Catallactics is a theory of the way the

free market system In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or an ...

reaches

exchange ratio In political economy and especially Marxian economics, exchange value (German: ''Tauschwert'') refers to one of the four major attributes of a commodity, i.e., an item or service produced for, and sold on the market, the other three attributes b ...

s and

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

s. It aims to analyse all actions based on monetary calculation and trace the formation of prices back to the point where an agent makes his or her choices. It explains prices as they are, rather than as they "should" be. The laws of catallactics are not

value judgment A value judgment (or value judgement) is a judgment of the rightness or wrongness of something or someone, or of the usefulness of something or someone, based on a comparison or other relativity. As a generalization, a value judgment can refer ...

s, but aim to be exact, empirical, and of universal validity. It was used extensively by the

Austrian School The Austrian School is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result exclusively from the motivations and actions of individuals. Austrian scho ...

economist

Ludwig von Mises Ludwig Heinrich Edler von Mises (; 29 September 1881 – 10 October 1973) was an Austrian School economist, historian, logician, and sociologist. Mises wrote and lectured extensively on the societal contributions of classical liberalism. He is ...

. Catallactics is a

praxeological In philosophy, praxeology or praxiology (; ) is the theory of human action, based on the notion that humans engage in purposeful behavior, contrary to reflexive behavior and other unintentional behavior. French social philosopher Alfred Espinas ...

theory. The term

catallaxy Catallaxy or catallactics is an alternative expression for the word "economy". Whereas the word economy suggests that people in a community possess a common and congruent set of values and goals, catallaxy suggests that the emergent properties o ...

was used by

Friedrich Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...

to describe "the order brought about by the mutual adjustment of many individual economies in a market." Hayek was dissatisfied with the usage of the word "economy" because its Greek root, which translates as "household management", implies that economic agents in a market economy possess shared goals. He derived the word "Catallaxy" (Hayek's suggested Greek construction would be rendered καταλλαξία) from the Greek verb ''katallasso'' (καταλλάσσω) which meant not only "to exchange" but also "to admit in the community" and "to change from enemy into friend." According to Mises (''

Human Action ''Human Action: A Treatise on Economics'' is a work by the Austrian economist and philosopher Ludwig von Mises. Widely considered Mises' ''magnum opus'', it presents the case for laissez-faire capitalism based on praxeology, his method to under ...

'', p. 3) and Hayek it was

Richard Whately Richard Whately (1 February 1787 – 8 October 1863) was an English academic, rhetorician, logician, philosopher, economist, and theologian who also served as a reforming Church of Ireland Archbishop of Dublin. He was a leading Broad Churchman, ...

who coined the term "catallactics". Whately's ''Introductory Lectures on Political Economy'' (1831) reads: A footnote to this paragraph continues: "It is perhaps hardly necessary to observe, that I do not pretend to have classical authority for this use of the word Catallactics; nor do I deem it necessary to make any apology for using it without such authority. It would be thought, I conceive, an absurd pedantry to find fault with such words as "thermometer," "telescope," "pneumatics," "hydraulics," "geology," &c. on the ground that classical Greek writers have not employed them, or have taken them in a different sense. In the present instance, however, I am not sure that, if Aristotle had had occasion to express my meaning, he would not have used the very same word. In fact I may say he has used another part of the same verb in the sense of "exchanging;" (for the Verbals in are, to all practical purposes, to be regarded as parts of the verbs they are formed from) in the third book of the Nicom. Ethics he speaks of men who hold their lives so cheap, that they risked them in exchange for the most trifling gain. The employment of this and kindred words in the sense of "reconcilement," is evidently secondary, reconciliation being commonly effected by a compensation; something accepted as an equivalent for loss or injury."

Notes

{{reflist Austrian School Friedrich Hayek Self-organization

See also

Notes