Catallactics as the Study of Human Exchange

Catallactics is the science of exchange.

Exchange is a basic interaction between or among people. There are three basic kinds of exchange.

1) Mutual Exchange -- Each party has something the other wants and each party therefore wants the exchange to take place; both parties are better off as a consequence of the exchange. This is a positive sum exchange. Mutual exchange is the foundation of all economic action.

2) Gift-Giving -- One party has something he wants to give to the other party; the second party is better off, while the first party may or may not be worse off. This is at worst a zero sum exchange (if we include emotions, it may be positive sum as well). Gift exchange is the foundation of science and the arts.

3) Coercion -- One party takes from the other party; the first party is better off and the second party is worse off. This is at best a zero sum exchange (if we include reduction of trust and other emotions involved, it is better considered a negative sum exchange). Included in such exchanges would be robbery, rape, and murder.

These are the basic forms of exchange. They are often mixed.

For example, a mutual exchange in fact has a degree of gift-giving involved. I won't engage in a mutual exchange unless I am made better off by the exchange. Thus, value increases for me. More, the other won't engage in a mutual exchange unless they are made better off by the exchange. Thus, value increases for them. The excess value is a gift each gives the other. This is why mutual exchange is a positive sum exchange.

Those who prefer to work in the gift economy, such as scientists and artists, also have to pay the bills, so it is not uncommon for them to seek gainful employment. And there are those willing to pay. If we are talking about scientists working in an institute, we have people giving gifts to the institute so a mutual exchange involving wages and production is realized so the scientist can produce science, which is a gift. A novelist will seek to publish his book, which enters market exchange with readers.

There are forms of coercion which have elements of mutual exchange. If a government takes your property under immanent domain, often that government (if it's not completely corrupt) will pay you "market value" for that property. Thus, you are forced to make the exchange (which is coercion), but you are given something in exchange (which is mutual exchange). The same is true of taxes and the things done with taxes.

Often people consider threats of being fired from one's job as a threat of coercion. But is it really coercion if you no longer want to contract out their time and expertise? Refusing to continue to engage in exchange is not the same thing as coercion. Firing someone is simply breaking a contract, and breaking a contract is not coercive. Either side can break the contract -- the employee by not doing the work he or she was hired to do, or the employer by firing someone for things other than what the contract stipulates (like having the audacity to ask for a raise when it is due). In the latter case, the employee is in the right to take the employer to court for improperly breaking the contract.

One may not like the term "coercion." I invite someone to come up with another morally neutral term that nevertheless describes all exchanges of this kind.

All government involves the use of coercion. The idea is that it is "legitimate coercion." Democracy makes it more legitimate, as it then involves the discovery of community values that are worth using coercion to enforce. With democracy, versus other forms of government, you have a process that allows for the constant discovery of these values. Votes allows for the change of these values over time. The best democracies would be those with institutions that best allow for continuous change, continuous adaptation.

Catallactics so defined therefore underlies the study of all spontaneous orders, as exchange is what is taking place in each and every case to create the different kinds of orders. It is not just human action (whose study is praxeology), but human interaction. This is the beginning of understanding them.