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PART I THEORY OF ECONOMIC SOCIETY

There are three forms of binding compensatory contracts: the social contract, the exchange contract and a contract of insurance. In the social contract a larger or smaller number of persons pledge themselves to unite values, goods or services, for some given purpose, especially acquisition. The contract of exchange as a rule is concluded by only two parties; by means of it the many-sided surrenders of goods, services or money are reconciled. The contract of insurance at times most resembles the social contract, at other times that of exchange. Its purpose is to distribute the effects of loss over many pri-

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vate economies. I t has attained great importance in developed economies. But it has to do only with the security of the economic body, not with its creation. We shall give no more attention to this form of agreement than we do uncompensated contracts; fundamentally we are concerned only with the erection of the social economic organism. Next we may disregard also the social contract. One should expect that it be adopted to the integration of the social economy. Nevertheless in its effect it is overshadowed by the exchange contract which, although it is made as a rule only between two parties, has manifested itself the coordinating instrument that binds the individual economies into the national economy.1 The social contract is used in its fullest form only in a relatively small number of cases. We shall therefore make full reference only to those institutions that are created by its agency. Our main task is to describe the institutions of exchange and erection of the national economic body that is brought about by these.