! 1! The$Metaphysics$of$Economic$Exchanges$ $ Olivier$Massin,$Philosophy$Department,$University$of$Geneva,$2$rue$de$Candolle,$ 1211$Genève,$Switzerland,$eFmail:$olivier.massin@unige.ch$ Emma$Tieffenbach,$Scientific$collaborator,$Swiss$Centre$for$Affective$Sciences,$9$ chemin$des$Mines,$1202,$Geneva,$Switzerland,$eFmail:$emma.tieffenbach@unige.ch$ $ [Penultimate$version.$Shortened$version$(without$appendices)$to$appear$ in$ Journal( of(Social(Ontology]$ $ "what$is$really$exchanged,$whether$a$commodity$$ intervene$or$not,$are$mutual$services."$$ A.$L.$Perry,$Elements(of(Political(Economy$(1878,$p.$86).$ ( Abstract$ What$ are$ economic$ exchanges?$ The$ received$ view$ has$ it$ that$ exchanges$are$mutual$transfers$of$goods$motivated$by$inverse$valuations$thereof.$As$ a$ corollary,$ the$ standard$ approach$ treats$ exchanges$ of$ services$ as$ a$ subspecies$ of$ exchanges$of$goods.$We$raise$two$objections$against$this$standard$approach.$First,$it$ is$ incomplete,$ as$ it$ fails$ to$ take$ into$ account,$ among$ other$ things,$ the$ offers$ and$ acceptances$that$lie$at$the$core$of$even$the$simplest$cases$of$exchanges.$Second,$it$ ultimately$ fails$ to$ generalize$ to$ exchanges$ of$ services,$ in$ which$ neither$ inverse$ preferences$nor$mutual$transfers$hold$true.$! We$propose$ an$ alternative$ definition$ of$ exchanges,$which$ treats$ exchanges$ of$ goods$ as$ a$ special$ case$ of$ exchanges$ of$ services$ and$ which$ builds$ in$ offers$ and$ acceptances.$According$to$this$theory:$(i)$The$valuations$motivating$exchanges$are$ propositional$and$convergent$rather$than$objectual$and$inverse;$(ii)$All$exchanges$of$ goods$ involve$ exchanges$ of$ services/actions,$ but$ not$ the$ reverse;$ (iii)$ Offers$ and$ acceptances,$together$with$the$contractual$obligations$and$claims$they$bring$about,$ lie$at$the$heart$of$all$cases$of$exchange.$$ ! Economic$ exchanges$ are$ fundamental$ economic$ phenomena,$ so$ much$ so$ that$ economics,$standardly$defined$as$the$study$of$the$allocation$of$scarce$resources$(Menger$ 1976,$p.$77F113;$Robbins$1984,$p.$12F15),$is$sometimes$alternatively$defined$as$the$science$ of$exchanges$or$"cattalactics"$(Bastiat$1996,$p.$59;$Buchanan$1964,$p.$213F222;$Buchanan$ ! 2! 2001,$ p.$ 27F321).$ Given$ the$ centrality$ of$ the$ concept$ of$ exchange$ in$ economics,$ it$ is$ surprising$ how$ little$ attention$ has$ been$ paid$ to$ the$ nature$ of$ exchanges.$ Economists$ have$ extensively$ studied$ the$ conditions$ in$ which$ exchanges$ occur$ and$ the$ role$ that$ exchanges$ play$ in$ the$ determination$ of$ prices$ and$ equilibria.$ In$ collaboration$ with$ philosophers,$they$have$assessed$various$normative$issues$pertaining$to$exchanges,$such$ as$ the$ positive$ and$ negative$ externalities$ they$ bring$ forth,$ the$ irrationality$ of$ some$ exchanges,$ or$ the$ potential$ ethical$ issues$ raised$ by$ certain$ species$ or$ conditions$ of$ exchanges,$such$as$asymmetries$in$bargaining$power.$$ But$ historical$ and$ contemporary$ economics$ literature$ rarely$ ever$ addresses$ what$ exchanges$ are.$ The$ main$ exceptions$ are$ the$ early$ Austrian$ marginalists,$ who,$ insightfully$if$rather$briskly,$explicitly$stated$the$account$of$exchanges$that$economists$ appear$to$implicitly$rely$on.$In$most$textbooks,$however,$the$nature$of$exchanges$is$just$ assumed$ to$ be$ intuitively$ clear,$ and$ accounts$ of$ exchangeFvalue,$ prices,$ efficiency,$ partial$ equibrium,$ etc.2$are$ then$ developed$ on$ the$ basis$ of$ a$ preFtheoretical$ grasp$ of$ exchanges.$$ Our$ goal$ in$ this$ paper$ is$ to$ provide$ a$ precise$ answer$ to$ the$ question:$ what$ are$ economic$exchanges?$We$want$to$highlight$that,$although$we$shall$argue$that$one$of$the$ most$basic$concepts$of$economics,$exchange,$has$not$been$properly$defined$so$far,$we$do$ not$ contend$ nor$ think$ that$ this$ has$ undermined$ economic$ theorising.$ The$ preF theoretical$ and$ tacit$ understanding$ of$ exchanges$ has$ proven$ sufficient$ for$ economic$ purposes.$Why$ then$bother$ about$ the$nature$ of$ exchanges,$ if$ an$ explicit$ and$detailed$ understanding$of$them$is$supererogatory$from$the$economic$standpoint?$Here$are$two$ answers.$$ First,$ we$ take$ this$ question$ to$ be$ of$ intrinsic$ interest,$ irrespective$ of$ the$ consequences$ it$ may$ have$ for$ economic$ theorizing.$ Exchanges$ are$ pervasive$ social$ phenomena,$and$scientists$interested$in$the$social$world$should$be$eager$to$get$a$proper$ understanding$of$them.$In$other$words,$rather$than$using$exchanges$as$explanantia(used$ to$ shed$ light$ on$ other$ phenomena$ (such$ as,$ typically,$ exchange$ value,$ prices),$ taking$ exchanges$as$our$explananda$is,$we$submit,$an$epistemically$valuable$inquiry.$ Second,$ as$ we$ shall$ suggest,$ although$ the$ standard$ conception$ of$ exchanges$may$ have$ been$ good$ enough$ so$ far,$ it$ now$ stands$ in$ tension$ with$ two$ wellFestablished$ directions$ in$ recent$ economic$ research.$ The$ first$ is,$ under$ the$ influence$ of$ rational$ choice$and$game$theory,$the$move$away$from$an$early$focus$on$goods$to$a$new$focus$on$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1$Kirzner$provides$an$illuminating$historical$overview$of$this$proposal$in$Kirzner$1960,$chap.$4.$$ 2$It$ could$ be$ objected$ that$ standard$ microeconomics$ in$ fact$ does$ the$ reverse:$ rather$ than$ explaining$ exchangeFvalue$and$prices$ in$ terms$of$exchanges,$ it$ explains$exchanges$ in$ terms$of$exchangeFvalue$and$ prices.$But$this$tension$disappears$as$soon$as$we$distinguish$the$project$of$explaining$what(exchanges(are$ from$the$project$of$explaining(what( causes( exchanges(occur.(One$cannot$explain$what$exchanges$are$by$ appealing$ to$ exchangeFvalue,$ on$ pain$ of$ vicious$ circularity$ (we$ need$ to$ grasp$ what$ exchanges$ are$ to$ understand$ the$ concept$ of$ exchangeFvalue).$ But$ one$ surely$ can$ explain$ why$ such$ and$ such$ exchanges$ occur$by$appealing$to$exchangeFvalues$of$the$exchanged$items$for$the$exchangers.$ ! 3! actions.$ The$ standard$ conception$ of$ exchanges,$modelled$ on$ exchanges$ of$ goods,$ has$ thus$become$at$odds$with$contemporary$gameFtheoretic$approaches$to$microeconomics$ whose$ starting$ points$ are$ preferences$ ranging$ over$ actions$ rather$ than$ commodities.$ Second,$a$growing$amount$of$research$lies$at$the$intersection$of$economics$and$law.$The$ standard$ conception$ of$ exchanges,$ not$ taking$ into$ account$ the$ normative$ aspects$ of$ exchanges,$ fails$ to$ draw$ any$ clear$ link$ between$ exchanges$ and$ law.$ By$ contrast,$ the$ actionFtheory$ of$ exchange$ we$ shall$ advocate$ is$ more$ in$ tune$ with$ such$ recent$ developments$in$economics.$While$still$being$able$to$account$for$exchanges$of$goods,$it$ views$ exchanges$ of$ actions$ as$ the$ most$ basic$ phenomena,$ in$ accordance$ with$ game$ theory.$ Furthermore,$ by$ putting$ emphasis$ on$ offers,$ understood$ as$ conditional$ promises,$ it$ provides$ a$ straightforward$ way$ to$ connect$ exchanges$ with$ contractual$ obligations.$ In$ section$ 1$ we$ introduce$ what$ we$ take$ to$ be$ the$ standard$ theory$ of$ exchanges,$ which$we$ retrieve$ from$various$ tacit$ and$explicit$ assumptions$widely$made$across$ the$ economic$ literature.$ Section$ 2$ argues$ that$ the$ standard$ theory$ is$ incomplete$ as$ its$ stands,$and$that$it$cannot$be$easily$completed;$section$3$argues$that$the$standard$theory$ also$fails$to$give$necessary$conditions$for$exchanges:$in$particular,$it$fails$to$account$for$ exchanges$of$services.$ In$section$4$we$ introduce$the$theory$of$exchanges$we$advocate,$ which$we$call$the$action$theory.$Section$5$explains$how$the$action$theory,$modelled$on$ exchange$of$ services,$ accounts$ for$ exchanges$ of$ goods.$ Section$6$ compares$ the$ action$ theory$of$exchanges$to$the$standard$theory,$and$concludes$that$the$action$theory$fares$ better$in$all$respects.$ Outline:$ §1$Standard$Theory$of$Exchange$(STE)$ §2$The$Incompleteness$of$the$STE$ §3.$The$Restrictedness$of$the$STE$ §4$The$Action$Theory$of$Exchanges$(ATE)$ §5$Exchanges$of$goods$with$the$ATE$ §6$Wrapping$up:$the$ATE$vs.$the$STE$ Appendix$I:$The$Ownership$Theory$of$Exchange$ Appendix$II:$The$Buying/Selling$distinction$$ $ $ 1.!The!Standard!Theory!of!Exchanges! ! 1.1.!The!Standard!Theory!introduced( ! 4! For$simplicity,$we$shall$here$focus$on$exchanges$between$two$agents,$involving$only$ two$entities$exchanged.$For$example,$what$is$it$for$Julie$to$sell$her$bike$to$Paul?$$ One$intuitive$answer$(which,$although$rarely$explicitly$spelled$out,$is$widely$shared$ among$economists,$as$we$shall$argue)$goes$as$follows:$for$Julie$to$sell$her$bike$to$Paul,$it$ has$to$be$the$case$that$(i)$Julie$prefers$Paul's$money$to$her$bike,$(ii)$Paul$prefers$Julie's$ bike$to$his$money,$and$that,$in$virtue$of$these$inverse$preferences,$(iii)$Julie$voluntarily$ transfers$ her$ bike$ to$ Paul$ and$ (iv)$ Paul$ voluntarily$ transfers$ his$money$ to$ her.$More$ generally,( exchanges(consist( in(mutual( transfers(of(goods,(motivated(by( the(exchangers'( inverse( valuations(of( these(goods$-where$by$"inverse$valuations"$we$simply$mean$that$ each$exchanger$values$the$good$of$the$other$more$than$his$own.$(We$shall$here$assume$ throughout$that$money$is$a$kind$of$good).$ Standard! theory! of! voluntary! economic! exchange! (STE):$if$A$and$B$exchange$ their$goods$x$and$y,$then:$ (1)$Inverse(preferences:$$ $ (1.1.)$A$prefers$y$to$x$$ $ (1.2.)$B$prefers$x$to$y$$ (2)$Mutual(transfers:$$ $ (2.1.)$A$voluntarily$transfers$x$to$B$$ $ (2.2.)$B(voluntarily$transfers$y$to$A$ (3)$(2.1.)$partly$because$of$(1.1);$(2.2.)$partly$because$of$(1.2).$$ The$ "because"$ in$ the$ last$ condition$ is$ the$ because$ of$ subjective$ reason:$ each$ exchanger's$preference$motivates$him$to$transfer$his$good.$Note$that$the$STE$only$spells$ out$ some$necessary$ conditions$ for$ exchanges.$ It$ is$ not$ intended$ to$ give$ the$ complete$ story$about$them.$ The$ STE$ is$ meant$ to$ be$ widely$ encompassing,$ being$ true$ of$ barters$ ("direct$ exchanges")$ as$ well$ as$ monetary$ exchanges$ ("indirect$ exchanges").$ Hence$ the$ preferences$ at$ stake$might$ be$ final$ or$ instrumental.$ Presumably,$ Julie's$ preference$ for$ money$ is$ instrumental,$ that$ is,$ she$ wants$money$ because$ of$ the$ purchasing$ power$ it$ confers;$ Paul's$ preference$ for$ the$ bike$ is,$ typically,$ not$ instrumental$ in$ this$way:$ Paul$ does$not$value$the$bike$as$a$means$of$exchange.$$ Most$ importantly,$ the$ notion$ of$ "good"$ (or$ "commodity")$ employed$ in$ the$ STE$ is$ meant$to$be$very$generic:$goods$include$immaterial$goods((alternatively$called$intangible( goods)$as$well$as$tangible(goods.$This$distinction$between$tangible$and$intangible$goods$ is$key$to$the$STE's$handling$of$exchanges$of$services.!To$apply$the$STE$to$exchanges$of$ services,$ one$ just$ needs$ to$ identify( services( as( a( subEspecies( of( intangible( goods.$ Therefore,$a$fundamental$presupposition$of$the$STE$is$that$goods$and$services$belong$to$ ! 5! the$same$ontological$category,$namely$the$category$of$objects$(an$assumption$we$shall$ challenge$below).$ That$exchangeables$are$material$or$ immaterial$goods$ (the$ latter$of$which$ includes$ services)$ is$ arguably$ the$ overarching$ feature$ of$ the$ STE.$ For$ once$ it$ is$ admitted$ that$ what$is$exchanged$are$the$goods$of$the$exchangers,$the$idea$that$exchanges$essentially$ involve$transfers$of$good$becomes$almost$irresistible:$how$could$an$exchange$take$place$ without$ goods$ changing$ hands?$ And$why$would$ such$ a$ swapping$ of$ goods$ ever$ take$ place$if$the$exchangers$were$not$to$value$the$exchanged$goods$in$inverse$fashion?$How$ else$ are$ we$ to$ account$ for$ the$motivation$ to$ exchange$ goods$ if$ not$ by$ these$ inverse$ valuations?$$ This$is$precisely$how$the$appeal$to$inverse$preferences$is$justified.$The$idea$is$simply$ that$ exchanges$ would$ not$ take$ place$ in$ their$ absence.$ If$ potential$ exchangers$ were$ to$ value$goods$ in$exactly$ the$same$way,$ they$would$never$bother$exchanging.$What$ is$ the$ point$ of$ exchanging$ a$ oneFdollar$ coin$ against$ another,$ or$ a$ bottle$ of$Château$Margaux$ 1982$ against$ an$ exactly$ similar$ one?$ Exchangers$ are$ willing$ to$ exchange$ because$ each$ exchanger$values,$ex( ante,$ the$other's$good(s)$more$ than$his$own.$Each$exchanger$ thus$ expects$to$be$better$off$after$the$exchange.$Such$ex(ante$valuations$might$prove$wrong.$ Exchangers$ might$ regret$ the$ exchange:$ they$ can$ be$ disappointed$ by$ the$ good$ they$ received,$or$the$good$they$have$given$up$might$retrospectively$appear$more$valuable$to$ them.$Still,$agents$engage$ in$exchanges$because$they$expect,$correctly$or$not,$ that$ their$ satisfaction$will$increase$as$a$result.$$ Although,$ following$the$standard$contemporary$microeconomics,$we$have$equated$ the$ states$ motivating$ mutual$ transfers$ with$ preferences,$ the$ core$ idea$ need$ not$ be$ expressed$ in$ terms$ of$ preferences.$ The$ STE$ might$ be$ spelled$ out$ in$ terms$ of$ "A( wants/desires/needs/values/likes...$x$more$than$A$wants/desires/needs/values/likes...$y"$ rather$ than$ "A$ prefers$ x$ to$ y".$ A$ preference$ is$ a$ single$ attitude$ with$ a$ comparative$ content:$ Prefers(x,y).$ On$ the$ other$ hand,$ Liking( more( and$ its$ cognates$ are$ pairs$ of$ attitudes,$ each$with$ a$ typically$ nonFcomparative$ content:$Likes(x)(more( than( Likes(y).$ One$ might$ think$ that$ preferences$ are$ internal$ relations$ supervening$ on$ monadic$ attitudes$of$different$degrees,$or$deny$it$(Mulligan$2015).$The$STE$is$not$committed$to$ any$of$these$views.$Since$the$following$discussion$of$the$STE$and$its$rivals$ is$meant$to$ hold$true$whether$these$views$are$framed$in$terms$of$preferences$or$of$liking$more,$we$ shall$ henceforth$ ignore$ this$ distinction,$ and$use$ the$ terms$ "preferring",$ "liking$more",$ "valuing$more"$ interchangeably.$ In$the$present$context,$ the$only$three$essential$points$ about$these$comparative$attitudes$are:$$ (i) that$such$attitudes$be$objectual$rather$than$propositional.$They$target$goods( (x's$and$y's)$rather$than$propositions$or$states$of$affairs$(p's$and$q's)$$ (ii) that$ some$ comparison$ takes$ place$ between$ these$ goods$ (either$ within$ the$ content$of$such$objectual$attitudes$–preferences;$or$between$such$attitudes$– liking(more);$ ! 6! (iii) that$the$valuations$of$the$two$exchangers$be$the$inverse$of$each$other,$that$is,$ that$the$good$that$one$exchanger$values$more,$or$prefers,$is$the$one$that$the$ other$exchanger$values$less,$or$disprefers.$$ Thanks$ to$ the$ introduction$ of$ inverse$ preferences,$ upholders$ of$ the$ STE$ are$ in$ a$ position$to$reject$two$simplistic$views$of$exchanges,$which$have$been$thought$to$form$a$ dilemma:$$ • Either$ exchanges$ are$ "exchanges$ of$ equivalent",$ in$ the$ sense$ that$ the$ goods$ exchanged$are$of$equal$values$(Aristotle,$Nic.$Ethic,$V,$5,$1133a,$24),$and$nobody$ gains$from$exchanging.$ • Or$the$goods$exchanged$are$of$unequal$values,$and$the$profit$of$one$exchanger$ is$ the$ loss$ of$ the$ other$ (a$ view$ often$ attributed$ to$ Montaigne,$ albeit$ controversially$so3).$$ One$reason$why$both$horns$of$the$dilemma$are$unattractive$is$that,$if$exchanges$are$ necessarily$ either$ pointless$ or$ detrimental$ to$ one$ exchanger,$ it$ becomes$ unclear$ why$ exchanges$ are$ so$ ubiquitous.$ Once$ inverse$ valuations$ are$ taken$ into$ account,$ the$ dilemma$turns$out$ to$be$a$ false$one.$Because$exchangers$value$goods$ in$ reverse$ways,$ both$ gain$ from$ exchanging.$ No$ contradiction$ is$ involved$ since$ the$ values$motivating$ exchanges$are$subjective:$in$Julie's$eyes,$Paul's$money$has$more$value$than$her$bike;$in$ Paul's$eyes,$Julie's$bike$is$more$valuable$than$his$money.$(To$anticipate:$we$shall$agree$ that$ the$ dilemma$ above$ needs$ to$ be$ escaped,$ and$ we$ shall$ also$ agree$ that$ goods$ exchanges$are$in$the$end$motivated$by$inverse$preferences.$But$we$shall$argue$in$§6$that$ the$ fundamental$ sense$ in$which$all$ exchanges$-of$ goods$ as$well$ as$ of$ services-$ are$ mutually$beneficial$is$that$they$satisfy$convergent$rather$than$inverse$preferences$of$the$ exchangers.)$ The$ STE$ is$ therefore$ committed$ to$ a$ subjectivist( understanding( of( the( values( motivating( exchanges( (which$ is$not$ to$ exclude$objective$ values,$ but$ just$ to$ claim$ that$ these$ are$ not$ the$ ones$ motivating$ exchanges).$What$ prompts$ exchanges$ are$ not$ the$ objective$ values$ of$ the$ goods$ that$ are$ exchanged$ (for$ instance,$ the$ quantity$ of$ labour$ they$ incorporate,$ or$ their$ objective$ aesthetic$ worth)$ but$ rather$ the$ exchanger's$ subjective$valuations$of$the$goods$at$stake.$More$precisely,$it$is$the$subjective$value$of$an( additional( unit$ of$ that$ good$ to$ the$ subject,$ given$ what$ he$ already$ possesses$ -the$ marginal$utility$of$that$good-$that$lies$behind$the$subject's$preferences.$Thus$the$STE$is$ naturally$combined$with$a$marginalist$approach$to$economic$value.$$ Additionally,$ the$ STE$ as$ it$ stands$ is$ compatible$ with$ (but$ does$ not$ entail)$ methodological( individualism,$ the$ view$ that$ only$ individuals$ think$ and$ act.$ The$ valuations$at$ stake$ in$an$exchange$are$ the$ individual$mental$ states$of$each$exchanger.$ Likewise,$ the$ two$ transfers$ are$ two$ individual$ actions.$No$ "we",$ no$ sense$ of$ "common$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3!Long$(2008);$Montero$&$al.$(2015)$argue$that$this$wasn't$Montaigne's$view;$Bagus$&$al$(2016)$argue$that$ this$was$Montaigne's$view.! ! 7! interest",$no$"collective$intentionality"$or$"joint$action",$is$required$for$exchanges$to$take$ place.$ 1.2.!How!Standard!is!the!Standard!Theory?! Few$ economists,$ we$ take$ it,$ would$ readily$ recognize$ in$ the$ STE$ the$ standard$ economic$ view$ of$ exchanges.$ A$ first$ reason$ for$ this$ may$ simply$ be$ terminological.$ Instead$of$"goods"$one$often$finds$"commodities",$ "resources"$or$even$"values";$ instead$ of$"transferring"$one$often$finds$"ceding",$"giving$up",$"delivering",$"selling",$etc.;$instead$ of$"S$prefers$x$to$y"$one$often$finds$"S$values$x$more$than$y",$"x$has$a$higher$(marginal,$ expected)$utility$for$S$than$y",$"x$is$better$for$S$than$y",$"S$is$willing$to$give$up$x$for$y",$ etc.4.$ But$ the$main$reason$why$the$STE$may$not$ look$ like$a$standard$piece$of$economic$ theorizing$ is$ that$ it$ is$ in$ fact$ virtually$ never$ explicitly$ spelled$ out$ in$ the$ economics$ literature.$ The$main$ exceptions$ are$ Austrian$ economists,$ who,$ certainly$ because$ they$ share$ philosophers'$ taste$ for$ a$ priori$ truths,$ definitions$ and$ metaphysical$ inquiries$ (Smith$1990),$have$paid$explicit$attention$to$the$nature$of$exchanges.$To$our$knowledge$ the$most$detailed$version$of$the$STE$is$the$one$advanced$by$Menger$in$his$Principles(of( Economics:$ $ The$ most$ general$ form$ of$ the$ relationship$ responsible$ for$ human$ trade$ is$ therefore$as$follows;$an$economizing$individual$A,$has$a$certain$quantity$of$a$ good$at$his$disposal$which$has$a$smaller$value$to$him$than$a$given$quantity$of$ another$ good$ in$ the$ possession$ of$ another$ economizing$ individual,$ B,$ who$ estimate$ the$ values$ of$ the$ same$ quantities$ of$ goods$ in$ reverse$ fashion,$ the$ given$quantity$of$the$second$good$having$a$smaller$value$to$him$than$the$given$ quantity$of$the$first$good$which$is$at$the$disposal$of$A.$[...]$If,$in$addition,$the$ two$ economizing$ individuals$ (a)$ recognize$ the$ situation$ and$ (b)$ have$ the$ power$actually$to$perform$the$transfer$of$the$goods,$a$relationship$exists$that$ makes$ it$ possible$ for$ them,$by$ a$mere$ agreement,$ to$provide$better$ or$more$ completely,$ for$ the$ satisfaction$ of$ their$ needs$ than$would$ be$ the$ case$ if$ the$ relashionship$were$not$exploited.$(Menger$1976,(p.(179F180).$ $ But,$ Austrian$ economists$ aside,$ economists$ generally$ take$ the$ phenomenon$ of$ exchange$to$be$obvious$enough$to$constitute$an$unanalysed$explanans.$In$doing$so,$they$ nevertheless$make$a$certain$number$of$tacit$assumptions$about$exchanges.$The$STE,$we$ contend,$captures$these$assumptions.$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4$Note$that$our$point$is$only$that$these$expressions$are$often$used$interchangeably,$not$that$they$should$ be$ so$ used.$Mulligan$ (2015)$ argues$ that$ preferring$ and$ liking$more$ are$ distinct$ comparative$ attitudes;$ Broome$(1991,$p.$1F12)$urges$that$having(higher(utility$and$being(better(have$different$meanings$(although$it$ is$a$substantive$question$whether$they$have$the$same$extension).$ ! 8! As$we$ saw,$ the$ three$ core$ assumptions$ of$ the$ STE$ are$ (i)$ that$ exchangeables$ are$ goods$ (material$ or$ immaterial);$ (ii)$ that$ exchanges$ involve$ mutual$ transfers$ of$ these$ goods;$and$(iii)$that$exchanges$are$motivated$by$inverse$valuations$of$these$goods.$We$ shall$ now$ argue$ that,$ terminological$ variations$ aside,$ these$ three$ assumptions$ are$ standardly$admitted$across$economic$textbooks.$ (i)$ Consider$ first$ the$ view$ that$ exchangeables$ are$ goods( (or$ bundles,$ baskets$ thereof).$ This$ assumption$ is$ shared$ not$ only$ by$ Austrians,$ but$ by$ nearly$ all$ early$ neoclassical$economists.$Walras$(1874,$p.$70)$refers$to$"commodities"$("marchandises").$ He$insists$that$exchangeables$are$commodities,(and$that$these$belong$to$the$category$of$ things.( Following$ him,$ microeconomics$ assumes$ that$ trade$ bears$ on$ goods,$ commodities,$ or$ bundles$ thereof.$ One$ clear$ symptom$ of$ this$ is$ that$ the$ variables$ of$ economic$formalizations$are$individual$variables$(x,(y,(z...),$not$propositional$ones$(p,(q,( r...).$ The$ preferences$ appealed$ to$ in$ economic$ theorizing$ are$ objectual$ preferences$ (preferring$ x$ to$ y)$ rather$ than$ propositional$ ones$ (x$ prefers$ to$ F$ rather$ than$ to$G;( x$ prefers$that$p$rather$than$that$q).$Indifference$curves,$for$instance,$are$held$to$represent$ the$ possible$ combinations$ of$ two$ (bundles$ of)$ goods$ between$ which$ consumers$ are$ indifferent.$$ Why$ such$ a$ focus$ on$ goods?$Why$ does$ economics$ tend$ to$ give$ priority$ to$ goods$ over$ services$ by$ subsuming$ the$ later$ under$ the$ former?$ One$ chief$ reason$ for$ this,$ advanced$ by$ Hill$ (1976,$ 1999),$ is$ that$ economics$ is$ often$ conceived$ as$ studying$ the$ allocation$of$scarce$resources$and$relatedly,$as$bearing$on$wealth,$usually$conceived$in$ terms$ of$ possession$ of$ goods.$ Under$ this$ conception$ of$ economics,$ the$ only$ way$ for$ services$ to$ be$ included$ in$ its$ field$ of$ inquiry$ is$ for$ them$ to$make$ a$ difference$ in$ the$ wealth$ of$ individuals$ (or$ nations).$ For$ this,$ services$ need$ to$ be$ seen$ as$ allocatable( resources,$ that$ is,$ as$ goods.$ If,$ on$ the$ other$ hand,$ being$ rendered$ a$ service$ does$ not$ consist$ in$being$allocated$a$good,$ then$ it$does$not$necessarily$make$one$richer,$which$ led$Smith$to$call$service$rendering$"unproductive$labour"$(Smith,$1904,$Book$II,$Ch.$III).$ In$other$words,$if$wealth$and$allocation$of$scarce$resources$are$the$focus$of$economics,$ then$either$services$have$to$be$equated$with$allocatable$objects$-i.e.,$goods-$or$they$ are$not$of$immediate$interest$to$economics.$The$first$option$has$been$widely$accepted,$ as$ amply$ documented$ by$Hill$ (1999),$ and$ as$ a$ consequence$ exchanges$ of$ services$ are$ seen$as$subFcases$of$exchanges$of$goods.$ Is$ this$ objectual$ approach$ to$ exchanges$ still$ at$ play$ in$ contemporary$ microeconomics,$ however?$ This$ may$ appear$ doubtful$ at$ first.$ Microeconomics,$ as$ presented$in$today's$advanced$textbooks$(e.g.$Kreps$1990;$MasFColell,$Whinston,$Green$ 1995),$is$an$application$of$expected$utility$theory$and$game$theory,$for$which$preferences$ bear$not$on$commodities,$but$on$actions.$However,$oddly$enough,$when$thinking$and$ writing$about$exchanges,$contemporary$microeconomics$routinely$relapses$ into$ its$old$ objectual$mindset.$ ! 9! Thus,$when$rational$choice$theory$is$put$to$use$to$understand$markets,$economics$ textbooks$typically$revert$back$to$the$traditional$assumption$that$commodities$are$"the$ objects$of$ choice$ for$ the$consumer"$ (MasFColell,$Whinston,$Green,$ 1995$p.$ 17;$ see$also$ Kreps,$ 1990,$p.$ 18F19,$Arnold$ 2015,$ p.$ 26).$ In$one$of$ the$ few$works$ explicitly$ aiming$ at$ providing$ a$ gameFtheoretic$ approach$ to$ economic$ exchanges5,$ Hardin$ (1982,$ 251F2)$ continues$ to$ waver$ rather$ freely$ between$ goodsF$ and$ actionFbased$ approaches$ to$ exchangeables.$The$survival$of$this$objectual$mindset$is$also$apparent$in$the$way$services$ are$still$conceived$of.$As$mentioned$above,$the$view$that$services$are$intangible$goods$is$ the$orthodox$position$within$the$history$of$economics.$One$would$have$expected$that$by$ moving$ from$ objectFpreferences$ to$ actionsFpreferences,$ microeconomics$ would$ have$ moved$ correspondingly$ from$ the$ view$ that$ services$ are$ intangibles$ goods$ to$ the$ view$ that$services$are$actions.$But$this$did$not$happen:$services$are$still$treated$as$intangible$ commodities$ in$ contemporary$ microeconomic$ textbooks$ (Varian$ 1992,$ p.$ 314;$ MasF Colell,$Whinston,$Green$ 1995,$p.$ 17).$One$also$continues$ to$apply$ to$ services$ the$ large$ panoply$of$concepts$tailorFmade$for$the$economics$of$goods:$thus$services$are$said$to$be$ such$that$they$can$be$had$ (Johnson,$ 1958),$be$part$of$one's$endowment,$be$given(up(or( received( (as$ entailed$ by$ standard$ definitions$ of$ marginal$ rate$ of$ substitution)$ or$ be$ accumulated.$But$how$could$one$have,$be$endowed$with,$give$up,$receive$or$accumulate$ actions?$Thus,$although$the$modern$decisionFtheoretic$approach$to$microeconomics$de$ facto$ entails$ -correctly$ in$ our$ view-$ that$ fundamental$ exchangeables$ are$ actions,$ microeconomics$continues$to$conceive$of$them$as$goods.$ Why$ it$ that$ so?$The$main$ reason$may$ simply$ be$ that$ the$way$ to$deal$with$ goods$ exchanges$under$the$hypothesis$ that$basic$exchangeables$are$actions$remains$obscure.$ To$our$knowledge,$no$encompassing$view$of$exchanges$amenable$to$subsume$under$the$ same$heading$exchanges$of$goods$and$exchanges$of$actions$has$been$proposed$so$far$(we$ shall$ advance$one$ in$§5).$ In$ lack$of$ such$a$proposal,$ the$only$available$way$ to$explain$ goods$exchanges$is$to$revert$back$to$the$standard$objectual$conception$of$exchanges.$As$ a$result,$the$paradigm$shift$from$goodFdriven$to$actionFdriven$microeconomics$remains$ incomplete.$ On$ exchangeables,$ to$ paraphrase$ Quine,$ economists$ tend$ to$ remain$ instinctively$"goodsFminded".$ (ii)$ Second,$ is$ the$ assumption$ that$ exchanges$ involve$ transfers$ of$ goods$ also$ standard?$We$noted$ that$ this$ is$ a$ very$natural$ view$ to$hold$ once$ exchangeables$ have$ been$ equated$with$ goods,$ and$ it$ is$ unsurprisingly$widely$ accepted.$Menger$ speaks$ of$ "mutual$transfers"$(Menger$1976,$p.$177F178);$Fischer$writes$that$"An$exchange$consists$of$ two$mutual$ and$ voluntary$ transfers,$ each$ in$ consideration$ of$ the$ other"$ (Fisher$ 1912,$ chap$ 1,$ §1:$ 3);$more$ recently,$Arnold$writes$ that$ "Exchange,$ or$ trade,$ is$ the$process$of$ giving$ up$ one$ thing$ for$ something$ else"$ (Arnold$ 2015,$ p.$ 26);$ and$ Rutherford$ defines$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5$Hardin$argues$that$economic$exchanges$and$the$prisoner's$dilemma$fall$under$a$same$heading;$a$ view$independently$defended$by$Kliemt,$1986.$ ! 10! exchanges$ in$ terms$ of$ "The$ mutual$ transfer$ of$ goods,$ money$ or$something$ of$ value$ between$two$or$more$parties"$(Rutherford$2002,$entry$"Exchanges").$$ (iii)!Consider,$finally,$the$view$that$exchanges$are$motivated$by$inverse$valuations$of$ goods.$Is$it$widely$shared$as$well?$This$way$of$putting$it$is$admittedly$quite$Austrian.$For$ instance,$Wieser$writes$"Each$of$the$two$parties$entering$into$a$natural$exchange$desires$ to$ secure$ for$ himself$ superior$ value.$ Each$ surrenders$ something$ to$which$he$ attaches$ less$utilityFvalue$than$he$does$to$the$good$or$service$which$he$obtains$in$exchange.$[...]$it$ must$ happen$ that$ the$ two$ parties$ estimate$ the$ two$ objects$ of$ exchange$ in$ a$ directly$ opposite$manner$so$that$both$may$be$able$simultaneously$to$receive$better$value$by$the$ same$transaction."$(Wieser,$1927,$p.$167$-similar$Austrian$descriptions$are$to$be$found$ in$Menger$ 1976,$p.$ 179F180,$BohmFBawerk$ 1881,$p.$ 179F180;$ von$Mises$ 1949,$p.$ 204F205;$ Rothbard$2009,$p.$880F881;$Kirzner$1960,$p.$76;$to$which$Wicksteed$1910,$p.$126F157,$may$ be$added).$$ But$ even$ though$ the$ phraseology$ of$ "inverse$ valuation",$ "reverse$ preference",$ or$ "valuing$goods$in$reverse$fashion"$is$typically$Austrian,$the$idea$behind$it$-that,$in$any$ exchange,$ one$ prefers$ what$ one$ gets$ to$ what$ one$ cedes-$ is$ shared$ far$ beyond$ the$ Austrian$heterodoxy.$The$ idea$ is$usually$expressed$ in$terms$of$mutual$advantages:$ the$ reason$why$exchanges$are$mutually$beneficial$(ex(ante,$but$no$necessarily$ex(post6),$it$is$ claimed,$ is$ precisely$ that$ each$ exchanger$ values$ the$ good$ of$ the$ other$more$ than$ his$ own.$Hence$the$exchangers$expect$to$be$better$off$by$swapping$goods.$ The$ idea$ is$ already$ to$ be$ found$ in$ Aquinas:$ "buying$ and$ selling$ seem$ to$ be$ established$for$the$common$advantage$of$both$parties,$one$of$whom$requires$that$which$ belongs$ to$ the$other,$and$vice$versa."$ (Aquinas$ 1920,$question$77,$chap.1).$But$ the$ first$ complete$ formulation$ should$perhaps$be$ credited$ to$Condillac:$ "Indeed,$ if$ one$ always$ exchanged$equal$value$for$equal$value,$there$would$be$no$gain$to$be$made$for$either$of$ the$contracting$parties.$Now,$both$of$ them$make$a$gain,$or$ought$to$make$one.$Why?$ The$fact$is$that$with$things$only$having$value$in$relation$to$our$needs,$what$is$greater$for$ one$person$is$less$for$another,$and$vice$versa."$(Condillac$1776,$chap.$6,$p.$120).$Following$ him,$the$French$philosopher$and$economist$Destutt$de$Tracy$writes$even$more$explicitly$ in$ 1823:$ "Whenever$ I$make$ an$ exchange$ freely,$ and$without$ constraint,$ it$ is$ because$ I$ desire$the$thing$I$receive$more$than$that$I$give;$and,$on$the$contrary,$he$with$whom$I$ bargain$ desires$what$ I$ offer$more$ than$ that$which$ he$ renders$me."$(Destutt$ de$ Tracy$ 1817,$chap.$1,$61F62).$Such$claims$were$still$relatively$rare$and$controversial$at$the$time:$ Say$1855$(book$I,$chap.$2,$p.$61)$and$Bastiat$(1850,$p.$66F72)$strongly$criticized$Condillac's$ view$of$the$mutual$benefits$of$exchange.$But$they$became$commonplace$in$the$wake$of$ marginalist$theories.$Here$is$Jevons:$$ $ Imagine$ that$ there$ is$ one$ trading$ body$ possessing$ only$ corn,$ and$ another$ possessing$only$beef.$ It$ is$ certain$ that,$under$ these$ circumstances,$ a$portion$of$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 6$Rothbard$(2004,$p.$885)$is$especially$clear$on$the$ex(ante/ex(post$distinction.$$ ! 11! the$corn$may$be$given$in$exchange$for$a$portion$of$the$beef$with$a$considerable$ increase$of$utility.$How$are$we$to$determine$at$what$point$the$exchange$will$cease$ to$be$beneficial?$ [...]$ if,( to( the( trading( body(which( possesses( corn,( ten( pounds( of( corn(are( less(useful( than(one(of( beef,( that( body(will( desire( to( carry( the( exchange( further.(Should(the(other(body(possessing(beef(find(one(pound(less(useful(than(ten( pounds(of(corn,(this(body(will(also(be(desirous(to(continue(the(exchange.(Exchange$ will$thus$go$on$until$each$party$has$obtained$all$the$benefit$that$is$possible,$and$ loss$ of$ utility$would$ result$ if$more$were$ exchanged.$ (Jevons$ 1888,$ p.$ 95F96,$ our$ italics).$ $ This$by$now$standard$way$of$explaining$not$only$why$exchanges$are$mutually$beneficial,$ but$also$at$which$point$they$will$cease$to$be,$by$appealing$to$differences$in$the$marginal$ utility$of$the$exchangers$is$nothing$less$than$a$refined$version$of$the$inverse$preferences$ idea.$Exchanges$of$two$kinds$of$goods$between$two$individuals$will$carry$on$as$long$as$ an$additional$unit$of$the$other's$goods$has,$for$each$exchanger$more$utility$for$him$than$ the$ last$ unit$ of$ his$ own$ goods.$ Jevons'$ proposal$ was$ reformulated$ ten$ years$ later$ by$ Edgeworth$ through$ the$ introduction$ of$ indifference$ curves.$ His$ famous$ "box",$ which$ vividly$ illustrates$ Jevon's$ marginalist$ story$ above,$ is$ one$ place$ where$ the$ inverse$ preference$ story$ surfaces$ in$ textbooks$of$microeconomics.$Although$ the$ idea$ that$ two$ individuals$will$gain$ from$exchange$as$ long$as$each$continues$to$prefer$something$the$ other$has$ to$ something$he$himself$ has$ is$ now$ typically$ couched$ in$mathematical$ and$ technical$ terms$ -Edgeworth$ box,$ marginal$ rate$ of$ substitution-$ colloquial$ formulations$ of$ the$ idea$have$not$ disappeared.$ For$ instance,$Marshall$writes:$ "If$ each$ gives$up$that$which$has$for$him$the$lower$utility$and$receives$that$which$has$the$higher,$ each$will$gain$by$the$exchange."$(Marshall$ 1920,$chap.$5,$§1).$ In$their$recent$textbooks,$ Pindyck$ and$ Rubinfeld$ explain$ that$ "There$ is$ thus$ room$ for$ mutually$ advantageous$ trade$because$James$values$clothing$more$highly$than$Karen$does,$whereas$Karen$values$ food$more$highly$than$James$does."$(Pindyck,$Rubinfeld$2005,$p.$603).$$ Finally,$ note$ that$ outside$ economics$ the$ same$ basic$ idea$ surfaces$ in$ philosophical$ writings.$ For$ instance,$ Reinach$ (1983,$ p.$ 3)$ writes:$ "Where$ two$ persons$ each$ have$ an$ object$ in$ their$ possession$ and$ each$ of$ the$ persons$ wants$ what$ the$ other$ has$ and$ is$ willing$to$give$up$his$own$thing$for$the$sake$of$getting$it,$the$immediate$exchange$of$the$ things$is$the$indicated$way$of$satisfying$the$desire$of$both."$More$recently$Hardin$(1982)$ characterizes$economics$exchanges$ in$ terms$of$ "reverse$valuation"$and$Brennan$(2016)$ writes$ that$"exchange$ is$made$possible$by$the$ fact$ that$ I$have$a$greater$desire$ for$ that$ which$the$other$has$(and$I$want)$than$for$that$which$I$have".$$ The$ three$ central$ features$ of$ the$ STE$-exchangeables$ as$ (i)$ goods$which$ are$ (ii)$ mutual$ transferred$ and$ (iii)$ valuated$ in$ reverse$ fashion-$ are$ therefore$ assumptions$ widely$ shared,$ not$ only$ by$ Austrian$ economists,$ but$ in$ most$ of$ the$ historical$ and$ contemporary$ economics$ literature.$ We$ conclude$ that$ the$ view$ that$ exchanges$ are$ ! 12! mutual$transfers$of$goods$motivated$by$inverse$valuations$thereof$correctly$captures$the$ economists'$ implicit,$ preFtheoretical$ conception$of$ exchanges.$We$ shall$now$ raise$ two$ sets$of$objections$against$this$theory.$ $ 2.!The!Incompleteness!of!the!Standard!Theory! 2.1.!What!the!STE!leaves!unexplained! Our$first$set$of$worries$is$that$the$STE$leaves$several$intuitively$important$features$of$ exchange$unaccounted$ for.$We$only$get$a$partial$ insight$ into$the$nature$of$exchanges.$ To$ reach$a$more$ complete$ account$of$ exchanges,$ at$ least$ three$points$will$need$ to$be$ explained:$ 1.$ Bridging( the( gap.$ The$ explanatory$ step$ from$ inverse$ preferences$ (1)$ to$ mutual$ transfers$ (2)$ is$ incomplete$ as$ it$ stands.$ The$ preferences$ are$ held$ to$ motivate$ the$ transfers,$ but$ are$ clearly$ not$ sufficient$ to$ do$ so.$Why$ should$ Julie's$ preferring$ Paul's$ money$ to$ her$ bike$ lead$ her$ to$ transfer$ her$ bike$ to$ Paul?$ Absent$ further$ explanation,$ such$ behaviour$ seems$ plainly$ irrational:$ systematically$ transferring$what$we$ own$ and$ disprefer$to$those$who$own$what$we$prefer$is$in$general$a$very$ineffective$method$to$get$ us$what$we$want.$Paul$is$quite$likely$to$take$the$bike$and$keep$his$money.$So$something$ must$happen$between$(1)$and$(2)$which$makes$it$rational$for$Julie$to$transfer$her$bike$to$ Paul$so$as$to$get$his$money.$ 2.$The(quid(pro(quo.$A$related$worry$is$that$the$STE$as$it$stands$does$not$account$for$ the$quid(pro(quo$of$exchanges,$the$idea$that$things$are$exchanged$against$other$things$ (Perry$1878,$p.$76;$Kirzner$1960,$p.$76;$Brennan,$Pettit$2000,$p.$82;$Brennan,$2016).$What$ is$missing$ in$ the$ STE$ is$ an$understanding$of$ the$ explanatory$ connection$between$ the$ two$transfers:$ Julie$ transfers$her$bike$to$Paul$against$Paul's$money.$And$ likewise,$Paul$ gives$his$money$for$Julie's$bike.$$ 3.$Claims( and( obligations.$Another$connected$worry$ is$ that$ claims$and$obligations$ arise$ at$ some$ point$ in$ any$ exchange,$ and$ the$ STE$ leaves$ them$ unexplained.$ Suppose$ Julie$ transfers$ her$ bike$ to$ Paul,$ and$ that$ Paul$ goes$ away$ with$ the$ bike,$ without$ transferring$his$money$to$her.$Surely,$something$has$gone$wrong:$if$they$were$indeed$in$ the$process$of$exchanging,$Paul$had$at$that$point$an$obligation$to$transfer$his$money$to$ Julie,$and$Julie$had,$conversely,$a$claim$to$Paul's$money$since$she$already$transferred$her$ bike$to$him.$It$is$only$when$the$exchange$is$completed$-when$Paul$has$transferred$his$ money-$that$such$claims$and$obligation$disappear.$The$STE$per(se$does$not$explain$the$ arising$and$vanishing$of$such$transitory$claims$and$obligations.$ These$ points,$ we$ submit,$ are$ necessary$ features$ of$ our$ concept$ of$ economic$ exchange.$If$two$individuals$enter$ into$some$social$ interaction$that$fails$to$display$any$ quid$pro$quo,$or$any$correlative$claims$and$obligations,$they$cannot$properly$be$said$to$ be$exchanging.$$ ! 13! ! 2.2!Completing!the!STE?! Can$the$STE$be$completed$so$as$to$account$for$these$three$explananda?$Some$hints$ are$ to$ be$ found$ in$ Menger's$ quote$ above.$ Menger$ adds$ that$ the$ individuals$ must$ "recognize"$that$they$"value$the$goods$in$reverse$fashion"$(1976,$p.$179F180).$That$is,$the$ content$of$each$exchanger$preferences$needs$to$be$transparent$to$the$other.$Further,$he$ adds$that,$once$these$inverse$valuations$of$goods$are$mutually$known,$an$exchange$may$ occur$ "by$ mere$ agreement"$ of$ the$ parties$ (1976,$ p.$ 179).$ Shared$ knowledge$ and$ agreement$ may$ be$ thought$ to$ readily$ account$ for$ our$ three$ missing$ points.$ (1)$ The$ reason$ why$ Julie$ transfers$ her$ bike$ to$ Paul$ is$ that$ Paul$ has$ agreed$ to$ reciprocate$ by$ transferring$his$money$to$Julie.$And$both$reach$these$agreements$in$virtue$of$knowing$ the$preferences$of$each$other.$(2)$The$quid(pro(quo$of$exchange$is$also$explained.$Julie$ transfers$ her$ bike$ against$ Paul's$ money$ because$ this$ is$ what$ she$ and$ Paul$ mutually$ agreed$ to$ be$ bound$ to.$ (3)$ Finally,$ the$ claims$ and$ obligations$ that$ arise$ and$ vanish$ through$an$exchange$are$simply$ the$claims$and$obligations$ that$would$have$remained$ unresolved$had$the$agreement$not$been$respected$by$one$party.$ However,$supplementing$the$STE$with$shared(knowledge$and$agreement$in$this$way$ is$problematic$for$three$reasons.$ First,$ shared$ knowledge$ of$ each$ other's$ valuations$ of$ the$ goods$ at$ stake$ is$ quite$ demanding:$ for$ exchanges$ to$ take$place,$ each$party$would$have$ to$have$knowledge$of$ the$private,$ subjective$preferences$of$ the$other.$But,$as$Anderson$ (1993,$p.$ 146)$ rightly$ observes,$ "Commodities$are$exchanged$without$ regard$ for$ the$ reasons$people$have$ for$ wanting$them".$Accordingly,$on$the$more$parsimonious$theory$we$shall$advance$in$the$ next$section,$the$motivational$gap$is$filled$without$requiring$any$exchanger$to$be$aware$ of$the$other's$preferences.$ Second,$ as$ we$ stressed$ above,$ and$ as$ agreed$ by$Menger,$ the$ STE$ is$meant$ to$ be$ compatible$ with$ methodological$ individualism.$ But$ it$ is$ controversial$ whether$ agreements$ are$ compatible.$ While$ agreements$ are$ often$ construed$ as$ exchanges$ of$ promises$ -which$ are$ individual$ acts-,$ Margaret$ Gilbert$ (1993)$ has$ argued$ that$ no$ exchange$ of$ promises$ can$ give$ rise$ to$ the$ sort$ of$ simultaneous$ and$ interdependent$ obligations$that$characterize$agreements.$Joint$commitments$lie$according$to$her$at$the$ heart$ of$ agreements.$ If$ she$ is$ right,$ then$ plugging$ in$ agreement$ in$ the$ analysis$ of$ exchanges$ is$ incompatible$ with$ methodological$ individualism.$ The$ action$ theory$ of$ exchanges$ we$ shall$ propose$ below,$ by$ eschewing$ talk$ of$ agreements,$ avoids$ that$ potential$incompatibility$with$methodological$individualism.$ Third,$as$Gilbert$rightly$urges,$an$agreement$between$two$individuals$amounts$to$an$ exchange$of$promises$which$generates$two$obligations,$one$for$each$individual.$But,$in$ most$exchanges,$only$one$individual$incurs$an$obligation$-as$we$shall$see,$the$offeror.$ The$offeree,$on$his$side,$incurs$usually$none$(more$on$acceptance$below).$Intending$to$ ! 14! pay$ the$amount$ indicated$ in$ the$price$ tag$ (which$ is$an$offer)$does$not$commit$one$ to$ anything.$Hence$appealing$to$agreement$in$an$account$of$exchanges$not$only$threatens$ methodological$individualism,$it$generates$too$many$obligations$and$correlative$claims.$ In$sum,$the$STE$stands$in$need$of$completion$in$at$least$three$respects$and$the$main$ extant$proposal$for$completing$it$proves$unsatisfying.$$ $ 3.!The!Restrictedness!of!the!Standard!Theory!! Our$ second$objection$ against$ the$ STE$ is$more$damaging:$ the$ STE$ fails$ to$ provide$ necessary$ conditions$ for$ exchanges.$ Many$ exchanges,$ we$ shall$ now$ argue,$ involve$ neither$mutual$transfers,$nor$inverse$preferences.$So$the$STE$is$at$best$true$of$only$some$ exchanges.$One$of$the$main$problems$for$the$STE,$we$shall$now$argue,$are$exchanges$of$ services.$$ The$STE$focuses$on$exchanges$of$goods.$As$we$saw,$to$explain$exchanges$of$services$ its$ upholders$ stress$ that$ "goods",$ or$ "commodities",$ encompasses$more$ than$material$ goods:$"goods"$also$encompasses$intangible(goods,$of$which(services$are$allegedly$a$subF species.$ We$ agree$ that$ there$ are$ intangible$ goods$ and$ that$ intangible$ goods$ can$ be$ exchanged:$pieces$of$music,$ theories,$ the$blueprint$ for$a$new$car,$computer$programs,$ etc.$are$instances$thereof.7$We$submit$that$rights$(rights$to$use$a$good,$financial$claims$ ensuing$ from$ debts...)$ are$ another$ central$ case$ of$ nonFtangible$ goods$ which$ can$ be$ exchanged.$Julie$can$rent$her$bike$to$Paul$for$an$hour,$that$is,$exchange$her$right$to$use$ her$ bike$ during$ that$ hour$ against$ some$money.$Money$ is$ perhaps$ itself$ an$ intangible$ good$ (Smith$ 2003,$ p.$ 285F309).$We$ disagree,$ however,$with$ the$ idea$ that$ services$ are$ intangible$goods.$That$"services$are$not$ intangibles"$has$been$forcefully$argued$by$Hill$ (1976,$ 1999).$ In$what$ follows$we$ shall$ argue$ that$ this$ is$ especially$ true$ in$ the$ case$ of$ exchanges$ of$ services:$ services( cannot( be( transferred,( and( their( exchanges( cannot( be( motivated(by(inverse(objectEpreferences.$ 3.1.!Exchanges!without!transfers! Consider$ first$ transfers.$ The$ act$ of$ transferring$ something$ is$ an$ episode$ involving$ three$ participants:$ the$ transferer,$ the$ transferee,$ and$ the$ thing$ transferred.$A$ transfer$ unfolds$ in$ such$ a$ way$ that$ at$ the$ beginning$ the$ transferer$ has$ the$ thing$ and$ the$ transferee$ does$ not$ have$ it,$ whereas$ at$ the$ end$ the$ transferee$ has$ the$ thing$ and$ the$ transferer$doesn't:$ Transfer:!x$is$transferred$from$y$to$z$between$t0$and$t1$iff$at$t0$x$exclusively$belongs$ to$y$and$at$t1$x$exclusively$belongs$to$z.$$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 7$These$examples$are$taken$from$Hill$(1999).$ ! 15! An$ electron$ can$ thus$ be$ transferred$ from$ one$ atom$ to$ another.$ In$ the$ case$ of$ economic$exchanges,$the$transfers$at$stake$must$be$voluntary,$and$the$"belonging"$must$ be$ of$ the$ economically$ relevant$ kind,$ which$ we$ will$ assume$ here$ is$ ownership8.$ This$ definition$ of$ transfers$ puts$ two$ constraints$ on$ the$ kinds$ of$ entities$ that$ can$ be$ transferred:$ (i)$ transferable$ entities$must$ be$ liable$ to$ enter$ into$ exclusive$ belonging$ relations$ with$some$other$entities$(the$exchangers);$$ (ii)$ transferable$ entities$ must$ endure$ over$ time,$ at$ least$ during$ the$ transfer:$ the$ same$x$that$was$y's$at$t0$must$z's$at$t1.9$ $As$a$consequence,$if$exchanges$are$defined$in$terms$of$transfers,$as$the$STE$has$it,$ three$kinds$of$goods$cannot$be$exchanged:$$ (1)$episodic$goods$(services)$ (2)$nonEdepletable$goods$(e.g.$knowledge)$ (3)$unEowned(goods$(granted$rights).$$ Let$us$explain.$$ (1)$ Episodic( goods.$ Appealing$ to$ transfers$ in$ the$ definition$ of$ exchanges$ forbids$ exchanges$of$services.$The$reason$is$this:$only$endurants,$that$is,$entities$that$persist$over$ time$without$having$temporal$parts,$can$be$transferred.$Services,$typically,$either$do$not$ persist$over$time$(the$prescription$of$a$remedy,$the$delivery$of$ letter,$ the$opening$of$a$ bank$ account$ are$ instantaneous-which$ is$ not$ to$ say$ that$ it$ does$ not$ take$ time$ to$ achieve$ them,$ or$ that$ they$ lack$ longFstanding$ effects)$ or$ persist$ by$ having$ temporal$ parts$ (a$ violin$ lesson,$ a$massage,$ a$ lawyer's$ plea,$ visiting$ a$ cathedral).$ In$ both$ cases,$ services$ cannot$be$ transferred$because$ they$do$not$keep$ their$numerical$ identity$over$ time,$they$do$not$endure10.$$ Furthermore,$ services$ might$ be$ provided$ or$ rendered,$ but$ they$ cannot$ be$ had$ or$ owned,(as$goods$can.$If$Julie$sells$a$biking$lesson$to$Paul,$it$is$not$the$case$that$there$was$ a$biking$lesson$that$she$had$in$the$first$place$and$that$now$belongs$to$Paul.$$ (2)$NonEdepletable(goods.$The$second$restriction$imposed$by$the$appeal$to$transfers$ in$the$definition$of$exchanges$concerns$nonEdepletable$goods,$which$we$understand$as$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8$For$simplicity's$sake$we$ignore$the$important$distinction$between$possession$or$command,$understood$as$ the$capacity$to$use$one$thing,$and$ownership,$understood$as$the$source$of$property$rights$on$a$thing$(the$ robber$ of$ Julie's$ bike$ possesses$ it,$ but$ does$ not$ own$ it).$ What$ follows$ is$ fully$ compatible$ with$ the$ distinction,$ and$ could$ in$ fact$ be$ refined$ thanks$ to$ it,$ distinguishing$ between$ transferring$ the$ mere$ possession$of$a$good$(which$happens$for$instance$on$the$black$market),$the$mere$ownership$of$a$good,$or$ both.$The$possession/ownership$distinction$ is$ sharply$drawn$by$Reinach$ (1983).$See$Massin$ (2015)$ for$a$ presentation$and$defence$of$Reinach's$account.$ 9$The$ reasons$ why$ perdurant$ entities$ -entities$ such$ as$ lives,$ weddings$ or$ soccer$ games-$ cannot$ be$ transferred$partly$overlap$with$the$reason$why$they$can't$move:$see$Dretske$(1967).$ 10$For$similar$remarks$about$the$nonFtransferability$of$services,$see$Say$(1855,(book$I,$chap.$XIII)$and$Hill( (1976,$1999).$ ! 16! goods$such$that$their$being$owned$by$some$agent$do$not$decrease$the$amount$of$them$ available$ to$ other$ agents.$ Consequently,$ such$ goods$ might$ be$ transmitted$ to$ others$ without$losing$them.$If$Julie$shares$some$of$her$knowledge$to$Paul$in$exchange$for$some$ money,$ she$hasn't$ lost$any$of$her$knowledge$once$ the$exchange$has$ taken$place.$ Julie$ and$Paul$now$both$have$this$piece$of$knowledge$in$its$entirety11.$Likewise,$if$the$young$ Julie$gives$her$chickenpox$to$Paul$against$a$doll,$she$still$has$her$chickenpox$after$the$ exchange.$The$same$is$often$true$of$transmission$of$digital$data.$NonFdepletable$goods$ can$be$ transmitted$without$being$ lost.$But$ since$ transfers$ require$exclusive$belonging,$ the$STE$cannot$account$for$such$exchanges.$If$we$want$to$account$for$the$exchange$of$ nonFdepletable$ goods,$ we$ need$ a$ different$ relation$ to$ transferring$ in$ the$ third$ stage.$ Transmitting$is$a$good$candidate.$Transmission$is$also$a$threeFplaces$relation.$But,$while$ something$that$is$transferred$is$lost$by$the$transferer,$something$might$be$transmitted$ without$being$ lost$by$the$transmitter.$Compare$transmitting$some$piece$of$knowledge$ to$transferring$a$bike.$ (3)(UnEowned(goods.$Finally,$because$transferring$a$good$requires$owning$it$first,$the$ STE$ cannot$ accommodate$ cases$ of$ exchanges$ of$ unEowned( goods.$ To$ the$ extent$ that$ rights$are$owned$and$endure$over$time,$rights$can$be$transferred.$For$instance,$Julie$can$ transfer$ to$Paul$-either$ forever$or$ for$ some$ limited$ time-$the$ right$ to$use$her$bike.$ But,$as$urged$by$Reinach,$ transferring$a$ right$ is$not$ the$only$way$ to$confer$a$ right$on$ another$person:$one$might$also$grant$ that$ right$ to$a$person$ (Reinach$ 1983,$§6,$p.$68).$ Suppose$Julie$made$a$promise$to$Paul,$and$that,$for$whatever$reason,$she$asks$Paul$for$ the$right( to( revoke(her(promise.$Paul$might$grant$that$right$to$Julie.$But$that$granting,$ Reinach$urges$correctly,$ is$not$a$transfer,$ for$Paul$never$had$ the$right$to$revoke$Julie's$ promise$in$the$first$place$(only$the$promisor$might$have$such$a$right).$Thus,$the$right$to$ revoke$a$promise$ is$a$ right$ the$promisee$can$grant,$although$he$never$had$ it.$Besides,$ such$unFowned$ rights$clearly$can$be$exchanged.$Paul$might$grant$ to$ Julie$ the$ right$ to$ revoke$ her$ promise$ in$ exchange$ for$ Julie's( bike.$ Here$ again,$ we$ have$ an$ exchange$ without$any$mutual$transfers.$ Summing$up:$the$STE$only$accounts$for$exchanges$of$enduring$entities$that$can$be$ owned.$It$could$be$replied$that$we$have$been$attributing$too$strict$a$notion$of$transfer$to$ the$STE.$Perhaps$the$STE$can$relax$the$concept$of$transfer$it$appeals$to,$so$that$it$would$ encompass$transfers$in$the$strict$sense$(for$goods),$provisions$(for$services,$e.g.$playing$ the$ piano12),$ transmissions$ (for$ nonFdepletable$ goods,$ e.g.$ knowledge),$ and$ grantings$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11 $What$ economists$ call$ nonFdepletable$ goods$display$ some$ analogies$ with$ universals,$ i.e.$ repeatable$ entities:$nonFdepletable$goods$(e.g.$a$piece$of$knowledge,$a$broadcast,$a$software)$can$be$wholly( had$by$ several$ individuals$ all$ at$ once.$NonFdepletable$ goods$ are$ also$ nonFrival$ goods,$ i.e.$ they$ can$ be$used$ by$ more$than$one$person$at$a$time.$However,$they$are$not$equivalent$to$nonFexcludable$goods$(goods$that$it$ is$ not$ possible$ to$ exclude$ people$ from$using):$ streets$ and$ sidewalks$ are$ nonFexcludable$ but$ depletable$ goods.$ 12$We$here$conform,$for$the$sake$of$the$argument,$to$the$economic$jargon,$which$has$it$that$services$are$ provided.$In$fact,$we$have$doubts$that$the$term$is$adequate.$To$provide$something$to$someone$is$to$make$ ! 17! (for$unFowned$goods,$e.g.$right$to$waive$a$promise).$But$it$is,$first,$prima(facie$far$from$ obvious$ that$ there$ exists$ a$natural,$nonFdisjunctive$kind,$which$ subsumes$ transfers$ in$ the$strict$ sense,$ transmissions,$provisions,$grantings,$and$plausibly$other$cases.$At$any$ rate,$it$seems$fair$to$say$that$at$this$point$it$is$up$to$the$STE's$upholder$to$tell$us$more$ about$ this$ broad$ kind.$ And,$ second,$ even$ if$ such$ a$ kind$ could$ be$ characterised,$ one$ would$ still$ need$ to$ show$ that$ it$ fits$ the$ other$ features$ of$ the$ STE.$ For$ suppose$ that$ transmitting$knowledge$is$now$considered$as$a$kind$of$transfer.$Is$ it$at$all$plausible$to$ say$ that,$ when$ Julie$ shares$ her$ knowledge$ of$ deontic$ logic$ with$ Paul$ against$ some$ money,$ she$values$her$knowledge$ less$ than$ she$values$Paul's$money?$Or$ suppose$ that$ rendering$a$ service$ is$ considered$as$a$kind$of$ transfer.$ Is$ it$ at$ all$plausible$ to$ say$ that$ when$ Julie$sells$a$biking$ lesson$to$Paul$she$prefers$Paul's$money$to$her$biking$ lesson?$ Widening$ the$ concept$ of$ transfer$ beyond$ the$ clear$ cases$ of$ material$ and$ immaterial$ goods$ changing$hands$not$ only$ leads$ to$ a$ gerrymandered$ concept$ of$ transfers;$ it$ also$ violates$ the$ letter$ of$ the$ STE,$which$ appeals$ to$ inverse$ valuations,$ as$well$ as$ its$ spirit$ which$ is$driven$by$ the$ idea$ that$ economics$ is$ about$ allocating$goods,$ conceived$of$ as$ scarce$resources.$$ 3.2!Exchanges!without!inverse!objectGvaluations$ In$the$same$way$that$there$are$exchanges$that$do$not$involve$mutual$transfers,$there$ are$exchanges$which$do$not$involve$any$inverse$preferences.$ Exchanges$made$simply$for$pleasure$constitute$a$first$kind$of$counterexample.$Such$ exchanges$are$often$dismissed$out$of$hand$by$upholders$of$the$STE,$who$consider$them$ rare$borderline$cases$not$worth$spending$too$much$time$on$(Menger$1976,$p.$176,$BöhmF Bawerk$ 1891,(p.$ 190F194).$Upholders$of$ the$STE$are$ right$ that$most$ exchanges$are$ "not$ made$ simply$ for$ amusement",$ in$ BöhmFBawerk's$ terms$ (1891,$ book$ 4,$ chap.$ 1).$ But$ as$ long$ as$ some$ exchanges$ are$ pleasurable,$ however$ rare$ they$may$ be,$ a$ good$ theory$ of$ exchange$ should$ accommodate$ them.$ The$ STE$ fails$ to$ account$ for$ such$ exchange$ for$ two$reasons.$First,$the$preferences$involved$in$exchanges$made$for$amusement$are$not$ directed$ at$ goods,$ but$ at$ the$ action$of$ transferring$goods.$ Second,$when$ two$ children$ exchange$ two$ toys$ back$ and$ forth,$ their$ preferences$ are$ not$ opposite$ but$ convergent:$ both$prefer$transferring$toys$mutually$over$not$transferring$toys$mutually.$ But$ the$most$ important$ class$ of$ counterexamples$ to$ the$ claim$ that$ exchanges$ are$ motivated$ by$ inverse$ preferences$ about$ the$ exchangeables$ are,$ again,$ exchanges$ of$ services.$Suppose$ Julie$explains$modal$ logic$ to$Paul$ in$exchange$ for$Paul's$playing$ the$ violin$to$her.$Should$we$say,$as$entailed$by$the$STE,$that$Julie$values$Paul's$playing$the$ violin$to$her$more$than$she$values$explaining$modal$logic$to$him?$And$that,$on$the$other$ hand,$Paul$ prefers$ Julie's$ explaining$modal$ logic$ to$him$ to$playing$ the$ violin$ to$ Julie?$ That$sounds$very$weird.$If$anything,$Paul$and$Julie$have$converging$preferences:$both$of$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! it$ available$ to$ him,$ but$ when$ one$ repairs$ someone's$ bike,$ it$ is$ unclear$ that$ one$ makes$ a$ reparation$ available$to$him.$Instead$of$being$provided,$services$are$rather$simply$done.$$ ! 18! them$prefer$a$situation$where$Julie$explains$modal$logic$to$Paul$and$Paul$plays$the$violin$ to$ Julie$ to$ a$ situation$ where$ none$ of$ these$ two$ events$ happens.$ Such$ preferences$ or$ valuations$are$clearly$not$opposite$but$convergent$(more$on$this$below).$ The$point$ is$ perhaps$ even$more$obvious$ in$ the$ case$of$mixed$ exchanges,$where$ a$ good$is$exchanged$against$a$service.$Suppose$Julie$transfers$her$bike$to$Paul$in$exchange$ for$Paul's$playing$the$violin$to$her.$One$might,$perhaps,$make$sense$of$the$idea$that$Julie$ prefers$Paul's$playing$the$violin$to$her$bike.$But$it$would$be$quite$contrived$to$say$that$ Paul$prefers$Julie's$bike$to$his$playing$the$violin$for$her.$$ The$intuition$of$opposite$valuations$works$well$for$goods,$but$vanishes$once$services$ are$ taken$ into$ consideration.$This$ is$not$ to$ say,$nor$ to$ imply,$ that$no$preference$ is$ at$ stake$here,$nor$ that$ the$ idea$of$ exchanges$being$mutually$beneficial$ is$misguided.$On$ the$contrary,$we$shall$argue$that$all$exchanges$ involve$valuations,$preferences$-albeit$ convergent$ones-$in$virtue$of$which$they$are$mutually$beneficial$(not$only$ex(ante,$but$ also$ ex( post).$ Our$ point$ has$ only$ been$ that$ neither$ mutual$ transfers$ nor$ inverse$ preferences$hold$true$in$the$case$of$exchanges$of$services13.$$ This$ confirms$ that,$ as$ argued$ by$Hill,$ it$ is$ a$ bad$mistake$ to$ equate$ services$ with$ intangible$ goods.$ The$ STE$has$ no$ problem$dealing$with$ exchanges$ of$ such$ intangible$ goods$(suppose$Julie$exchanges$her$right$to$use$her$bike$against$Paul's$right$to$attend$a$ concert:$we've$got$mutual$transfers$of$rights$and$inverse$preferences$about$these$rights).$ But$the$STE$cannot$deal$with$exchanges$of$services.$The$more$it$treats$services$as$goods$ -that$is,$as$objects$which$one$refers$to,$which$can$be$owned,$transferred,$and$towards$ which$we$entertain$objectual$attitudes-$the$more$it$is$led$to$absurd$conclusions$of$the$ above$kind.$While$there$are$clearly$ intangible$goods$(transferable$rights,$ for$ instance),$ the$ distinction$ between$ tangible$ and$ intangible$ goods$ does$ not$ dichotomize$ exchangeables.$ This$ is$ the$ reason$why,$ in$ order$ to$ capture$ exchanges$ of$ services,$ the$ theory$of$exchange$needs$to$accept$exchangeables$which$are$not$goods.$ Services,$we$submit,$do$not$belong$to$the$category$of$objects,$but$to$the$category$of$ actions.$A( service( is( something( one( does( for( somebody,( not( something( one( transfers( to( somebody.$ Bracketing$ vexing$ issues,$ actions$ are$ not$ primarily$ referred$ to:$ they$ are$ basically$ expressed$ through$ verbs$ and$ propositions,$ not$ names.$ Correspondingly,$ our$ attitudes$towards$actions$are$typically$propositional,$not$objectual.$Not:$preferring$x$to$ y;$but:$preferring$to$φ$rather$than$to$ψ.$Not:$liking$x$more$than$one$likes$y;$but:$liking$to$ φ$ better$ than$ liking$ to$ ψ.$ Actions$ cannot$ be$ owned$ in$ the$ strict$ sense,$ they$ do$ not$ endure$over$time,$and$therefore$cannot$be$transferred.$Yet$they$can$be$exchanged.$They$ are$even,$as$we$shall$now$argue,$the$most$fundamental$exchangeables.! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 13$Note$ that$ although$ we$ have$ been$ relying$ on$ very$ simple$ examples,$ the$ problems$ we$ raised$ generalize$ to$ more$ complex$ cases$ of$ services,$ such$ as$ financial$ services$ (investment$ management,$ processing$of$credit$cards$transactions,$reinsurance,$etc.)$or$ legal$services.$In$all$cases$where$a$service$is$ bought,$ some$money$ is$ transferred$ to$ its$ provider$ in$ exchange$ for$ him$ doing$ something$ (managing$ a$ portfolio,$processing$transactions,$etc.).$ ! 19! 4.!The!Action!Theory!of!Exchanges! In$order$ to$ avoid$ the$problems$ faced$by$ the$STE,$we$proceed$as$ follows.$To$get$ a$ complete$theory$of$exchange,$we$introduce$offer(and$acceptance.$To$get$an$unrestricted$ theory$of$exchange,$able$to$account$for$exchanges$of$services,$we$argue$that$even$in$the$ case$ where$ goods$ are$ exchanged,$ what( is( immediately( exchanged( are( actions.$ One$ consequence$ of$ focussing$ on$ actions$ rather$ than$ goods$ is$ that$ the$ motivating$ preferences$are$convergent$rather$than$inverse.$ The$ view$ that$ actions$ are$ the$ target$ of$ exchanges$ is$ not$ unprecedented.$ It$ was$ endorsed$ by$ Frederic$ Bastiat,$ who$ insisted$ that$ all$ exchanges$ (which$ are$ for$ him$ the$ fundamental$ social$ phenomena)$ are$ fundamentally$ exchanges$ of$ services:$ "every$ transaction$can$be$reduced$to$a$bartering$of$services"$(1851,$p.$106,$see$also,$p.$31F33,$63,$ 74F75,$115).$Unfortunately,$perhaps$because$Bastiat$combined$his$approach$to$exchanges$ with$ a$ disputable$ theory$ of$ economic$ value 14 ,$ his$ proposal$ has$ remained$ widely$ neglected.$ One$ exception$ is$ his$ American$ disciple$ Arthur$ Latham$ Perry,$ who$ builds$ upon$Bastiat's$ proposal$ to$ develop$ a$ plausible$ threefold$ classification$ of$ exchangeable$ entities$ (commodities,$ claims$ and$ services),$ arguing$ that$ the$ latter$ are$ the$most$basic$ (Perry,$1978,$p.$84F87).$$ The$ action$ theory$ of$ exchange$ we$ shall$ now$ propose$ takes$ up$ Bastiat's$ central$ proposal:$what$we$basically$ exchange$ are$not$ goods$ (which$ fall$ under$ the$ category$of$ objects)$but$services$(which,$as$ just$argued,$ fall$under$the$category$of$actions).$This$ is$ the$ first$ respect$ in$which$our$theory$departs$ from$the$STE.$The$second$respect$ is$ that$ the$action$theory$introduces$social(acts,$namely$offers$and$acceptances,$at$the$heart$of$ exchanges.$ Let$ us$ introduce$ this$ action$ theory$ by$ looking$ at$ how$ it$ deals$ with$ our$ earlier$ example$of$exchange$of$services:$Julie(explains(modal(logic(to(Paul(in(exchange(for(Paul's( playing(the(violin(to(her(iff:(( (1)$Julie$prefers$[to$explain$modal$logic$to$Paul$and$that$Paul$plays$the$violin$to$her]$ rather$ than$ that$none$of$ these$actions$ take$place.$Paul$has$a$preference$with$basically$ the$ same$ content:$ he$prefers$ [to$ play$ the$ violin$ to$ Julie$ and$ that$ Julie$ explains$modal$ logic$to$him]$rather$than$none$these$actions$take$place.$ Furthermore,$ Julie$believes$ that$making$an$offer$to$Paul$ is$a$way$for$her$to$get$Paul$to$ play$the$violin$to$her.$$ (2)$Because$of$her$preference$and$her$belief,$Julie$makes$the$following$offer$to$Paul:$ "I$promise$you$that$if$you$play$the$violin$to$me,$I$will$explain$modal$logic$to$you."$$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 14$Although$he$ sometimes$ denies$ it,$ Bastiat's$ theory$ of$ value$ is$ a$ version$ of$ the$ labour$ theory$ of$ value.$ Bastiat$defines$services$as$efforts(made$to$satisfy$the$wants$of$others$(Bastiat$1850,$p.$32),$and$argues$that$ the$value$of$a$service$resides$in$the$amount$of$effort$spared$to$the$person$to$which$it$is$rendered$rather$ than$the$amount$of$effort$the$service$requires$(p.$111).$$ ! 20! (3)$Because$of$his$preference,$Paul$accepts$ Julie's$offer$and$plays$ the$violin$ to$her.$ Julie$now$incurs,$in$virtue$of$her$promise,$the$unconditional$obligation$to$explain$modal$ logic$to$Paul,$which$she$does,$thereby$settling$the$exchange.$ The$action$theory$of$exchange$is$a$generalisation$of$this$story:$ $ Action! theory! of! exchanges! (ATE):$ Individuals$ A$ and$ B( respectively$ φ$ and$ ψ$ in( exchange$=df$ (1)$Preferences(and(belief:$$ (1.1)$A$prefers$[to$φ$and$that(B$ψFs]$rather$than$[not$to$φ$and$that$B$does$not$ψ]$ (1.2)$B$prefers$[to$ψ$and$that$A$φFs]$rather$than$[not$to$ψ$and$that$A$does$not$φ]15$ (1.3)$A$believes$that$[promising$to$φ$to$B$on$the$condition$that$B$ψFs]$is$a$way$for$ him$to$make$B$ψ.$ (2)$Offer(&(acceptance:$$ (2.1)$The(offer:$Because$of$(1.1)$&$(1.3),$A$promises$to$B$that$he$will$φ,$if$B$ψFs.$$ (2.2)$The(acceptance:$Because$of$(1.2),$B$accepts$the$offer.$$ (3)(Provisions:$ (3.1)$First(provision.$Because$of$(2.2),$B$ψFs.$As$a$result,$A$incurs$the$obligation$to$φ.$ (3.2)$Second(provision.$Because$of$(2.1.)$and$(3.1.),$A$φFs.$ Or!the!reverse:$(1.3'):$B$believes$that$promising$to$ψ$to$A$on$the$condition$that$A$φFs$ is$a$way$for$him$to$make$A(φ;$hence:$(2.1')$B$promises$to$A$that$he$will$ψ,$if$A(φ$–s;$ (2.2')$A$accepts$B's$offer;$(3.1'):$A(φ$–s;$(3.2')$B$ψFs.$ Let$us$comment$on$and$motivate$these$conditions$in$turn.$ $ 4.1!Preferences!and!beliefs! The$first$stage$only$involves$each$party's$private$mental$states:$each$has$a$preference$ of$a$given$sort,$and$at$least$one$of$them$has$a$belief$on$how$to$satisfy$that$preference.$$ With$respect$to$the$preferences((1.1)$&$(1.2.),$four$comments$are$called$for.$$ First,$ under$ the$ ATE,$ the$ preferences$ essential$ to$ exchanges$ are$ directed$ at$ the$ actions16$of$the$exchangers$(transferring$the$bike/the$money),$rather$than$at$their$goods$ (the$bike,$the$money).$The$first$reason$in$favour$of$this$move,$as$we$saw,$is$that$it$paves$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 15$This$does$not$reflect$the$whole$ordering$of$A$and$B's$preferences,$see$below.$ 16$What$ is$ exchanged$ may$ not$ be$ an$ action,$ strictly$ speaking,$ but$ its$ forbearance.$ A$ case$ in$ point,$ described$by$Nozick$(1974,$p.$84F85),$is$the$offer$to$pay$a$neighbour$for$not$going$on$with$his$plan$to$erect$ an$ugly$building$in$his$garden,$ ! 21! the$way$for$a$unified$account$of$the$exchanges$of$goods$and(services.$A$second$reason$in$ favour$ of$ this$ focus$ on$ actions$ is$ that$ it$ connects$ preferences$ more$ tightly$ with$ the$ content$of$offers$and$acceptances,$and$that$of$provisions:$the(very(same(actions(that(are( preferred(in(the(first(step(are(promised(in(the(second(step(and(performed(in(the(third(step.$ In$the$STE$by$contrast,$there$was$a$motivational$gap$between$preferences$and$transfers.$ No$such$gap$impairs$the$ATE.$ Second,$ it$ should$ be$ noted$ that$ the$ preferences$ appealed$ to$ in$ the$ ATE$ do$ not$ represent$ the$ whole$ of$ A$ and$ B's$ preferences$ with$ respect$ to$ the$ actions$ at$ stake.$ Typically,$ each$ exchanger$ prefers$ most$ to$ get$ what$ he$ wants$ without$ having$ to$ give$ anything,$ and$ prefers$ least$ not$ to$ get$ what$ he$ wants$ while$ nevertheless$ giving$ something.$Thus$the$whole$ordering$of$A$and$B's$preferences$will$typically$be:$ • A's$preferences:$[A$does$not$φ$and$B$ψFs]$≻$[A!φAs!and!B!ψAs]!≻![A!does!not!φ! and!B!does!not!ψ]!≻![A$φFs$and$B$does$not$ψ]$$ • B's$preferences:$[A$φFs$and$B$does$not$ψ]$≻$[A!φAs!and!B!ψAs]!≻![A!does!not!φ! and!B!does!not!ψ]!≻![A$does$not$φ$and$B$ψFs]$$ When$we$say$that$A$and$B's$preferences$are$convergent$we$only$mean$the$preferences$ that$ are$ here$ in$ bold.$ It$ is$ not$ the$whole$ sets$ of$ the$ exchangers'$ preferences$ that$ are$ convergent,$but$only$the$subFsets$of$those$that$motivate$the$exchange.$ Third,$ why$ not$ use$ "that$ clauses"$ all$ over$ instead$ of$ that$ mixture$ of$ infinitive$ complements$and$thatFclauses?$That$is,$why$not$say:$$ • A$prefers$(that$A$φFs$and$that$B$ψFs)$rather$than$(that$A(does$not$φ$and$that(B$ does$not$ψ)$( • B$prefers$(that$B$ψFs$and$that$A$φFs)$rather$than$(that$B$does$not$ψ$and$that$A$ does$not$φ).( Our$main$reason$ for$not$ retaining$ this$ simpler$phrasing$ is$ that$one$of$ the$actions$ that$each$party$prefers$is$an$action$that$he$identifies$as$an$action$of(himself,$which$the$ thatFformulation$above$ fails$ to$capture.$Applying$ J.$Perry$ (1979)'s$problem$of$essential$ indexicals$to$preferences,$A$might$prefer$that$A$φFs,$without$realising$that$he$is$A.$The$ problem$does$not$arise$with$"A$prefers$to$φ".$This$issue$will$presumably$often$be$ignored$ for$ formalisation's$ sake:$ going$ for$ thatFclauses$ all$ over$ is$ far$ simpler.$However$ such$ a$ simplification,$we$want$to$stress,$is$not$part$of$the$theory$of$exchange$itself.$ Fourth,$one$complication$that$our$proposal$does$not$take$into$account$as$it$stands$is$ that$in$many$(plausibly$most)$cases$of$exchange,$the$contents$of$the$preferences,$as$well$ as$ the$ contents$ of$ the$ offers,$ should$ be$ expressed$ by$ general$ instead$ of$ singular$ propositions.$The$preferences$will$often$be$of$the$form:$$ • A$prefers$(that$he$does$φ$and$that$someone$does$ψ)$rather$than$(that$he$does$not$ φ$and$that$nobody$does$ψ)( • B$prefers$(that$he$does$ψ$and$that$someone$does!φ)$to$(that$he$does$not$ψ$and$ that$nobody(does$φ)$ ! 22! How$to$plugFin$generalized$preferences$in$the$ATE$is$a$question$we$here$leave$open.$ Finally,$ one$ chief$ point$ with$ respect$ to$ preferences$ motivating$ exchanges$ is$ that$ under$ the$ATE$ these$ preferences$ are$ convergent$ rather$ than$ inverse$ (as$ per$ the$ STE),$ which$means$that$exchangers(exchange(because(they(both(value(the(same(course(of(action( against(the(same(alternative(course(of((in)action.$$ (1.3)$The(belief.$We$now$have$two$agents$with$weakly$converging$preferences:$there$ is$ a$ course$of$ action$which$both$prefer$ to$alternative$ones.$ In$our$example,$both$ Julie$ and$Paul$prefer$the$course$of$action$in$which$Julie$explains$modal$logic$to$Paul$and$Paul$ plays$ the$violin$ to$ Julie.$How$do$we$move$ from$ these$ converging$preferences$ towards$ the$ exchange?$Although$ the$preferences$of$ the$parties$ are$private,$ their$ expression$or$ disclosure$ is$not$required$ in$order$ for$ Julie$and$Paul$to$move$on$to$the$next$stage.$All$ that$ is$needed$ to$go$ further,$we$ submit,$ is$ an$offer$ from$one$of$ them$to$ the$other.$ In$ order$to$make$such$an$offer,$one$party$must$have,$on$top$of$his$preference,$a$belief.( In$ order$to$make$an$offer$to$Paul,$Julie$must$believe$that$making$such$an$offer$is$likely$to$ bring$her$the$money$transfer$she$wants.$If,$on$top$of$her$preference,$Julie$believes$that$ offering$to$explain$modal$logic$to$Paul$if$he$plays$the$violin$to$her$is$a$way$to$get$Paul$to$ play$the$violin,$she$may$well$proceed$with$making$this$offer( (Paul$might$not$have$any$ belief$of$the$sort).$$ Although$ Julie's$ instrumental$ belief$ might$ stem$ from$ some$ beliefs$ or$ guesses$ regarding$the$other$party's$own$preferences,$they$do$not$have$to.$Julie's$belief$that$Paul$ might$accept$her$offer$ is$often$ justified$by$her$attributing$to$Paul$some$preference$ for$ her$explaining$modal$logic$to$him.$But$there$is$no$necessity$to$speculate$about$the$other$ agent's$ preferences$ in$ order$ to$ rationally$make$ an$ offer$ to$ him.$ Surely,$ Julie$ needs$ to$ believe$that$her$offer$has$a$chance$of$being$accepted$by$Paul$in$order$to$make$it$to$him.$ But$ she$does$not$need$ to$believe$ that$he$prefers$her$explaining$modal$ logic$ to$him$ in$ order$ to$offer$ to$explain$modal$ logic$ to$him$ in$exchange$ for$him$playing$ the$violin$ to$ her.$This$ is$because$she$does$not$need$to$know$what$might$prompt$him$to$accept$her$ offer$ in$ order$ to$ make$ such$ an$ offer.$ An$ economic$ agent$ conditioned$ purely$ behaviourally,$ lacking$ any$ theory$ of$ mind,$ could$ still$ rationally$ proceed$ to$ make$ an$ offer.$"Making$some$kind$of$offers$happens$to$get$me$what$I$want.$I$have$no$clue$about$ why$this$is$so,$but$this$works".$$ Besides,$ even$when$ Julie's$offer$ is$motivated$by$her$ ascribing$ some$preferences$ to$ Paul,$Paul's$acceptance$will$often$remain$blind$to$Julie's$own$preferences:$typically,$only$ the$ offer$ will$ matter$ to$ him,$ regardless$ of$ its$ underlying$ motivation.$ So$ neither$ exchanger$needs$ to$ inquire$about$ the$other's$preferences$ in$order$ for$ the$exchange$ to$ take$place.$ 4.2!Offer!&!acceptance$ ! 23! (2.1)$ Following$ Kent$ Bach$ (1995) 17 ,$ we$ assume$ that$ offers$ are$ promises$ with$ conditional$ content.$ There$ is$ a$ distinction$ between$ unconditional( promises( with( conditional( content$ (I$promise$that$ if$p,$ I$φ),$and$conditional( promises$ (If$p,$ I$promise$ that$ I$ φ)18.$ Offers$ are$ of$ the$ former$ kind:$ promises( with( a( conditional( content.$ Julie$ promises$to$Paul$to$transfer$the$ownership$of$her$bike$to$him$if$he$transfers$to$her$the$ ownership$of$some$amount$of$money.$Because$of$this$offer,$Julie$incurs$an$obligation$to$ transfer$her$bike$to$Paul$if(he(pays(her.$Julie's$offer$may$be$that$she$promises$to$transfer$ her$bike$to$Paul$if$he$pays$her(now.(But$she$may$alternatively$offer$Paul$the$possibility$to$ pay$later.$In$such$a$case,$Julie$promises$to$transfer$the$bike$to$Paul$now,$if(Paul(promises( now(to(pay(her(later.$In$that$case,$the$action$that$is$exchanged$against$Julie's$transfer$of$ her$bike$is$Paul's$promise$to$pay$rather$than$Paul's$payment$itself.$ Following$Reinach's$(1983)$pioneering$and$all$too$neglected$work,$we$here$assume$ that$promises$have$at$least$the$two$following$essential$features:$$ 1) Promises$are$social(acts(in$the$sense$that$they$are$uttered$by$a$promisor,$and$have$to$ be$heard$and$understood$by$the$promisee.$$ 2) Promises$generate,$in$virtue$of$their$nature,$pro$tanto$obligations$on$the$promisor$to$ realize$their$content,$and$correlative$pro$tanto$claims$for$the$promisee.19$$ That$ is,$necessarily,$ in$ virtue$of$ the$nature$of$promises,$ if$A$ promises$ to$φ$ to$B,$ then$ (1)$ B$ heard$ and$ understood$ A's$ utterance$ (ii)$ as$ an$ immediate$ result$ of$ this$ promise,$A$incurs$the$obligation$to$φ$and$B$incurs$the$correlative$(same$content)$claim$ to$A's$ φFing.$ In$ the$ case$ of$ promises$ with$ conditional$ content,$ the$ obligation$ of$ the$ offeror$ and$ the$ related$ claim$of$ the$ offeree$ also$ arise$ at$ the$ very$moment$ the$ offer$ is$ made,$but$both$are$conditional:$ the$offeror$has$an$obligation$to$φ$ if( some( condition( is( met;$and$the$offeree$has$the$correlative$conditional$claim$to$the$offeree's$φFing.$Both$the$ obligation$and$the$claim$are$actual,$but$unactivated,$as$it$were,$waiting$for$the$fulfilment$ of$the$condition$in$order$to$become$unconditional.$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 17$Offers$are$sometimes$alternatively$defined$in$contract$law$in$terms$of$expression$of$intention$(Guenter,$ Treitel$2003,$p.$8).$We$believe$that$this$theory$of$offers$should$be$rejected$on$the$very$same$ground$as$the$ theory$according$to$which$promises$are$expressions$of$intentions,$namely,$that$expressions$of$intentions$ are$not$binding:$they$do$not$generate$claims$and$obligations$(Reinach$1983,$p.$27).$Promises$and$offers,$on$ the$other$hand,$are$binding.$ 18$The$distinction$is$drawn$independently$by$Reinach$(1983)$and$Gilbert$(1993)$whose$accounts$match$very$ closely$ on$ this$ point.$ Conditional$ promises$ (externally$ conditional$ promises$ in$ Gilbert's$ terms)$ raise$ difficult$ issues$ about$ the$ time$ at$ which$ the$ corresponding$ obligations$ arise.$ Additionally,$ one$ might$ suspect$ that$ conditional$ promises$ are$ either$ not$ promises$ (but$ expressions$ of$ intentions$ to$ promise$ if$ some$conditions$are$met)$or$that$they$are$secondForder$promises$with$conditional$content:$"If$p,$I$promise$ (to$φ)"$would$then$amount$to$"I$promise$that$(If$p,$I$will$promise$to$φ)".$ 19$These$ two$ features$ of$ promises$ are$ widely$ accepted,$ and,$ since$ Hume$ at$ least,$ most$ philosophical$ debates$about$promises$have$focussed$on$how$to$explain$the$second$feature:$how$do$promises$generate$ promissory$obligations?$Reinach$thought$of$ these$ two$ features$as$being$primitive$and$nonconventional;$ on$the$other$hand,$various$reductionist$or$conventionalist$accounts$of$promises$have$been$given$–see$for$ instance$Fried$1981;$Gilbert$1993,$2011;$Darwall$2011.$In$so$far$as$such$approaches$explain$the$two$features$ above,$any$one$of$these$can$be$plugged$into$the$ATE.! ! 24! One$ might$ object$ that$ many$ exchanges$ occur$ without$ any$ offers$ having$ been$ made.$ This$ however$ neglects$ the$ fact$ that$many$ offers$ remain$ implicit$ or$ tacit.$Price( tags,(for(instance,(constitute(one(ubiquitous(form(of(offer$(no$to$be$conflate$with$prices,$ which,$contrary$to$price$tags,$are$determined$by$the$exchanges$actually$taking$place).$ Another$ possible$ objection$ is$ that$ the$ preference$ of$ the$ offeree$ is$ often$ not$ fixed$ before$ the$ offer.$ Offers$ might$ prompt$ new$ preferences$ or$ change$ the$ preferences$ of$ offerees.$We$entirely$agree:$ it$could$be$ that$Paul$did$not$have$a$preference$ for$buying$ Julie's$ bike$ before$ receiving$ Julie's$ offer.$ Although$ the$ linear$ presentation$ we$ have$ adopted$might$suggest$the$contrary,$the$ATE,$we$wish$to$stress,$is$not$committed$to$the$ offeree's$preferences$being$fixed$before$the$offer.$All$that$ it$requires$ is$that$the$offeree$ accepts$the$offer$because(of$his$preference.$This$does$not$rule$out$the$possibility$that$the$ offer$elicited$the$offeree's$preference.$ (2.2)$Acceptance:$once$ Julie$makes$her$offer,$ the$ball$ is$ in$Paul's$ court.$ It's$up$ to$ him$to$accept$the$offer$or$not.$ In$the$present$context,$accepting$an$offer$ is$not$simply$ uptaking$it$(that$is,$hearing$it,$grasping$it),$nor$is$it$simply$expressing$one's$intention$to$ realize$the$condition.$There$are$two$possibilities:$ a) To$ accept$ an$ offer$ may$ consist$ in$ performing$ another$ social$ act,$ such$ as$ the( unconditional(promise(to(fulfil(the(condition(of(the(offer,$as$argued$by$Bach$(1995).$ To$accept$Julie's$offer$to$provide$him$with$the$bike$if$he$pays$her,$would$be$for$ Paul(to(promise(to(pay(her.$$ b) To$accept$an$offer$may$be$simply$voluntarily$ fulfilling( the( condition$ specified$ in$ its$ content.$Accepting$ an$offer$ conditional$ on$ a$payment$might$ just$be$ putting$ the$money$ on$ the$ table.$ In$ this$ case,$ the$ act$ of$ transferring$ counts$ as$ both$ an$ acceptance$of$the$offer$and$as$the$fulfilment$of$the$condition,$thus$activating$A's$ obligation$to$actually$fulfil$his$offer.$The$acceptance$(2.2)$and$the$first$provision$ (3.2.)$are$one$and$the$same.$$ We$suspect$that$the$last$answer$is$the$correct$one,$and$that$the$intuition$in$favour$ of$the$first$answer$stems$from$a$confusion$between$offers$conditioned$on$payment$and$ offers$conditioned$on$promises$of$payment.$These$ two$kinds$of$offers$give$ rise$ to$ two$ very$distinct$sorts$of$exchanges.$Suppose$Julie$promises$Paul$to$explain$modal$ logic$to$ him$ if$ Paul$ pays$ her$ a$ certain$ amount$ of$ money.$ The$ ensuing$ exchange$ will$ be$ an$ exchange$of$a$lesson$of$modal$logic$against$a(certain(amount(of(money.$Suppose,$on$the$ other$hand,$that$Julie$promises$to$Paul$to$explain$modal$logic$to$him$if$Paul$promises$to$ pay$a$certain$amount$of$money$to$her.$Such$an$exchange$will$typically$be$an$exchange$of$ a$lesson$of$modal$logic$against(a(claim(to(a(certain(amount(of(money((by$contrast$to$an$ exchange$against$a$certain$amount$of$money).$What$ Julie$has$earned$after$ the$second$ exchange$ is$ a$ financial$ claim$ (i.e.$ the$ right$ to$ receive$money$ latter)$ rather$ than$ some$ money.$ Such$ a$ claim$ does$ not$ need$ to$ be$met$ for$ the$ exchange$ to$ have$ taken$ place.$ Debts$ are$ exchanged$ in$ financial$markets,$ whether$ or$ not$ these$ debts$will$ be$ repaid.$ ! 25! Offers$ conditioned$ on$ transfers$ of$ goods$ are$ distinct$ from$ offers$ conditioned$ on$ promises$of$transfer$of$goods.$$ With$this$distinction$in$hand,$our$proposal$is$that$promises$constitute$acceptances$ only$ in$ the$ latter$ case,$ that$ is,$ the$ case$ of$ offers$ conditioned$ on$ promises.$ Not$ all$ acceptances$are$promises;$only$acceptance$of$offers$conditioned$on$promises$are.$Thus$ in$any$case,$accepting$an$offer$is$just$fulfilling$its$condition.$$ Still,$ one$ might$ object,$ isn't$ it$ perfectly$ fine$ for$ Paul$ to$ accept$ Julie's$ offer$ to$ explain$modal$logic$to$him$against$a$payment$just$by$promising$to$pay$her?$Admittedly,$ on$the$face$of$it,$it$is$quite$common$to$accept$offers$whose$conditions$cannot$be$fulfilled$ immediately$(such$as$important$payments)$by$promising$to$fulfil$these$conditions$later.$ But$such$cases,$we$submit,$should$not$be$taken$at$face$value.$The$reason$for$this$is$that,$ when$ Paul$ replies$ to$ Julie's$ offer$ by$ saying$ "I$ accept,$ I$ will$ pay$ you$ by$ tomorrow",$ it$ would$ perfectly$ correct$ for$ Julie$ to$ retort,$ without$ violating$ any$ of$ her$ promissory$ obligations,$ "No( credit( given,$ I$ want$ a$ payment,$ not$ a$ promise$ thereof".$Were$ Paul's$ promise$ to$ count$ as$ an$ acceptance,$ Julie$ would$ be$ refusing$ Paul's$ acceptance$ of$ her$ offer,$which$she$is$not$entitled$to$do$(the$best$she$can$do$is$to$revoke$her$promise$-to$ retract$ her$ offer-$ but$ for$ this,$ as$ we$ saw$ in$ §3.1.$ Paul$ has$ to$ grant$ her$ the$ right$ to$ revoke).$ What$ then,$ really$ happens$ in$ cases$ where$ offers$ conditioned$ on$ payments$ are$ seemingly$accepted$through$promises$of$payment?$At$least$two$readings$are$possible.$$ First,$it$might$be$that$the$offer$was$implicitly(conditioned$on(a(promise(of$payment,$ so$that$the$promise$is$indeed$an$acceptance$of$that$implicit$offer.$How$an$offer$explicitly$ conditioned$on$a$payment$may$actually$count$as$an$offer$conditioned$on$a$promise$of$ payment$ is,$ we$ surmise,$ easily$ explained$ through$ conversational$ implicatures.$ For$ instance,$ in$ cases$ where$ a$ large$ amount$ of$ money$ is$ in$ play$ it$ usually$ goes$ without$ saying$that$the$money$cannot$be$transferred$right$away.$ $Second,$if$the$initial$offer$was$fully$explicit$and$not$implicitly$conditioned$on$any$ promises$to$pay,$the$offeree's$promise$to$pay$might$constitute$a$counter(offer$instead$of$ an$acceptance.$ Julie's$offer$was$to$explain$modal$ logic$to$Paul$against$a$payment.$Paul$ does$not$accept$ that$offer,$but$ instead$makes$the$ following$counter$offer:$he$promises$ Julie$ that,$ if$ she$ explains$ modal$ logic$ to$ him,$ he$ will$ pay$ her.$ It$ is$ now$ up$ to$ Julie$ whether$to$accept$that$offer$or$not.$In$such$a$case,$some$other$intermediary$steps$would$ have$taken$place$between$the$first$offer$(2.1)$and$the$acceptance$of$the$final$offer$(2.2),$ namely,$ a$ negotiation.$ Admittedly,$ while$ exchanges$ often$ involve$ such$ turnarounds,$ these$are$not$essential$components$of$them.! 4.3!Provisions! (3.1)$Before$ the$ condition$ specified$ in$ Julie's$ offer$has$been$ fulfilled,$Paul's$ claim$ and$Julie's$related$obligation$remain$conditional,$unFactivated.$But,$once$Paul$has$played$ ! 26! the$ violin$ to$ Julie,$ his$ claim$ to$ Julie's$ logic$ lesson,$ together$ with$ Julie's$ obligation$ to$ provide$such$a$lesson,$become$fully$actual$and$unconditional.$ (3.2)$These$two$correlative$claims$and$obligations$are$met$and$disappear$once$Julie$ explains$modal$ logic$ to$Paul.$The$exchangers$are$ then$ finished:$once$an$exchange$has$ been$completed,$all$the$obligations$and$claims$which$arose$during$it$are$resolved.$The$ claims$and$obligations$generated$within$exchanges$are$transient.$ We$shall$now$argue$that$the$ATE$fares$better$than$the$STE.$ 5.!Exchange!of!goods!with!the!ATE! We$argued$ that$ the$STE,$because$ it$ is$ tailorFmade$ for$ exchanges$of$goods,$ cannot$ account$ for$ exchanges$ of$ services.$ Now$ our$ own$ ATE$ faces$ a$ symmetrical$ objection:$ since$it$ is$modelled$on$exchanges$of$services,$one$should$worry$that$ it$cannot$account$ for$exchanges$of$goods.$Given$the$central$role$that$good$exchanges$play$ in$economics,$ the$sheer$denial$of$their$possibility$would$clearly$be$a$reductio$of$the$ATE.$$ At$this$point$one$might$be$tempted$to$doubt$that$any$theory$of$exchange$will$be$in$a$ position$ to$ subsume$ exchanges$ of$ services$ and$ exchanges$ of$ goods$ under$ the$ same$ heading.$ Such$ a$ disjunctive$ line$ of$ thought$ naturally$ suggests$ itself$ once$we$ take$ the$ measure$ of$ the$ categorial$ distinction,$ emphasised$ above,$ between$ goods$ and$ services.$ Tempting$as$it,$this$disjunctive$approach$to$the$concept$of$exchange$should$however$be$ resisted$ for$ one$ simple$ reason:$ goods$ can$ be$ exchanged$ against$ services.$ There$must$ therefore$ be$ one$ overarching$ concept$ of$ exchange,$ which$ subsumes$ goodsFforFgoods,$ servicesFforFservices$ and$ servicesFforFgoods$ exchanges.$ This,$ we$ maintain,$ is$ the$ category$of$ exchanges$of$ actions,$ from$which$ the$ category$of$ goodsFexchanges$ can$be$ defined,$as$we$shall$now$argue.$ A$natural$way$to$fit$exchanges$of$goods$into$the$ATE$would$be$to(equate(exchanges( of(goods(with(exchanges(of(transfers(of(goods.$To$go$back$to$our$opening$example,$Julie$ sells$her$bike$to$Paul$iff:$ (1)$Julie$prefers$[to$transfer$the$ownership$of$her$bike$to$Paul$and$that$Paul$transfers$ the$ownership$of$his$money$to$her]$rather$than$that$none$of$these$transfers$happen.$Paul$ has$a$preference$with$basically$the$same$content:$he$prefers$that$[the$two$transfers$take$ place]$rather$than$not.$ $Furthermore,$Julie$believes$that$making$an$offer$to$Paul$is$a$way$to$get$Paul$transfer$ the$ownership$of$his$money$to$her.$$ (2)$ Because$ of$ her$ preference$ and$ of$ her$ belief,$ Julie$makes$ the$ following$offer$ to$ Paul:$ "I$ promise$ you$ that,$ if$ you$ transfer$ the$ ownership$ of$ your$money$ to$me,$ I$ will$ transfer$the$ownership$of$my$bike$to$you."$$ (3)$Because$of$his$preference,$Paul$accepts$Julie's$offer$and$transfers$the$ownership$ of$ his$ money$ to$ Julie.$ Julie$ now$ incurs,$ in$ virtue$ of$ her$ promise,$ the$ unconditional$ ! 27! obligation$to$transfer$the$ownership$of$her$bike$to$Paul,$which$she$does,$thereby$settling$ the$exchange.$ More$generally:$$ Exchanges!of!goods!(first!try):$Individuals$A$and$B$exchange$goods$x$and$y$iff:=df$ (1)$Preferences(and(belief:$$ $ (1.1)$ A$ prefers$ [to$ transfer$ the$ ownership$ of$ x$ to$ B$ and$ that( B$ transfers$ the$ ownership$of$y$to$him]$to$[not$to$transfer$the$ownership$of$x$to$B$and$that(B$does$ not$transfers$the$ownership$of$y$to$him]$ $ (1.2)$ B$ prefers$ [to$ transfer$ the$ ownership$ of$ y$ to$ A$ and$ that( A$ transfers$ the$ ownership$of$x$to$him]$to$[not$to$transfer$the$ownership$of$y$to$A$and$that(A$does$ not$transfers$the$ownership$of$x$to$him]$ $ (1.3)$A$ believes$ that$ promising$ to$B$ to$ transfer$ the$ ownership$ of$x$ to$B$ on$ the$ condition$ that( B$ transfers$ the$ ownership$ of$ y$ to$ him$ is$ a$ way$ for$ him$ to$ get$B$ transfer$the$ownership$of$y$to$him.$ (2)$Offer(&(acceptance:$$ (2.1)$The(offer:$Because$of$(1.1.)$&$(1.3),$A$promises$to$B$to$transfer$the$ownership$of$ x$to$B$on$the$condition$that(B$transfers$the$ownership$of$y$to$him.$ (2.2)$ The( acceptance:$ Because$ of$ (1.2),$ B$ accepts$ the$ offer.$ Hence,$ B$ incurs$ the$ obligation$to$ fulfil$ the$condition$specified$ in$A's$promise:$B$ought$to$transfer$the$ ownership$of$y$to$B.$ (3)(Provisions:$ (3.1)$ First( provision.$ Because$ of$ (2.2),$ B$ transfers$ the$ ownership$ of$ y$ to$A.$ As$ a$ result,$A$incurs$the$obligation$to$transfer$the$ownership$of$x$to$B.$ (3.2)Second(provision.$Because$of$(2.1.)$and$(3.1.),$A$transfers$the$ownership$of$x$to$ B.$ Or!the!reverse!(...)$ There$ are$ however$ strong$ reasons$ to$ reject$ this$ proposal.$ Exchanging$ transfers$ of$ goods$is$necessary$but$not$sufficient$to$exchange$goods.$To$see$this,$consider$the$case$of$ exchanges$ made$ simply$ for$ amusement.$ Such$ exchanges,$ we$ argued$ (§3.2.),$ are$ motivated$ by$ preferences$ bearing$ on$ the$ actions$ of$ transferring,$ rather$ than$ by$ preferences$bearing$on$the$goods$exchanged.$What$the$exchangers$really$exchange$(and$ enjoy)$are$not$goods,$but$actions$of$transferring$goods.$Our$point$was$that$the$STE,$with$ its$ inverse$ objectFpreferences,$ couldn't$ accommodate$ such$ exchanges,$ because$ the$ preferences$motivating$them$are$convergent.$ Now$this$objection$to$the$STE$backfires$against$our$ATE$in$the$present$context.$ If$ exchanges$ made$ for$ amusement$ are$ ultimately$ just$ exchanges$ of$ actions$ and$ not$ ! 28! exchanges$ of$ goods,$ then$ some$ exchanges$ of$ transfers$ of$ goods$ are$ not$ exchanges$ of$ goods.$More$generally,$although$the$reason$we$are$interested$in$being$transferred$a$good$ is$most$often$that$we$are$interested$in$the$good,$ it$does$not$have$to$be$so.$Paul$might$ want$to$buy$Julie's$bike$not$because$he$has$any$interest$in$the$bike,$but$just$because$he$ thinks$this$ is$his$best$way$to$come$into$contact$with$Julie$or$to$spend$some$time$with$ her.$ObjectEpreferences(cannot(be(scrutinized(from(preference(over(transfers(of(object.$ Thus,$unless$there$is$a$way$to$discriminate,$within$exchanges$of$transfers$of$goods,$ between$those$that$are$simply$exchanges$of$transfers$and$those$that$are$really$exchanges$ of$goods,$the$ATE$fails$to$capture$what$is$specific$about$goods$exchanges.$ To$ answer$ this$ important$ worry,$ we$ propose$ utilising$ the$ STE's$ own$ arsenal.$ To$ distinguish$ between$ exchanges$ of$ transfers$ of$ ownership$ of$ goods$ simpliciter$ and$ genuine$ exchanges$ of$ goods$ we$ suggest$ appealing$ to$ the( preferences( that( ground( the( preferences(for(transfers.$The$idea$is$that$what$distinguishes$mere$exchanges$of$transfers$ of$ goods$ from$ exchanges$ of$ goods$ is$ that,$ in$ the$ latter$ but$ not$ the$ former$ case,$ the$ preferences$ for$ transferring$ the$ ownership$ of$ goods$ are$ grounded$ in$ the$ opposite$ preferences$for$goods.$This$is$the$important$grain$of$truth$in$the$STE.$We$thus$need$to$ supplement$ our$ previous$ account$ of$ goods$ exchanges$ by$ inverse$ object$ valuations$ (added$conditions$in$bold):$ Exchanges!of!goods!(second!try):$A$and$B$exchange$goods$x$and$y$iff:$ (0)!Inverse!valuations:! (0.1)!A!prefers!y!to!x!! ! (0.2.)!B!prefers!x!to!y! ! (1)$Preferences(and(belief:$$ $ (1.1)$Because! (0.1),$A$ prefers$ [to$ transfer$ the$ ownership$ of$ x$ to$ B$ and$ that( B$ transfers$the$ownership$of$y$to$him]$to$[not$to$transfer$the$ownership$of$x$to$B$and$ that(B$does$not$transfers$the$ownership$of$y$to$him]$ $ (1.2)$Because! (0.2),$B$ prefers$ [to$ transfer$ the$ ownership$ of$ y$ to$A$ and$ that( A$ transfers$the$ownership$of$x$to$him]$to$[not$to$transfer$the$ownership$of$y$to$A$and$ that(A$does$not$transfers$the$ownership$of$x$to$him]$ $ (1.3)$A$ believes$ that$ promising$ to$B$ to$ transfer$ the$ ownership$ of$x$ to$B$ on$ the$ condition$ that( B$ transfers$ the$ ownership$ of$ y$ to$ him$ is$ a$ way$ for$ him$ to$ get$B$ transfer$the$ownership$of$y$to$him.$ (2)$Offer(&(acceptance:$$ (2.1)$The(offer:$Because$of$(1.1.)$&$(1.3),$A$promises$to$B$to$transfer$the$ownership$of$ x$to$B$on$the$condition$that(B$transfers$the$ownership$of$y$to$him.$ ! 29! (2.2)$ The( acceptance:$ Because$ of$ (1.2),$ B$ accepts$ the$ offer.$ Hence,$ B$ incurs$ the$ obligation$to$ fulfil$ the$condition$specified$ in$A's$promise:$B$ought$to$transfer$the$ ownership$of$y$to$B.$ (3)(Provisions:$ (3.1)$ First( provision.$ Because$ of$ (2.2),$ B$ transfers$ the$ ownership$ of$ y$ to$A.$ As$ a$ result,$A$incurs$the$obligation$to$transfer$the$ownership$of$x$to$B.$ (3.2)Second(provision.$Because$of$(2.1.)$and$(3.1.),$A$transfers$the$ownership$of$x$to$ B.$ Or!the!reverse!(...)! Thus,$in$the$case$of$exchanges$made$for$pleasure,$exchangers$do$not$care$about$the$ goods$ at$ stake:$ what$ they$ value$ is$ the$ activity$ of$ transferring.$ Their$ preferences$ for$ transfers$ are$not$grounded$ in$ inverse$preferences$ for$ goods,$ conditions$ (0.1)$ and$ (0.2)$ are$ not$ met.$ Accordingly,$ goods$ are$ here$ mere$ decorations,$ and$ all$ we$ have$ is$ an$ exchange$of$services$(namely,$of$transfers).$ If,$on$the$other$hand,$the$exchangers$prefer$to$transfer$the$ownership$of$their$goods$ because$ they$ prefer$ each$ other's$ goods,$ then$ we$ have$ an$ exchange$ of$ goods.$ When$ exchanges$ of$ transfers$ of$ ownership$ of$ goods$ are$ ultimately$ grounded$ in$ reverse$ preferences$ for$ these$ goods,$ then$ is$ it$ is$ right$ to$ say$ that$ these$ goods$ are$ exchanged.$ Note,$ incidentally,$ that$ this$ story$ typically$ holds$ for$ offers$ conditioned$ on$ promises,$ discussed$ above.$ Such$ offers$ typically$ prompt$ exchanges$ that$ are$ not$ exchanges$ of$ services$(promises),$but$exchanges$of$a$special$kind$of$goods:$claims.$This$is$because$the$ reason$why$we$usually$accept$a$promise$in$return$for,$say,$the$transfer$of$a$good,$is$that$ we(value(promises(made(to(us(in(virtue(of(the(claims(they(give(rise(to.$When$Julie$transfers$ her$bike$to$Paul$in$exchange$for$Paul's$promise$to$pay$her,$what$she$really$is$after$is$not$ Paul's$ promising$ per( se,$ but$ the$ claim$ that$ the$ promise$ gives$ rise$ to.$ The$ two$ goods$ exchanged$are$here$the$(promiseFgenerated)$claim$and$the$bike.$ This$strategy$of$identifying$the$target$of$exchanges$via$the$preferences$that$ground$ the$preferences$for$transfers$yields$two$interesting$refinements.$ First,$building$on$Commons$(1931),$there$is$a$distinction$between$valuing$goods$and$ valuing$ownership( of( goods.$ These$ valuations$ usually$ go$ together:$we$ often$ prefer$ the$ good$that$we$prefer$to$own.$But$this$does$not$need$to$be$so.$Julie$might$prefer$her$castle$ to$ Paul's$ house,$ but$ nevertheless$ prefer$ owning$ Paul's$ house$ to$ owning$ her$ castle$ (because,$say,$maintaining$the$castle$it$too$costly).$Paul,$on$the$other$hand,$might$prefer$ his$ house$ to$ Julie's$ castle,$ but$ nevertheless$ prefer$ owning$ Julie's$ castle$ to$ his$ house$ (because,$say,$his$house$is$in$a$country$in$which$he$has$fiscal$troubles).$In$such$a$case,$ Paul$ and$ Julie$ might$ end$ up$ exchanging$ the$ ownership$ of$ their$ house$ and$ castle.$ However,$the$targets$of$their$exchange$are$not$the$castle$and$the$house,$but$rather$the$ ownerships$of$ the$castle$and$of$ the$house.$More$generally,$ if$ the$exchangers$prefer$ to( ! 30! transfer$the$ownership$of$their$goods$because$they$prefer$to(own$each$other's$good,$and$ they$do$not$prefer$each$other's$good,$we$have$an$exchange$of$ownership$of$goods$which$ is$not$an$exchange$of$goods$owned.$$ Second,$whether$ an$ exchange$ is$ ultimately$ an$ exchange$ of$ goods,$ an$ exchange$ of$ ownership,$ or$ just$ an$ exchange$ of$ transfers,$ is$ dependent$ on$ each$ exchanger's$ motivation.$Since$these$ intrinsic$motivations$need$not$be$the$same,$one$and$the$same$ exchange$ can$ be$ both$ an$ exchange$ of$ goods$ relative$ to$ one$ exchanger$ and$ a$ pure$ exchange$of$action$relative$to$the$other.$Suppose$Julie$transfers$her$bike$to$Paul$against$ some$ money$ because$ she$ values$ Paul's$ money$ more$ than$ her$ bike,$ and$ that$ Paul$ transfers$her$money$to$Julie$against$her$transferring$her$bike$to$him,$because$he$simply$ loves$ transacting$ with$ Julie.$ This$ single$ exchange$ proceeds$ from$ two$ very$ different$ motivations:$ for$ Julie,$ the$ exchange$ is$ ultimately$ motivated$ by$ intrinsic$ object$ preferences;$ for$ Paul,$ it$ is$ fundamentally$ motivated$ by$ action$ preferences.$ This$ very$ same$exchange$will$be$an$exchange$of$goods$with$respect$to$Julie,$and$a$simple$exchange$ of$services$with$respect$to$Paul.$$ In$sum,$by$introducing$object$preferences$(which$upholders$of$the$STE$appeal$to)$as$ possible$grounds$ for$ the$action$preferences$(on$which$the$ATE$relies),$ the$ATE$ is$ in$a$ position$ to$distinguish$between$ exchanges( of( goods,$ exchanges( of( ownership( of( goods,$ and$ pure( exchanges( of( transfers( of( ownership( of( goods,$ although$ all$ these$ exchanges$ essentially$require$exchanges$of$transfers$of$ownership$of$goods.$ 6.!Wrapping!up:!STE!vs.!ATE! We$raised$two$kinds$worries$against$the$STE.$$ Incompleteness.$ First,$ the$ STE$ is$ incomplete$ in$ three$ respects:$ (i)$ there$ is$ a$ motivational$gap$between$inverse$object$preferences$and$mutual$transfers,$(ii)$the$quid( pro(quo$of$exchanges–exchanging$something$against$something$else–is$left$unexplained,$ (iii)$the$claims$and$obligations$that$arises$within$exchanges$remain$ungrounded.$ The$ ATE$ avoids$ all$ these$ flaws:$ (i)$ The$ motivational$ gap$ is$ filled$ since$ the$ preferences$motivating$ exchanges$ bear$ on$ the$ very$ actions$ constitutive$ of$ exchanges,$ which$ also$ figure$ in$ the$ content$ of$ the$ offer,$ (ii)$ the$ quid( pro( quo$ of$ exchange$ is$ accounted$ for$ by$ offers$ (understood$ as$ promises$with$ conditional$ content),$ and$ their$ acceptance:$A$conditionally$promises$to$φ$in$order$to$get(B(to$ψ,$and$B$ψFs$in$order$to$ get$A$ to$φ,$ (iii)$ the$ claims$and$obligations$ that$ arise$within$ exchanges$ are$ simply$ the$ promissory$claims$and$obligations$that$arise$from$any$promise.$ It$might$ be$ objected$ that$ the$ATE$ too$ comes$with$ its$ own$ gaps.$ First,$ one$might$ think$ that$a$key$ ingredient$missing$ from$the$ATE$ is$ trust.$To$accept$ Julie's$offer,$Paul$ needs$to$trust$Julie's$description$of$the$bike,$and$he$also$needs$to$trust$that$she$will$fulfil$ her$ promise$ and$ give$ him$ her$ bike$ after$ having$ received$ the$ priceFtagged$ amount$ of$ money.$Trust$is$indeed$often$required$for$an$offer$to$be$accepted,$and$therefore$for$an$ exchange$to$take$place.$But$that$does$not$entail$that$trust$is$an$ingredient$of$exchanges.$ ! 31! A$first$reason$for$this$ is$ that$ interpersonal$trust$may$not$always$be$necessary.$Perhaps$ Paul$ does$ not$ trust$ Julie,$ who$ he$ considers$ to$ be$ very$ unreliable,$ but$ nevertheless$ accepts$her$offer$because$he$ counts$on$ the$ legal$ institutions$ to$enforce$ the$rights$ and$ obligations$arising$from$promises.$For$this$he$may$need$to$trust$the$institutions$at$stake,$ but$this$is$a$very$different$kind$of$trust$than$trust$directed$at$the$promisor.$Other$cases$ are$imaginable:$it$is$not$the$task$of$a$general$theory$of$exchange,$we$submit,$to$elucidate$ and$spell$out$the$various$possible$preFconditions$of$acceptances.$ Likewise,$ one$may$worry$ that$ the$ATE$neglects$ another$ core$ aspect$of$ exchanges,$ namely,$their$various$degrees$of$voluntariness.$Often$a$preference$for$exchanging$exists$ only$ because$ one$ party$ in$ the$ exchange$ feels$ compelled$ to$ carry$ out$ the$ exchange,$ typically$because$of$ asymmetries$ in$bargaining$power.$Extreme$cases$are$ the$ soFcalled$ "offers$one$can't$refuse",$such$as$'Your$money$or$your$life'.$Our$response$here,$again,$is$ that,$ in$the$same$way$that$a$theory$of$exchange$does$not$need$to$incorporate$the$preF conditions$of$offers$ and$acceptances,$ a$ theory$of$ exchange$does$not$need$ to$elucidate$ the$ origin$ of$ the$ agents'$ preferences20.$ This$ way,$ the$ theory$ of$ exchange$ remains$ compatible$ with$ all$ the$ varieties$ of$ genetic$ explanations$ of$ agents'$ preferences,$ from$ coercion$ to$ autonomous$ deliberation.$ Correspondingly,$ the$ many$ normative$ issues$ raised$ by$ blackmail,$ coercive$ offers,$ unequal$ or$ exploitative$ exchanges$ should$ not$ be$ settled$by$a$theory$of$the$nature$of$exchange.$If$one$is$to$disagree$about$whether$or$not$ there$are$exploitative$exchanges,$or$about$whether$or$not$they$should$be$regulated,$one$ needs$first$to$agree$about$what$exchanges$are.! Restrictedness.$Our$second$objection$to$the$STE$was$that$it$is$unable$to$account$for$ exchanges$of$services,$because$both$the$preferences$and$the$actions$(transfers)$it$appeals$ to$bear$on$objects,$and$because$it$assumes$that$such$preferences$are$inverse,$which$does$ not$hold$true$of$services.$No$such$problem$arises$within$the$ATE.$When$Julie$explains$ modal$ logic$ to$ Paul$ in$ exchange$ for$ Paul's$ playing$ the$ violin$ to$ her,$ no$ transfer$ ever$ takes$ place:$ the$ ATE$ takes$ services$ for$ what$ they$ are,$ actions,$ and$ does$ not$ need$ to$ consider$ them$ as$ intangible$ goods$ passing$ from$ hand$ to$ hand.$ Preferences,$ being$ propositional,$do$not$need$to$be$interpreted$as$bearing$on$hypostasized$actions.$Further,$ because$the$preferences$are$convergent,$the$ATE$conforms$to$our$intuitions$that,$in$the$ case$of$exchanges$of$services,$it$is$not$the$case$that$one$exchanger$values$more$what$the$ other$values$less.$$ Finally,$while$ the$ STE$ fails$ to$ account$ for$ exchanges$ of$ services,$ the$ATE$ can$use$ inverse$valuations$to$account$for$exchanges$of$goods.$$ However,$one$may$ask,$could$the$STE$not$fare$better$than$the$ATE$in$other$respects?$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 20$That$ preferences$ are$ fixed$ and$ exogeneously$ given$ also$ is$ a$ general$ assumption$ in$ rational$ choice$ theory.$For$an$attempt$to$explore$the$formation$of$preferences$within$the$rational$choice$framework,$see$ List,$Dietrich$(2012).$ ! 32! Methodological(individualism.$One$purported$advantage$of$the$STE$noted$in$§1$is$its$ compatibility$ with$ methodological$ individualism.$ One$ might$ worry$ that,$ by$ putting$ social$acts$(offers)$at$the$heart$of$exchanges,$the$ATE,$for$its$part,$proves$incompatible$ with$methodological$individualism:$some$form$of$collective$intentionality$or$joint$action$ would$be$nested$within$all$exchanges.(( This$worry$ is$misguided.$Social$acts$ indeed$require$more$ than$one$ individual$-as$ opposed$ to$ solitary$actions,$ such$as$ intending,$grieving,$or$ running-$but$ they$do$not$ require$ collective$ agents$ or$ thinkers.$ Other$ people$ are$ essential$ to$ social$ acts$ not$ because$they$jointly$perform$them$but$only$because$they$hear( them.$The$promise$that$ Julie$makes$to$Paul$has$to$be$heard,$and$understood,$by$Paul$(Reinach$1983,$p.$109).$But,$ while$its$uptake$by$Paul$is$essential$to$Julie's$promise$being$made,$Julie$is$the$only$agent$ that$makes$the$promise.$Thus,$although$any$social$act$requires$two$persons$at$least,$they$ remain$the$act$of$one$person$only.$No$weFpromises$are$required$by$the$theory:$only$IF promises$and$IFuptakes.$$ Value( subjectivism.( Another$ noted$ feature$ of$ the$ STE$ is$ its$ valueFneutrality:$ exchanges,$on$the$STE,$are$only$motivated$by$subjectiveFvaluations$of$ individuals,$and$ no$commitment$to$objective$values$is$required$to$account$for$exchanges.$One$might$fear$ that$ the$ ATE$ is,$ in$ contrast,$ too$ normative.$ Because$ each$ promise$ generates$ an$ obligation$ on$ the$ part$ of$ the$ promisor$ to$ keep$ his$ promise,$ and$ a$ claim$ to$ the$ same$ effect$on$the$part$of$the$promisee,$objective$norms$enter$the$scene.$After$the$offer,$the$ offeror$incurs$a$conditional$obligation$(A$has$the$obligation$to$transfer$x$if$B$transfers$y$ to( A),$ and$ the$ offeree$ has$ a$ conditional$ claim$ (B$ has$ a$ claim$ to$ the$ transfer$ of$x$ if$B$ transfers$y$to$A).$After$the$offeree's$acceptance$these$norms$become$nonFconditional:$A$ has$the$nonFconditional$obligation$to$transfer$y$to$B,$and$B$a$nonFconditional$claim$to$ the$ same$ effect.$ All$ these$ norms$ are$ objective:$ neither$ figure$ within$ the$ scope$ of$ an$ attitude.$It$is$not$that$Julie$thinks$she$has$an$obligation;$she$really$has$one,$whether$she$ recognizes$ it$ or$ not.$ And$ the$ same$ hold$ for$ Paul's$ claim.$ So,$ according$ to$ the$ ATE,$ exchanges$are$normsFladen$from$the$secondFstep$on.$ We$ submit$ that,$ while$ this$ is$ true,$ it$ is$ harmless.$ The$ crucial$ thing$ is$ that$ no$ normative$ assessment$ of( the( preferences( of( the( individuals( is$ involved$ in$ this$ picture.$ Nowhere$ is$ it$ claimed$ that$ individuals$ should$ prefer$ x$ to$ y,$ or$ that$ it$ would$ be$ (rationally,$ ethically,$ aesthetically...)$ better$ to$ prefer$ x$ to$ y.$ To$ the$ extent$ that$ an$ assessment$ of$ preferences$ is,$ according$ to$ the$ principle$ of$ valueFneutrality,$ what$ economic$science$purports$to$avoid,$the$ATE$is$as$valueFfree$as$the$STE.$ Mutual(gains.$Under$the$STE,$the$mutual$gains$from$exchanges$are$grounded$in$the$ exchanges'$satisfying$the$inverse$object$preferences$of$the$exchangers.$Paul$values$Julie's$ bike$ more$ than$ his$ money;$ Julie$ values$ Paul's$ money$ more$ than$ her$ bike.$ Hence,$ exchanging$ the$ bike$ against$ the$ money$ would$ satisfy$ them$ both.$ Under$ the$ ATE,$ exchanges$are$also$mutually$beneficial,$but$for$a$rather$trivial$reason.$The$preferences$at$ stake$ are$not$opposed,$but$have$ (nearly,$ as$we$ saw)$ the$ same$ content:$ both$Paul$ and$ ! 33! Julie$prefer$that$Paul$transfers$the$bike$to$Julie$and$that$Julie$transfers$the$money$to$Paul$ to$the$situation$in$which$neither$of$these$transfers$take$place.$Hence,$under$the$ATE,$the$ mutual$gains$from$exchanges$are$grounded$in$the$exchanges'$satisfying$the$convergent$ propositional$preferences$of$the$exchangers.$Note$that$while,$on$the$STE,$exchanges$are$ mutually$ beneficial$ ex( ante,$ this$ is$ not$ essentially$ the$ case$ on$ the$ ATE,$ because$ the$ preferences$ that$ an$ exchange$ satisfies$ bear$ on$ the$ very$ actions$ constitutive$ of$ the$ exchange$ (there$ is$ not$ motivational$ gap).$ It$ is$ not$ because$ the$ exchangers$ expect$ (correctly$ or$ not)$ to$ be$ better$ off$ after$ the$ exchange$ that$ exchanges$ are$ mutually$ beneficial$ (although$ this$might$ also$ be$ the$ case);$more$ fundamentally,$ but$ also$more$ trivially,$ it$ is$ because$ the$ exchangers$ are$ willing$ to$ exchange$ that$ exchanges$ satisfy$ them.$$ Grammaticality.$Finally,$one$might$think$that,$contrary$to$the$STE,$the$ATE$achieves$ generality$ at$ the$ price$ of$ violating$ the$ syntax$ of$ "exchange".$ The$ verb$ "to$ exchange"$ usually$takes$four$referring$expressions$(in$italics)$to$make$a$sentence:$$ • Julie$and$Paul$exchange$a(bike$for$an(amount(of(money.$$ "Exchanging"$is$an$nFplace$predicate.$While$the$STE$got$this$right,$the$ATE,$appears$ to$ entail$ an$ ungrammatical$ construal,$ where$ "exchange"$ functions$ (partly)$ as$ a$ connective$taking$sentences:$ • *Julie$ and$Paul$ exchange$ that( Julie( transfers( her( bike( to( Paul$ for$ that( Paul( transfers(his(bike(to(Julie.$$ Our$reply$is$that$not$all$uses$of$the$term$"exchange"$are$predicative.$The$locution$"in$ exchange"$takes$sentences.$We$suggest$that,$with$respect$to$the$nature$of$exchanges,$it$ constitutes$the$fundamental$form:$ • Julie( transfers(her(bike(to(Paul$and,$in$exchange,$Paul(transfers(his(money(to( her.$ On$ the$ whole,$ with$ respect$ to$ methodological( individualism,$ value( subjectivism,$ mutual(advantages$and$grammaticality,$the$ATE$fares$at$least$as$well$as$the$STE.$And$it$ clearly$fares$better$than$the$STE$in$providing$sufficient$conditions$for$exchange$and$in$ accounting$for$exchanges$of$services.$$ To$conclude,$the$distinction$between$exchanges$of$goods$and$exchanges$of$services$ is$uncontroversial.$The$difficulty$is$to$understand$how$they$relate.$The$STE$tackles$this$ issue$by$treating$exchanges$of$services$as$a$special$case$of$exchanges$of$goods.$We$have$ argued$ that$ this$ strategy$ is$ doomed$ to$ failure.$ What$ should$ be$ done$ is$ exactly$ the$ opposite:$ consider$ exchanges$ of$ goods$ as$ a$ special$ case$ of$ exchanges$ of$ services.$ In$ ! 34! accordance$with$Bastiat,$ exchanges$of$ services,$not$exchanges$of$goods,$ constitute$ the$ most$fundamental$kind$of$economic$exchanges21.$ $ ! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 21$We$ wish$ to$ thank$ especially$ Kent$ Bach,$ Nicola$ Guarino,$ Robin$ McKenna,$ Kevin$ Mulligan,$ Geoffrey$ Brennan,$Hartmut$Kliemt$ and$ two$anonymous$ referees$of$ this$ journal$ for$ their$detailed$ and$ invaluable$ criticisms$and$suggestions.$Thanks$are$also$due$to$Arto$Laitinen,$Gerhard$Thonhauser,$Michaël$Bauwens,$ Danny$Frederick,$Paolo$Bonardi,$Paolo$Natali,$Damiano$Costa,$Fabrice$Correia,$Robert$Michels,$Philipp$ Blum,$ Maria$ Scarpati,$ Markus$ Haller,$ Thierry$ Feliz$ Capitao,$ Mélanie$ Sarzano,$ Isaïe$ Fasel$ and$ Steve$ Humbert$ Droz$ for$ their$ insightful$ comments.$ The$ paper$ also$ greatly$ benefited$ from$ comments$ from$ audiences$ in$ Geneva,$ Trento$ (VMBO2016),$ Paris$ (Institut$ JeanFNicod),$ Madrid$ (ENPOSS2014)$ and$ Gothenburg$(Social$Complexes$Parts$and$Wholes$2).$$ ! 35! Appendix!I:!the!Ownership!Theory!of!Exchange! Here$we$critically$examine$a$close$cousin$of$the$STE,$namely$the$Ownership$Theory$ of$ Exchange$ (OTE).$ We$ show$ that,$ although$ the$ OTE$ fails$ to$ go$ far$ enough,$ it$ is$ nevertheless$on$ the$ right$ track.$According$ to$ it,$what$we$exchange$are$not$goods,$but$ ownership(of(goods22.$This$view$was$first$explicitly$put$forward$by$Commons$in$a$seminal$ paper:$$$ The$ soFcalled$ "exchange"$ of$ money,$ materials$ or$ services$ is$ not$ an$ exchange$ of$ physical$products$or$material$services,$as$assumed$by$the$classical$and$hedonistic$ economists.$ It$ is$ two$ transfers$ of$ two$ ownerships.$ The$ physical$ delivery$ occurs$ after$the$ownership$is$transferred$(Commons$1931,$p.$241,$fn$7).$ What$ we$ buy$ and$ sell$ is$ not$ material$ things$ and$ services$ but$ ownership$ of$ materials$and$services$(p.$242).$ This$ suggests$ the$ following$ account$ of$ exchanges$ (although$ Commons$ does$ not$ state$it$explicitly):$ Ownership!Theory!of!Exchange!(OTE):$if$A$and$B$exchange$their$goods$x$and$y,$ then:$ (1)$Valuations:$$ $ (1.1)$A$prefers$[owning$y$to$owning$x]$$ $ (1.2)$B$prefers$[owning$x$to$owning$y]$ $ (2)$Mutual(transfers:$$ $ (1.1)$A$voluntarily$transfers$the$ownership$of$x$to$B$$ $ (1.2)$B(voluntarily$transfers$the$ownership$of$y$to$A$ (3)$(2.1.)$partly$because$of$(1.1);$(2.2.)$partly$because$of$(1.2).$$ The$OTE$suffers$from$very$similar$flaws$to$the$STE.$Not$only$is$it$incomplete,$it$is,$ furthermore,$unable$to$account$for$exchanges$of$services.$The$reason$why$is$that,$in$the$ same$way$that$upholders$of$the$STE$mistakenly$assume$that$services$can$be$transferred,$ Commons$misleadingly$ assumes$ that$ services$ can$ be$ owned.$ Julie,$ however,$ does$ not$ become$the$owner$of$the$lesson$that$Paul$gives$to$her.$She$might$own$a$right$to$Paul's$ lesson,$but$not$the$lesson$itself.$That$she$does$not$become$the$owner$of$the$lesson$she$ gets$from$Paul$is$reflected$in$the$fact$that$she$cannot$reFsell$it$(contrary,$again,$to$a$right$ to$ this$ lesson,$ or$ to$ a$ lesson$ she$ would$ give$ on$ the$ basis$ of$what$ she$ learnt$ through$ Paul's$lesson).$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 22$Economists$ indeed$ often$ waver$ between$ transfer$ of$ goods,$ and$ transfer$ of$ the$ ownership$ of$ good.$ Menger$for$instance$sometimes$describes$exchanges$in$terms$of$mutual$transfers$of$commands$of$certain$ goods$(Menger$1996,$p.$177).! ! 36! Despite$these$flaws,$the$OTE$constitutes$a$significant$improvement$over$the$STE.$It$ appeals$to$propositional$ instead$of$objectual$preferences,$and$therefore$explicitly$parts$ ways$with$the$view$that$one$exchanges$goods.$It$is,$so$to$speak,$less$goodsFminded$than$ the$STE.$$In$particular,$we$submit$that$Commons$is$right$to$insist$that$goods$simpliciter$ are$ not$ exchanged.$ It$ is$ clear$ than$ in$ most$ cases$ "transferring$ x"$ is$ elliptical$ for$ "transferring$the$ownership$of$x".$What$we$own$are$goods,$but$what$we$transfer$when$ exchanging$are$typically$not$goods,$but$ownerships$thereof.$$ A$second$respect$in$which$we$believe$the$OTE$fares$better$than$the$STE$is$that$the$ preferences$ it$must$rely$on$are$not$ inverse.$Because$ownership$ is$a$relation$between$a$ person$and$a$ thing,$ the$owner$has$ to$appear$ in$ the$content$of$ownership$preferences.$ Although$ these$ owners$ often$ remain$ unarticulated$ constituents$ of$ the$ propositional$ contents,$once$made$explicit$we$get:$ $ $ (1.1)$A$prefers$[that$(A$owns$y)$rather$than$that$(A$owns$x)]$ $ $ (1.2)$B$prefers$[that$(B$owns$x)$rather$than$that$(B$owns$y)],$ These$are$not$inverse$preferences,$for$they$are$not$instances$of:$(i)$A$prefers$that$p$ rather$than$that$q$and$(ii)$B$prefers$that$q$rather$than$that$p.$ Hence,$the$OTE,$although$incomplete$and$unable$to$account$for$exchanges$of$services,$ is,$we$ submit,$ on$ the$ right$ track:$ the$ track$ away$ from$goods$ and$ inverse$ preferences.$ The$ view$ of$ exchange$ we$ have$ proposed$ goes$ further:$ on$ our$ view,$ what$ is$ basically$ exchanged,$ when$ tangible$ goods$ are$ at$ stake,$ is$ neither$ goods$ (in$ accordance$ with$ Commons),$nor$ownership$of$these$goods$(pace$Commons),$but$transfers$of$ownerships$ of$goods.(What(we(own(are(goods.(What(we(transfer(are(ownerships(of(goods.(What(we( exchange(are(transfers(of(ownerships(of(goods.$ ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 37! Appendix!II:!the!buying/selling!distinction! Any$ exchange,$ intuitively,$ involves$ something$ being$ bought$ and$ something$ being$ sold.$How$should$we$account$for$this$distinction?$Three$proposals$should$be$considered.$ (i)$The$first,$rather$deflationist$strategy,$advocated$by$Walras,$is$to$equate$selling(a( thing$to$giving(it$in$the$context$of$an$exchange;$and$to$equate$buying(a(thing$to$receiving( it$ in$ the$ context$ of$ an$ exchange$ (Walras$ 1874,$ lesson$ 5,$ §$ 41).$ In$ the$ terminology$we$ retain$here,$selling$a$good$amounts$to$transferring$it,$and$buying$a$good$amounts$to$this( good(being(transferred(to(one,$again$in$the$context$of$an$exchange.$However,$since$each$ exchange$ involves$two$ transfers,$ this$proposal$entails$ that$each$exchange$contains$two$ sales$ (and$ conversely,$ two$ purchases).$ $ This$ is$ a$ consequence$ that$ Walras$ happily$ accepts.$According$to$him,$any$exchange$involves$a$double(purchasing$and$a$double(sale.$ Not$only$does$Julie$sell$her$bike$to$Paul$and$Paul$buy$it;$Paul$sells$his$money$to$Julie$and$ Julie$buys$this$money$with$her$bike.$$ Although$they$make$complete$sense$in$the$context$of$Walras'$theory,$as$far$as$our$ ordinary$concepts$of$selling$and$buying$are$concerned,$such$descriptions$are$farFfetched.$ These$ are$ quite$ unnatural$ things$ to$ say.$ Walras'$ concepts$ of$ purchase$ and$ sale$ are$ largely$ revisionary.$ If$ one$ is$ to$ maintain$ that$ in$ simple$ exchanges$ there$ is$ only$ one$ buyer,$and$one$seller,$one$needs$to$consider$the$two$other$accounts$of$the$distinction.$ (ii)$The$ second$strategy,$proposed$by$Mill$ (1874,$§69F71)23,$Menger$ (1892,$p.$ 252)24$ and$Fisher$(1906,$p.$11),$is$to$reject$the$view$that$all$exchanges$involve$a$double$sale$and$ a$double$purchase,$and$to$maintain$that$to$buy$is$to$give$up$money$against$some$nonE monetary(good,$and$that$to$sell$is$to$give$up$nonEmonetary(goods$in$exchange$for$some$ money.$$ It$is$true$that,$in(general,$the$exchanger$who$gives$up$money$is$called$the$buyer,$and$ the$ one$ who$ gives$ up$ nonFmonetary$ goods$ is$ called$ the$ seller.$ However,$ this$ is$ not$ always$ so,$we$ submit.$ First,$ the$ selling/purchasing$ asymmetry$ also$ arises$within$ nonF monetary,$direct,$exchanges.$It$ is$possible$to$sell$apples$against$massages.$Second,$it$ is$ perfectly$fine$to$buy$some$money,$as$we$do$when$we$buy$some$foreign$currency$in$an$ exchange$ office.$ Despite$ appearances,$ the$ buying/selling$ asymmetry$ is$ therefore$ not$ essentially$ tied$to$the$use$of$money$or$other$means$of$exchange$(it$might$still$be$true$ that$ for$ reasons$ pertaining$ to$ the$ pragmatic$ of$ language$ we$ often$ use$ "selling"$ for$ "transferring$against$money").$ (iii)$The$third$strategy,$ in$order$to$account$ for$the$selling/buying$distinction,$ is$ to$ appeal$ to$offers$-explicitly$ introduced$ in$ the$ATE$we$advocate.$On$ this$proposal,$ the( seller( is( the( offeror( and( the( buyer( is( the( offeree$who$ accepts$ the$ offer.$ Thus$ exchange$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 23$Mill$anticipates$Walras'$proposal$and$maintains$that$it$only$holds$true$of$barter.$In$case$of$monetary$ exchanges,$in$contrast,$there$is$a$single$sale$and$a$single$purchase.$ 24$See$Bastiat$(1850,$p.$74)$for$a$similar$proposal$(although,$as$noted$above,$Bastiat$rejects$the$STE).$ ! 38! offices$sell$currencies,$because$they$offer$to$transfer$currencies$if$some$other$currencies$ are$transferred$to$them.$ One$problem$ for$ this$proposal,$however,$ is$ that$one$may$offer( to( purchase( or( buy( something$to$somebody.$In$such$cases,$the$offeror$is$the$buyer.$ The$ strategy$ we$ favour,$ is$ a$ rather$ boring$mix$ of$ the$ second$ and$ third$ one.$ The$ concepts$of$selling$and$buying,$we$suggest,$are$ambiguous:$in$one$sense,$buying$means$ getting$a$good$(or$being$render$a$service)$against$some$money;$in$another$sense$buying$ means$ getting$ a$ good$ (or$ being$ rendered$ a$ service)$ as$ a$ result$ of$ having$ accepted$ an$ offer.$$$ $ $ $ $ $ $ ! 39! $ References! 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