Let’s see how far we can take the thesis that prices are like words, not by further deconstructing how individual words work, but by considering how a collection of words works in the discourse of a novel. I have never studied literary analysis, so M.M. Bakhtin, a Russian literary theorist, will do the heavy lifting.

The first time I read “Discourse in the Novel” I drew a blank. A complete blank. I understood each word, but as a whole it made no sense. Not unlike how $3.45 for a grande vanilla latte makes sense at the counter in Starbucks, and yet it’s not comprehendible what that $3.45 means for connecting an Ethiopian coffee grower with a professor in southern California.

The first stumbling block in reading Bakhtin is becoming comfortable with the word discourse. It isn’t a word commonly encountered in economics. Discourse is unmeasurable and sounds nebulously synthetical (and so must be unreliable). But at least discourse is immediately an intelligible word, unlike dialogic, which is strewn throughout the essay. To get comfortable with dialogic, the English translation of a Russian literary theoretical concept, think of it as the adjective of dialogue in opposition to a monologue. A dialogue is interactive, bi-directional, negotiable in real time, whereas a monologue is noninteractive, unidirectional, nonnegotiable.

Upon nailing down dialogic, an unarticulable sense of the essay begins to emerge by recognizing a correspondence between Bakhtin’s literary terms and common economic terms.

Literary term Economic term
word price
discourse exchange
stylistic economic
language market
speak trade
utterance trade
prose trade
say trade
art ethics
novel catallactics

Fleshing out this correspondence reveals a Bakhtinian critique on price theory [the substituted economic terms are displayed in red; all other words are quoted from the translated essay (p. 276)]:

As treated by traditional economic thought, the price acknowledges only itself (that is, only its own context), its own object, its own direct expression and its own unitary and singular market. It acknowledges another price, one lying outsides its own context, only as the neutral price of a market, as the price of no one in particular, as simply the potential for trade.

Consider the first lesson on supply and demand in a principles of economics text. There is a price p at which the quantity demanded equals the quantity supplied for a hypothetical good. As long as the prices of complementary and substitutable goods don’t change, p is the price at which quantity demanded equals the quantity supplied. It is the price at which every buyer with a value above it purchases from a seller with a cost below it.

The direct price, as traditional economics understands it, encounters in its orientation toward the object only the resistance of the object itself (the impossibility of its being exhausted by a price, the impossibility of trading with it for all transactionsit all), but it does not encounter in its path toward the object the fundamental and richly varied opposition of another’s price. No one hinders this price, no one argues with it.

This competitive price p for an object only receives pushback in the form of extra-marginal buyers (sellers) saying “no, I will not purchase (sell) at that price because my valuation (cost) for the object is less (greater) than p.” There is no process of forming prices, of buyers competing on bids to buy and sellers on asks to sell. No one argues with competitive price p. There simply exists such a p.

But no living price relates to its object in a singular way: between the price and its object, between the price and the trading subject, there exists an elastic environment of another, alien prices about the same object, the same theme, and this is an environment that it is often difficult to penetrate. It is precisely in the process of living interaction with this specific environment that the price may be individualized and given economic shape.

What are these “alien” prices? Other offers to sell (see the leftmost red triangles below) of $8.75, $7.50, and $7.00 and other bids to buy (blue triangles) of $3.50, $3.75, $5.00, $5.25, $5.50, all of which do not result in a trade.

What is a living price? A living price is an asking price of $6.00 ready to be accepted by a buyer in exchange for one unit of a good (see first transaction below). Given the specific arrays of willingness to buy (blue steps) and sell (red steps), the transaction price of $6.00 is individualized to Buyer 1 and Seller 5 at a particular moment in time. No social scientist, no market watcher, no other buyers or sellers can predict who will buy and sell at any moment, let alone the price at which they will agree to transact. Even after the first five trades at $5.50 and above, who could have predicted that Buyer 1 and Seller 1 would trade the sixth unit at $5.25? Every new set of buyers and sellers with these same values and costs gives the series of trades its unique economic shape.


Indeed, any concrete exchange (trade) finds the object at which it was directed already as it were overlain with qualifications, open to dispute, charged with value, already enveloped in an obscuring mist–or, on the contrary, by the “light” of alien prices that have already been trade withabout it. It is entangled, shot through with shared thoughts, points of view, alien value judgments and accents. The price, directed towards its object, enters a dialogically agitated and tension-filled environment of alien prices, value judgments and accents, weaves in and out of complex interrelationships, merges with some, recoils from others, intersects with yet a third group: and all this may crucially shape exchange, may leave a trace in all its semantic layers, may complicate its expression and influence its entire economic profile.

At this point economists familiar with the double auction experiment may say that, apart from its florid description, this literary theoretical take on prices adds nothing new to our understanding of how prices work. It doesn’t even say anything about how many units will trade. That is because the point of the double auction experiment is not the point at which the quantity demanded equals the quantity supplied. The point is the process by which first time traders in a double auction realize 100% of the gains from trade, a process imbued with value judgments, tensions, and complications. These early paragraphs are but prologue for applying Bakhtin’s essay to prices. The rest of the essay goes where economists dare not go–to ethics:

The dialogic orientation of a price among other prices (of all kinds and degrees of otherness) creates a new and significant ethical potential in exchange, creates potential for a distinctive ethics of trade, which has found its fullest and deepest expression in the catallactics. (p. 275)

A price animates people to action and is continuously animated by other prices, by other people. A price is about people, not mere physical phenomena, and hence as moral beings there is an ethics of trade in prices. Just like a novel expresses the artistic potential of discourse, the entire web of trade (catallaxy) expresses the moral aesthetics of exchange. A literary theoretical treatment of prices considers the ethics of strangers voluntarily trading to better their lives. As I have gone on far too long, the proof is left to the reader as an exercise.