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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’.[1] 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.[2] 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".[3]

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'.[4]

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.[5] Catallaxy also becomes a new dimension in software design and network architecture.[6]

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  1. ^ Aristotle, Nicomachean Ethics, 1141b-32
  2. ^ Aristotle, Nicomachean Ethics, 1140b-10
  3. ^ Hayek, F.A. Law, Legislation, and Liberty, Vol. 2, pp. 108–9.
  4. ^ Thayer and Smith. "Greek Lexicon entry for Katallasso". "The NAS New Testament Greek Lexicon". 1999.
  5. ^ Frey, C. Just too Lazy to Lie, 2nd edition 2009, pp. 50, 61-64
  6. ^ 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

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