Sam, John, and Adam have been discussing the distinction between exchange and transaction. I say the difference has to do with conversation.

Enter either a grocery store or a farmer’s market. Which of these more closely resembles the Walrasian auction-house? In which context do we observe what Veblen called, “lightning fast calculators of pleasure and pain?”

Grocery shopping, I contend, is transactional. In many grocery stores the shopper can select, check, bag, and pay for the groceries without ever having to speak to another person. Where is the catallaxy in that? You do not make friends with your celery and dog food. Grocery shopping is about cost primarily, because your choices have already been laid out for you. We may trade off a store with a better selection for one with lower prices, but in that context we have already made our choice in choosing where to shop, and all that is left is cost. The transactional context contains risk that can be managed, but is devoid of uncertainty.

A transaction does not require humans, nor necessarily the generation of surpluses. The result of grocery stores is competition that results in the very smallest producer surplus, at a price already anticipated by the shopper who, when considering the opportunity costs of shopping elsewhere, experiences very little surplus. The transaction most closely resembles the Aristotelian transfer of goods of equal value. Grocery shopping is a chore, not an outing.

The farmer’s market is about exchange. In exchange there is possibility of alteration of preferences. You go to the farmer’s market for the experience, and fresh tomatoes. But you never know what else might show up at the farmer’s market. It is fraught with uncertainty. It is also steeped in conversation. The very context suggests that one approaches it wanting to have her preferences shaped by the experience. Sellers get intimately involved in each sale, talking with every customer and potential customer. Advice is given and recipes are shared.

At the farmer’s market, the conversation required puts constrains on our behavior within an exchange. Levy and Peart, in On “Strongly Fortified Minds”: Discussion, Self Restraint, and Cooperation (forthcoming) look into J.S. Mill and report that “the exchange of words, discussion, constitutes the means by which we come to moderate our selfish impulses and, increasingly, to cooperate.” We don’t want to talk about the prohibited paraphernalia we are buying, we’d rather get that anonymously, online if possible. We become moral persons, to Smith at least, through the exchange of approbation. Without that discussion, there really is no trade, or exchange.

No conversation was ever fondly described as a transaction, but an exchange of words is common. An exchange of ideas is better.

Insomuch as they make it possible to concentrate our humanity on more important relationships, transactions are a good replacement for exchanges. I’d rather buy my staple goods at a grocery store and save time to have more exchanges of ideas with friends.

I’m not advocating that we all shop at the farmer’s market from now on. But it is a good idea to take the kids to one once in a while for a good lesson in exchange, mystery, friendship, and morality.