ABSTRACT
In his Great Transformation, Karl Polanyi wrote that a “host of writers on political economy, social history, political philosophy, and general sociology had followed in Smith’s wake and established his paradigm of the bartering savage as an axiom of their respective science” (Polanyi 1957: 44, emphasis added). He further argued that this paradigm has shaped the orthodox economic theory of the development of the market, a theory in which the propensity to exchange eventually would give rise to long-distance trade. But, Polanyi contended:
The logic of the case is, indeed, almost the opposite of that underlying the classical doctrine. The orthodox teaching started from the individual’s propensity to barter; deduced from it the necessity of local markets, as well as division of labor; and inferred, finally, the necessity of trade, eventually foreign trade, including long-distance trade. In light of our present knowledge we should almost reverse the sequence of the argument: the true starting point is long-distance trade, a result of geographical location of goods, and of the “division of labor” given by location. Long-distance trade often engenders markets, an institution which involves acts of barter, and if money is used, of buying and selling, thus eventually, but by no means necessarily, offering to some individuals an occasion to indulge in their alleged propensity for bargaining and haggling.
