He says that distributive justice is natural justice and involves balancing shares with worth. In turn, rectificatory justice involves straightening out by removing unjust gain, restoring unjust losses, and other forms of retribution for loss and/or damages. Reciprocity involves the interchange of goods and services and does not coincide with either distributive or corrective justice. Reciprocal justice involves comparative advantages and is concerned with particularized mutual benefits derived from specialization of function.

          In the Nicomachean Ethics Aristotle states that exchange depends on equality of both persons and commodities. It is in this work that he concentrates on the problem of commensurability. Aristotle used artisans as examples for his general and abstract discussions found in this work. In Book V of the Nicomachean Ethics he deals with justice, is concerned with determining proper shares in various relationships, analyzes the subjective interactions between trading partners looking for mutual benefit from commercial transactions, develops the concept of mutual subjective utility as the basis of exchange, and develops the concept of reciprocity in accordance with proportion. In the Nicomachean Ethics, Aristotle, in his treatment of justice, applied the concepts of ratio and proportion to explain just distribution.

          Aristotle states that fair exchange is a type of reciprocity, not of equality, but rather of proportion. This is achieved by equalizing proportions of products. His concern here is with the ratios in which goods are exchanged. Individuals create products of different value and unequal creators are made equal through the establishment of proportionate equality between the products. This led Aristotle to the consideration of commensurability and to inquire into the notion of exchange values.

          According to Aristotle, value is assigned by man and is not inherent in the goods themselves. He says that exchange occurs because what the participants want is different from what they have to offer. Need plus demand is what goes into determining proportionate reciprocity in a given situation. Aristotle explains that the parties form their own estimations, bargain in the market, and make their own terms and exchange ratios. The exchange ratio is simply the price of things. For Aristotle, voluntary is presumed just. Exchange must be mutually satisfactory. He sees mutuality as the basis for exchange and the equating of subjective utilities as the precondition of exchange. There is a range of reciprocal mutuality that brings about exchange. The actual particular price is determined by bargaining between the two parties who are equal as persons and different only with respect to their products.

          Aristotle appears to have recognized the subjective and relational nature of an exchange ratio. He observed that an exchange ratio is not a ratio of goods alone nor merely a ratio of people exchanging the goods involved in the transaction. Rather, it is simultaneously a ratio reflecting the interrelationships among and between all of the people and all of the goods involved in this transaction. This ratio of proportionate reciprocity is used to equalize both goods and persons.

          For Aristotle, money is a medium of exchange that makes exchange easier by translating subjective qualitative phenomena into objective quantitative phenomena. Although subjective psychological want satisfaction cannot be directly measured, the approximate extent of want satisfaction can be articulated indirectly through money. Not only does money eliminate the need for a double coincidence of wants, it also supplies a convenient and acceptable expression for the exchange ratio between various goods. Money, as an intermediate measure of all things, is able to express reciprocity in accordance with a proportion and not on the basis of a precisely equal ratio. Money, according to Aristotle, has become a convention or type of representation, by which all goods can be measured by some one thing. Money, as a modulating element and representation of demand, becomes a useful common terminological tool in the legal stage of the bargaining process.
 

The Household and the Polis

          In the Politics, Aristotle discusses exchange, barter, retail trade, and usury. He explains that exchange takes place because of natural needs and the fact that some people have more of a good and some have less of it. He says that natural exchange redistributes goods to supply deficiencies out of surpluses. Voluntary exchange occurs between self-sufficient citizens who exchange surpluses, which they value less, for their neighbor's surpluses, which they value more.

          For Aristotle, true wealth is the available stock of useful things (i.e., use values). He is concerned with having enough useful things to maintain the needs of the household and the polis. He says that wealth-getting that aims at use-value is legitimate. Use-value or true value involves goods that are necessary for life and for the household or the community of the city. Aristotle considers both the household and the polis to be natural forms of association. It is not against nature when individual households mutually exchange surpluses to satisfy the natural requirement of self-sufficiency. Aristotle considers friendship to be a necessary condition for natural exchange.

          Aristotle maintains that property must be used in a way that is compatible with its nature. Its use must benefit the owner by also being a necessary means of his acting in correspondence with his own nature. In the Politics, Aristotle distinguishes between natural and unnatural acquisition and discusses the problem of excess property. He says that the right to property is limited to what is sufficient to sustain the household and the polis life of the city. He explains that exchange between households requires mutual judgments of equal participants in the life of the polis. The life of the household is a sound and productive means to polis life if it produces only the necessary goods and services that provide a setting for the exercise and development of the potentialities required for polis life.

          Aristotle emphasizes the importance of natural limits in a system of natural relationships. He says that natural exchange has a natural end when the item needed is acquired. Production is the natural process of obtaining things for life's needs. Aristotle maintains that there is a limit to the amount of property that can be justifiably acquired as well as a limit to the ways in which it can be legitimately acquired.

          According to Aristotle, a household relies on exchange to supply property necessary to the household so that the citizen can develop his humanity. Natural exchange operates within an environment of friendship and mutual concern to complement the basic self-sufficiency of the household. Natural exchange between households requires the exercise of virtues and furnishes a bridge between one's work and well-being. A wide range of material goods is needed to attain a person's moral excellence. Economic activity is necessary to permit leisure and the material instruments necessary for a person to develop the full range of his potential and thereby flourish. Aristotle teaches that eudaimonia involves the total spectrum of moral and intellectual excellences.

          Aristotle explains that wealth derives its value from its contribution to the acquisition of other goods desirable for their own sake. Wealth and external or exterior goods are instruments that facilitate virtuous activity and eudaimonia, are means to an end, and have some natural limit with respect to each individual.

          Aristotle says that the polis exists for the sake of the good life, that the polis is a partnership in living well, and that mutual interaction is the bond that holds society together. He observed that people are related to each other through the medium of goods but that acquisition beyond the necessary diverts the citizen's capacities from the sphere of polis life. Advocating an inclusive-end teleology, Aristotle endorsed an active life devoted to a wide range of intellectual and moral perfections including the active engagement in civic affairs.

          In the Politics, Aristotle advanced the synergistic idea of social aggregation with the aggregate benefits to people exceeding the objective total of the benefits to individuals qua individuals. He sees this excess amount of benefits as a positive measurement of the goodwill created through association and as a reflection of the unifying strength of a society. In part, it is the mutual benefits of exchange which bring people together with one desiring another's goods more than he desires his own and vice versa.
 

Types of Exchange

          In the Politics, Aristotle delineates the historical development of money from its initial existence as a commodity. He also discusses the entire range of commodity exchange including barter, retail trade, and usury.

          Aristotle declares that the first type of exchange, barter, the direct non-monetary exchange of commodities, is natural because it satisfies the natural requirement of sufficiency. After direct working of the land, barter between households is the next most natural means of wealth acquisition. For Aristotle, natural exchange is based on the right to property being determined by the capacity for its proper use. He sees barter as natural but inadequate because of the difficulty of matching households with complementary surpluses and deficiencies. The concepts of surplus and deficiency are normative and derive from the right of property.

          Aristotle is irresolute and ambivalent regarding the second form of exchange which involves the transferring of goods between households but mediated by money. Here each participant starts and ends with use value which he approves of but the item is not being used in its natural aim or function because it was not made to be exchanged. Aristotle observes that what is natural is better than what is acquired and that an item that is final is superior to another thing that is wanted for the sake of this item.

          The introduction of money eliminates the problem of the double coincidence of wants. For Aristotle, the legitimate end of money is as a medium of exchange but not as wealth or as a store of value. He observed that money became the representation of want by agreement on law. A currency acceptable within the polis permits the full potential to be realized.

          Aristotle thought that money departs from its natural function as a medium of exchange when it becomes the beginning and end of exchange with no limit to the end it seeks. The ease of exchange permitted by the use of money makes it possible to engage in large production projects for exchange purposes instead of for direct household use. This can corrupt natural exchange for which money is a valuable instrument. Money, rather than serving simply to facilitate commodity exchange, can become the goal and end in itself.

          In the third form of exchange, retail trade, a person buys in order to sell at a profit. Retail trade is concerned with getting a sum of money rather than acquiring something that is needed and therefore consumed. Whereas Aristotle views household management as praiseworthy and as having a natural terminus, he is skeptical about retail trade because it has no natural terminus and is only concerned with getting a sum of money. Retail trade knows no limits. When money becomes an intermediate element in exchange, the natural limits on physical wants no longer exercise restraints on a person's desires. The lack of effective natural restraints leads to the unlimited desire for wealth. There exist no natural conditions restricting a person's desire to acquire money wealth.

          For Aristotle, retail trade is not a way of attaining true wealth because its goal is a quantity of money. He criticizes money-making as a way of gaining wealth. The end of retail trade is not true wealth but wealth as exchange value in the form of a sum of money. Aristotle observes that exchange value is essentially a quantitative matter that has no limit of its own. He says that it is from the existence of wealth as exchange value that we derive the idea that wealth is unlimited.

          In Book V of the Nicomachean Ethics, Aristotle states that commodity exchange between craftsmen is a natural but inferior form of exchange that is not closely connected to polis life. He says that craftsmen are involved with specialized production based on unlimited and unnatural acquisition, are not the equals of household heads, and are therefore unsuited for citizenship and for polis life.

          The fourth form of trade is usury – the begetting of money from money. Aristotle says that the usurer is the most unnatural of all practitioners of the art of money-making. The lending of money at interest is condemned as the most unnatural mode of acquisition. Aristotle insisted that money was barren. He did not comprehend that interest was payment for the productive use of resources made available by another person.

          Aristotle's economic criticisms are directed at wealth-getting in the sense of money-making. He disregards the fact that men were able to search for unlimited wealth even before money came into existence. Although he realized that wanting too much is a human failing, he placed a great deal of blame on money because it had no natural terminus. Aristotle taught that when a man pursues wealth in the form of exchange value he would undermine the proper and moral use of his human capacities. He fails to mention that men of commerce provide useful public service and make money only if they do so.
 

An Originator of Economic Analysis

          Aristotle saw so much even in the field of economics. He foresaw significant elements of Austrian value theory. For example, he glimpsed the concept of diminishing utility and its application to exchange value (i.e., price) determination. He held a theory of the importance of value determination in evaluating the efficiency of means in attaining human objectives. He also anticipated the Austrian theory of imputation that holds that the value of productive factors can be obtained via imputation from the market values of final products. Aristotle was the first to draw a distinction between value in use and exchange value. His pre-marginal utility theory also rejected the labor theory of value that later was held by many of the classical economists. In addition, he was the first thinker to analyze the problem of commensurability. Additionally, Aristotle recognized the paradox of value and the operation of the principle of scarcity. Although Aristotle's economic insights and influence on the development of economic thought were considerable, he did make some errors and failed to fully appreciate that markets and money-making activities could provide a mechanism through which order in society could be produced through individuals pursuing their own ends. Nevertheless, Aristotle is one of the great thinkers in the history of economic thought.