An economy, in the strict sense of the word in which a household, a farm, or an enterprise can be called economies, consists of a complex of activities by which a given set of means is allocated in accordance with a unitary plan among the competing ends according to their relative importance. The market order serves no such single order of ends. What is commonly called a social or national economy is in this sense not a single economy but a network of many interlaced economies. Its order shares, as we shall see, with the order of an economy proper some formal characteristics but not the most important one: its activities are not governed by a single scale or hierarchy of ends. The belief that the economic activities of the individual members of society are or ought to be part of one economy in the strict sense of this term, and that what is commonly described as the economy of a country or a society ought to be ordered and judged by the same criteria as an economy proper, is a chief source of error in this field. But, whenever we speak of the economy of a country, or of the world, we are employing a term which suggests that these systems ought to be run on socialist lines and directed according to a single plan so as to serve a unitary system of ends.
While an economy proper is an organization in the technical sense in which we have defined the term, that is, a deliberate arrangement of the use of the means which are known to some single agency, the cosmos of the market neither is nor could be governed by such a single scale of ends; it serves the multiplicity of separate and incommensurable ends of all its separate members.
The confusion which has been created by the ambiguity of the word economy is so serious that for our present purposes it seems necessart to confine its use strictly to the original meaning in which it describes a complex of deliberately co-ordinated actions serving a single scale of ends, and to adopt another term to describe the system of numerous interrelated economies which constitute the market order. Since the name ‘catallactics’ has long ago been suggested for the science which deals with the market order and has more recently been revived, it would seem appropiate adopt a corresponding term for the market order itself. The term ‘catallactics’ was derived from the Greek verk katallattein (or katallassein) which meant, significantly, not only ‘to exchange’ but also ‘to admit into the community’ and ‘to change from enemy into friend’. From it the adjective ‘catallactic’ has been derived to serve in the place of ‘economic’ to describe the kind of phenomena with which the science of catallactics deal. The ancient Greeks knew neither this term nor had no corresponding noun; if they had formed one it would probably have been katallaxia. From this we can form an English term catallaxy which we shall use to describe the order brought about by the mutual adjustment of many individual economies in a market. A catallaxy is thus the special kind of spontaneous order produced by the market through people acting within the rules of the law of propert, tort and contract.
Friedrich Hayek: Law, Legislation and Liberty. Vol 2, The Mirage of Social Justice: The Market Order or Catallaxy. Sidan 107ff.
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