Adam Smith showed us the importance of free markets for the welfare of the people in a nation (Smith, 1776). At that time people were restricted to a local environment and governments thought they could best protect national interest by preventing too much exchange. The market has undoubtedly liberated many people from local bonds by promoting free choice. This liberation has stimulated innovation and increased welfare. Thus, the highly specialized institution of a market—specialized as it concerns the exchange of commodities only—was very successful. This success is explained by the fact that in the 18th and 19th centuries markets made it possible for people to establish more comprehensive relations to other cultures and resources. This feature surpasses the commodity dimension usually represented in a market. Commodities from the Indies, China or Egypt, and its accompanying technical innovations connected people with other cultures and stimulated their imagination. In this paper we seek to develop a theory that is founded on these institutional dimensions.

Economists elaborating on the theory of markets emanating from Smith’s seminal work, have taught us that “free” means “perfect competition”, which is arrived at if no individual has any observable influence on the formation of the market price. That means a person enters a market anonymously, and only her anonymous willingness-to-pay is recognized and communicated. Economists have also shown that the perfectly competitive market mechanism is amoral: it processes what is demanded or supplied, without any moral filtering, and it accepts any initial distribution of wealth, however unjust. As argued above, this seems far removed from the underlying basic relational realities.