (and I hope to analyze ribit and ona’ah in more depth after Pesach, in my post-Hashkamah shiur at the Riverdale Jewish Center; I do not think that I will blog that for the WebYeshiva, however).  For now, what I hope to have shown is that while the Torah certainly prohibits someone sneakily taking money from someone else—what we call theft—it is concerned in more detail with the various ways people who know each other can manipulate the system, or use outright coercion, to take money that does not belong to them.

Both kinds of stealing are bad, but I think the attention the Torah pays to this kind shows that it poses perhaps even more of a threat to the social fabric.  If we have people robbing people under the cover of anonymity or by hiding their misdeeds, that’s a policing problem, and we need to address it. When people are openly expropriating money that shouldn’t belong to them, whichever way they do it, that’s a problem that threatens the very makeup of that society, it’s ability to think of itself as one that strives and comes ever closer to being a just society. If we legitimize financial wrongs, that’s in one sense worse than being inept about catching those who secretly steal from us.

 

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