Q. Why use the term “systems of exchange?” Why not “markets?”

A. The term “systems of exchange” distinguishes several types of economic exchange from the price-based “market” assumed by traditional economics. The “market” is only one type of economic exchange, and we argue that there are other, qualitatively different types of exchange that support different orientations to economic action. The term “system” suggests that elements of each type of exchange arena are stable, loosely coupled, and interdependent arrangements that combine to produce a distinctive social and economic world.

Q.  How central is the probability of success in substantive vs. instrumental decision-making? 

A.  The probability of success is not critical to substantive rationality.  Actors may feel morally or emotionally bound to pursuing a substantive goal—such as fighting poverty or mitigating climate change—but the probability of success is not the driving force behind substantive action.  In contrast, the probability of success is always part of the calculus of instrumental rationality.

Q. How are associative and communal systems different?

A. The associative system of exchange is analytically distinct from the communal system of exchange. In the communal system of exchange, individuals employ a substantive calculus—they exchange preferentially with individuals they already identify with. In the associative system of exchange, individuals choose to form an alliance not based on shared identification, but because they have employed an instrumental calculus and believe that a strategic alliance will best serve their interests in the marketplace.

Q. How should the Systems of Exchange typology be used?

A. The SOE framework is useful for comparative analysis, hypothesis formation, and causal explanations. Students of the economy can use it to understand and organize qualitatively different forms of economic action. The frameworkextracts the most crucial factors in various economic settings in order to drive theory formation and empirical analysis. For example, researchers could build on the SOE typology by studying competition between different logics of economic action, the conditions under which different systems arise, or the factors that precipitate transitions between systems.

Q. Can economic exchanges exhibit characteristics of multiple systems of exchange?

A. Yes! The economy is complex and varied, and many exchanges are mixed types. For example, some Asian business groups combine elements of communal and associative exchange, and many Western markets impose moral restrictions on pollution in price-based exchanges.