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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 of a market (prices, division of labor, growth, etc.) are the outgrowths of the diverse and disparate goals of the individuals in a community.
Aristotle was the first person to define the word "economy" as ‘the art of household management’. As is still a common method of explanation today, Aristotle tried to explain complex market phenomena through an analogy between a household and a state, take for example the modern analogy between the national debt of a country's government and a simple consumer's credit card debt. Aristotle used a common Greek word 'oikonomia' that meant "to direct a single household," and used it to mean the management of an entire city-state. In reality, a group of households is not an "economy" since it is not one household, but many. The word catallaxy aims to provide a more accurate word for the market phenomenon of groups of households.
First discussed by Ludwig von Mises, catallaxy was later made popular by Friedrich Hayek who defines it as follows: "the order brought about by the mutual adjustment of many individual economies in a market".
Hayek derived the word from the Greek word ‘katallasso’ (καταλλάσσω) which meant not only 'to change' or 'to exchange' but also 'to reconcile', 'to receive one into favour'.
Christopher Frey considers catallaxy being the key for a deeper understanding of knowledge economy and knowledge-based society but he doubts that it is price that rules the market. Catallaxy also becomes a new dimension in software design and network architecture.
- Demonstrated preference
- Partial knowledge
- Invisible hand
- The Fatal Conceit
- The Use of Knowledge in Society
- Tax choice
- Wisdom of the crowd
- Flat organization
- Aristotle, Nicomachean Ethics, 1141b-32
- Aristotle, Nicomachean Ethics, 1140b-10
- Hayek, F.A. Law, Legislation, and Liberty, Vol. 2, pp. 108–9.
- Thayer and Smith. "Greek Lexicon entry for Katallasso". "The NAS New Testament Greek Lexicon". 1999.
- Frey, C. Just too Lazy to Lie, 2nd edition 2009, pp. 50, 61-64
- Eymann, T., Padovan, B.and Schoder, D. in a Conference Paper at the 16th IFIP World Computer Congress, Conference on Intelligent Information Processing, Beijing/ PR China, August 21–25, 2000