Dyadic and triadic exchanges

In a post on how current policy favors large-scale development (an important point on which I agree with Washington), Emily Washington cites Patrick and Wagner on the "dyadic" nature of market exchanges, where only the buyer and seller are affected, as opposed to government actions, which affect third parties.

Now, there is nothing wrong with analytically isolating only two parties to an exchange, and treating it as though it effects only them. We couldn't have supply-and-demand diagrams without doing so, and those are a handy tool for thinking through many problems!

But this analytical isolation is an abstraction. In particular, viewing market transactions as involving only two parties ignores how the parties came to "possess" the property they are exchanging in the first place, and act of appropriation which necessarily affected everyone else in society.*

So, if John Malone and Ted Turner each own about 2 million acres of American land (i.e., each own an amount of land roughly equivalent to the size of Rhode Island and Delaware combined), we might ask the question, "Well, who says?"

The answer is, of course, "The government says." (And note: it would not make much difference if the answer was, "The network of ancap defense agencies says.") And if our social system allows two individuals to own more land that, say, ten million average suburban homeowners, that has huge impacts on millions of people.

As Pope Francis keeps stressing, everything is interconnected. It is fine to abstract from everything else and analyze market transactions as though they only involved two parties... so long as we don't actually start to believe it is true!

* I am being vague here, because the scope of who is affected is determined by the ecumenical development of the time in question: Marcellus acquiring a new latifundia in Italy in 50 BC did not much affect anyone living in China or the Andes. On the other hand, today, someone acquiring ownership of Antarctica might involve everyone in the world.


  1. And the fact that market transactions are also impacts on other people. Think mergers that create monopolies.

  2. If you point out that property rights constitute an externality, their reaction should be funny.