Dyads, triads, and the theory of exchange: Between liberty and coercion

Economists commonly use the Edgeworth box to illustrate the ability of exchange to generate gains from trade. In contrast to this framework of dyadic exchange, we explore triadic forms of exchange where margins of coercion are also present. In the presence of triadic exchange, market transactions are no longer wholly voluntary and instead reflect an admixture of liberty and coercion. We illustrate triadic exchange in the context of credit markets, showing how continual turbulence is a sign of neither market failure nor government failure but is rather a systemic quality of triadic exchange as a system of societal governance. Copyright Springer Science+Business Media, LLC 2013