Mises's third concept is akin to the first or "ideal type" concept, and its presumed necessity may actually be a result of the usefulness of constructing an ideal type of the market for the purpose of historical explanation, rather than being a requirement of a theory of catallactics.
The first law of thermodynamics applies only to physical science phenomena, not to catallactics, which is a science of human action in which value is created rather than being equilibrated or merely not lost.
First, he defined political economy as the study of exchange (introducing the term catallactics
that still has some currency among Austrian economists) rather than the study of economic growth and distribution.
He uses the term praxeology to refer to the general study of human action so defined (3, 12), reserving the term catallactics for the subset of problems that fall within the traditional scope of economics.
Economics in this broad sense is to be distinguished from "the field of catallactics or of economics in the narrower sense" (234).
People like me got "the treatment," but I was surely the better for it, and my appreciation of his focus on catallactics
was greatly sharpened.
The Genesis Story according to Buchanan's catallactics
goes further: "In the Beginning there were Perfect Markets: a world of atomistic buyers and sellers where economic power becomes meaningless.
So it was that they came upon the absurd idea of recommending the equations of mathematical catallactics
, which depict an image devoid of human action, as a substitute for the monetary calculation of the market economy.
Within a few years, Buchanan was calling for economics to focus on catallactics
, or exchange (1964a, 214).
It is immaterial whether innovation is produced by a bold individual lauded by society or by a group of humble researchers; the entrepreneurial activity still remains the same within the context of catallactics
The maximization hypothesis and the alertness factor (which are necessary for deducing the tendency towards equilibrium in a market process theory) are auxiliary hypotheses, which are to be postulated between praxeology and catallactics
Capitalism" and "the free market," for example, describe the catallactic
conditions that arise or are permitted in a libertarian society, but they do not encompass other aspects of libertarianism.