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The Catallaxy

by Morley Leonard Evans
Copyright 1992 and1996


F.A. Hayek suggested that the confusion, errors, and fallacies abundant in the social sciences, especially in economics, might be dispelled if “economy” were reserved to describe the deliberate arrangement of resources and that “catallaxy” be used to describe the market, the intricate web of relations that connect economies.1

Today it has become customary to refer to this web as the local, national, and even world “economy”. The value of using catallaxy instead would be to clearly differentiate between economies proper and their interrelation with one another.

Elimination of this confusion would prevent attempts to impose organizational structures and goals appropriate to an economy onto an order that is fundamentally different, and one for which such structures and goals are both inappropriate and inapplicable.

Such usage is consistent with etymology. The Oxford Dictionary tells us “economy” is derived from the Greek oikonomia, from oikonomos, which was formed by linking oikos (house) and nomos, from nemo (manage). Economics, then, literally means “household management”, a term appropriate to describe households, business firms, and even armies, as they are all organizations designed to achieve certain ends.2 An economy is a taxis: an order created by deliberate arrangement.

“Catallactics”, Hayek says on the other hand, “was derived from the Greek verb katallattein (or katallasein) which meant, significantly, not only ‘to exchange’ but also ‘to admit into the community’ and ‘to change from enemy into friend’.3”

Someone who studies the market process would be called a catallactist rather than an economist.

The catallaxy is a spontaneous order, for which the Greeks had another word: kosmos. Oxford defines cosmos as, “The universe as an ordered whole; an ordered system of ideas, etc.; the sum total of experience.” “Catallaxy” and “cosmos” are synonyms for this self-organizing and self-regulating system, although “catallaxy” is more specific to human affairs, especially to market phenomena.

“Cosmos” is the root for felicitous and reputable words that accurately describe a society which fully embodies the universal goals of modern man: namely, one in which there is order, individual sovereignty, self-actualization, justice, tolerance, mercy, peace, reason, fair-mindedness, prosperity, equalitarianism, and optimism--a humanitarian or humanistic order.

Such a society is a cosmopolity and its citizens are cosmopolites. These people, according to Oxford, would be “citizens of the world who are free from national attachments and prejudices.”
That society and its members, then, would be cosmopolitan: a venerable word enjoying long-standing use to describe every center of culture, science, trade, and liberty throughout history. Such people once were the “liberals”.

One might hope that members of all parties today would cultivate a view of the market and of society as a catallactic system whose forms and rules are endogenously generated through the teleocratic action of the individual participants, and that the order, which is spontaneously generated and which is the necessary result of individuals directing their own affairs, is only impaired by our various clever schemes to coercively improve it.

Were modern man to learn the cosmos is not a taxis, he might not only overcome alienation from his fellows, but find communion with the natural order itself.