Price Regulation in Jewish Law

Jewish law provides for government intervention in the markets for goods and services through price controls, limits on profits, and perhaps even allowing cartels to operate.

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“Artisans may make an agreement among themselves that one should not work on the day the other does, or the like, and that they will impose such-and-such a penalty upon him who violates the agreement. This rule applies only in a place where there is no distinguished sage to set the affairs of the locality in order and to make the life of its inhabitants prosper. However, if there is a distinguished sage there, the agreement of the residents is of no effect; nor may anyone inflict a penalty upon or cause a loss to him who does not accept the agreement unless he consented to the agreement and it was made with the approval of the sage. Hence, whosoever has caused a loss based upon an agreement made without the approval of the sage -- must pay for the loss he caused.” (Maimonides, Mishneh Torah, Laws of Sale 14:10-11)

Limiting Profits

The regulation restricting profits was established by [the third-century Babylonian sage] Samuel (Sh’muel): “Samuel said.... One who profits may not profit more than one sixth.” Rashbam [see above] explains: “It is an enactment of the Sages that no one profit more than this.”

Maimonides rules accordingly:

“We have already explained that he who does business on trust and says, ‘My profit is such and such an amount,’ is not subject to the law of overreaching, and even if he says, ‘I bought this article for a sela and am selling it to you for ten,’ it is legitimate. The courts are obligated, however, to fix market prices and put officers in charge thereof, to the end that each merchant should not make all the profit he desires; indeed, the courts of law should fix a sixth as his profit and the seller should thus not profit more than a sixth.” (Maimonides, Mishneh Torah, Laws of Sale 14:1)

This regulation, however, was restricted to necessities:

“This rule applies only to articles that are necessities of life, such as wines, oils, and various kinds of flour. However, for spices such as costus root, frankincense, and the like, no market price is fixed and one may make as much profit as he desires.” (Maimonides, Mishneh Torah, Laws of Sale 14:2)

The Shulhan Arukh imposes additional limitations upon the restriction of profits:

“(1) When does this apply? When one sells all his merchandise together with no additional labor, but a shopkeeper who sells his merchandise a little at a time -- we estimate his labor and his expenses and he is permitted a profit of one sixth on them as well. In other words, all this is considered part of the principal, and he is permitted to profit, one sixth on all, and this results in a greater amount than if he had profited one sixth only on the principal [before his labor and expenses were added].”

“(2) When does this [i.e., the restriction of profit to one sixth] apply? When the market value has not risen. When the market value has risen, however, he may sell it at the higher price.”

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Professor Nahum Rakover, former Deputy Attorney General of the State of Israel, is a leading scholar in the field of Jewish law and has written widely on Jewish legal topics. He compiled The Multi-Language Bibliography of Jewish Law.