Catallaxy, key to an Open Society

Catallaxy, key to an Open Society

The political value of “community" is collectivist. Community lies at the root of communism, socialism and nationalism. It stood behind Nazism, apartheid and white supremacy. It justified “ethnic cleansing" in Eastern Europe recently and promotes immigration barriers worldwide. In India, the idea of community lies behind the Hindutva and Marathi manoos agendas. The scheming politician loves a homogeneous community.

Yet, community is a bogus value in a market society, which, in order to succeed, must be urban and cosmopolitan. Community makes sense in a village comprising one caste or in a small, exclusive tribe where everyone knows everyone else. It makes no sense in a city where individuals operate, peacefully trading with complete strangers. For such a society, the appropriate political value is “catallaxy", which means an open trading arena. But first, a little about this word.

In the 20th century, Austrian economists alone used the word “catallactics" to denote the science of exchange. In Ludwig von Mises’ Human Action (1949), the section dealing with traditional economic issues is titled “Catallactics". Derived from the Greek word for “exchange", Mises mentions that catallactics was first used by the British economist and theologian Bishop Whately in the previous century, which means the word was well known to the classical political economists. Mises’ student from his Vienna years, Nobel laureate Friedrich Hayek, confessed to having “fallen in love with this word", for which he discovered two additional meanings that the ancient Greeks ascribed to it: first, “to welcome into the community"; and second, “to turn from enemy into friend". These connotations of the word indicate its importance to an Open Society.

The ancient Greeks traded and mingled with all nations around the Mediterranean. Their societies employed special people, called xenos, or “guest-friend", who looked after foreigners and their wares as they went about their trades in the Greek city-states. At the pinnacle of their glory, in Athens, they achieved an Open Society, as Pericles’ “Funeral Oration" teaches us. There was no “xenophobia", as in our modern world.

The success of any market society lies in its openness and inclusiveness, and not in a narrow sense of community. There is no “chief" issuing commands to all traders. A market society is not a “command economy". Such a society is strongly individualistic, wherein each trader takes independent decisions and is responsible only to himself for his own gains and losses. Further, such a society is marked by “impersonality". There are good manners, yes, but there is no personal relationship between trader and customer.

Going deeper, a market society is characterized by “competitive individualism": we all compete as sellers; we all compete as buyers. We all realize that we prosper when this catallactic competition is at fever pitch. We gain when there are a huge number of sellers as we go to buy. We gain when there are a huge number of buyers as we go to sell. The bazaar that is humming with catallactic energy is the crowded bazaar, not the vacant one. Thus, we all realize that openness matters. A successful catallaxy is open to strangers from all parts of the globe and hospitable towards them. It is not a closed community.

As we witness the economic decline of Western nations, we must realize that the primary cause of this decline is their misplaced faith in community. All of them operate “national economies" with national fiat currencies, central banking, immigration barriers, protectionism and rampant interventionism. Socialist India follows the same path. However, the great thing about India is that all our cities are cosmopolitan. They are truly “melting pots" of humanity. This is our inherent strength. If we are to use it to get ahead of the competition, we must ditch the political value of community and opt instead to become a nation of free-trading and self-governing cities and towns—all of them catallaxies that are open to strangers. We must do away with trade and migration barriers. Our bazaars must be possessed of the highest degree of catallactic energy to be found anywhere in the world. Our biggest industry must be tourism.

Hayek defines community as “a common recognition of the same rules". Such rules can be religious or tribal—or they can be secular. In an open catallaxy, only one rule need be recognized by all: private property. Happily enough, as Hayek also points out, this rule has been the cornerstone of open markets for millennia. Whenever people exchange, they exchange properties. Thus, most trade takes place without legal paperwork of any kind. Hayek said that the rule of private property operates in all of us “between instinct and reason". We follow the property rule without knowing why. We have given up the instinct to plunder, to snatch and grab—but we don’t know why.

Thus, there is a “natural order" in all cosmopolitan open catallaxies. Posses of armed policemen are not required to “maintain order" in any crowded marketplace anywhere in the world. This order exists on its own. Without the “narrow domestic walls" of community, the idea of catallaxy solves the social problem for all individuals, while also uniting humanity in a rational, natural order.

Sauvik Chakraverti is an author and columnist. He blogs at

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