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As Determined By Mutual Agreement

Markets are an example of a paradigm of a self-generating or spontaneous social order (Hayek 1973, p. 37), i.e. social arrangements in which participants` activities are spontaneously coordinated, through mutual adaptation or adaptation of separate decision-makers, without conscious and central direction. In this sense, the market order “as a particular type of social structure” (Swedberg 1994, p. 255) may be opposed to the deliberate and centralized coordination of activities within companies or organizations, i.e. within social entities such as “family, factory, factory, business, company, company and all associations, as well as all public institutions, including governments” (1973). 46). One of the central themes of F. A. Hayek`s work is that the distinction between the “two types of order” (Hayek 1973, p. 46), the market and the organization (Vanberg 1982) is fundamental to an adequate understanding of the nature of social phenomena in general and market order in particular.

The lack of adequate recognition of the nature of the market as a spontaneous social order is, according to Hayek, a great source of confusion in discussions on economic theory, and in particular on economic policy, confusion which he attributes in part to the ambiguity that is implied when the term “economy” is used to describe the market order. Since the term is derived from the Greek word oikonomia, which means domestic economy, “an economy in the strict sense is an organization or agreement in which someone deliberately assigns resources to a unit order of the extremities” (Hayek 1978, p. 178). To avoid misleading connotations, Hayek proposes not to refer to the market order as an economy, but as a catallaxie – derived from the Greek word katallatein, which means “exchange” (Hayek 1976, p. 108). As social agreements, markets are made up of bilateral, effective and potential foreign exchange transactions. Unlike theft or coercion, exchange is a peaceful way to get things you want. It is based on a mutual agreement between the trading partners. Given the alternative methods of personal enrichment mentioned, people can be expected to exchange views on when and where alternatives appear less attractive.

This is generally the case when people meet in a normative, legal and institutional framework that defines and enforces property rights, whereas even in the absence of a common normative order, people may have prudent reasons to pursue their interests through exchanges and not through violent methods. As Max Weber (1978, p. 640) put it, even someone who prefers to take without pay, as he can, can choose to trade peacefully, where he is “confronted with a power that corresponds to his own,” or where he believes it is wise to do so in the interest of future exchanges that might otherwise be threatened. Indeed, the interest in exploiting the potential benefits of trade outside the hereditary community can be seen as the main driver of the development of a normative and legal order that goes beyond traditional community boundaries.

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