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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.

Catallaxy is derived from the Greek verb katalatto, which means “to exchange,” or “to become reconciled with,” or “to admit into the community,” or, “to change from an enemy into a friend.”[1] The cognate catallaxy, therefore, refers to a pattern of mutually beneficial interaction ("friendship") that does not require that participants share the same ends.[2]

Aristotle was the first person to define the word "economy" as ‘the art of household management’.[3] 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.[4] 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 and inclusive word for the market phenomenon of groups of households, in which participants are free to pursue diverse ends of their own.

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".[5]

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.[6] Catallaxy is also used to refer to a marketplace of ideas, especially a place where people holding diverse political ideologies come together to gain deeper understanding of a wide range of political orientations.[7] Catallaxy also becomes a new dimension in software design and network architecture.[8]

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  1. ^ Greek-English Lexicon, Liddell and Scott (Oxford University Press: Oxford, UK, 1975 (first edition 1889), Seventh edition, p. 410
  2. ^ Hayek, Freidrich; The Mirage of Social Justice, Volume 2: Law, Legislation, and Liberty; University of Chicago Press, Chicago, IL, 1972 pp. 108-109
  3. ^ Aristotle, Nicomachean Ethics, 1141b-32
  4. ^ Aristotle, Nicomachean Ethics, 1140b-10
  5. ^ Hayek, F.A. Law, Legislation, and Liberty, Vol. 2, pp. 108–9.
  6. ^ Frey, C. Just too Lazy to Lie, 2nd edition 2009, pp. 50, 61-64
  7. ^
  8. ^ 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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