10: The Market Order or Catallaxy

authors: F.A. Hayek year: 1978 See in Zotero

Literature Notes

Makes the distinction between an economy (as economists use it) and a catallaxy. An economy allocates scare resources based on a utility function - very utilitarian.

A catallaxy does not assume there is one scale of utility for everyone. Every person might be pursuing different ends. All of these people with different plans and desires (and perspectives) all can work together to help each other through a market.

In fact, the differing views are a very good thing for society and for the catallaxy. The differing views mean that know different things, can contribute different things to the catallaxy and will have different values for things than others - incentivizes trade. This is good for society because it creates an environment where you want peace/ to provide resources to people you may not agree with.

In addition, the division of knowledge in a catallaxy is good because each member’s local knowledge can be integrated into society through the market. The market doesn’t just incentivize people to work, it also incentivizes people to act on comparative/ relative knowledge. For example, if someone knows a better way to use fewer inputs for a product, they have the incentive to do that. That knowledge will become part of the market as there is less demand for the input prices will reflect the decreased relative importance or need for that product.

Markets allow for cooperation for people pursuing different plans to happen simultaneously. Though this may not always seem fair it is a system that helps the whole of humanity to communicate very effectively.