Socrates’ first step, before he and Adeimantus begin building the city proper, is to discuss which “beginning” or “principle” (the word arche can mean either or both of these depending on the context, which is often ambiguous) they will look to in order to build it, and their reasons for choosing that begin- ning/principle. Here is the passage in question:

“Now then,” I said, “a city comes to be, as I believe, since each of us happens not to be self-sufficient but to be in need [endees] of many [things]. Or do you believe that any other beginning/principle [arche] founds a city?” “None [other],” he said. “In this way, therefore, as one [of us] takes on one [person], and another [takes on] another—[each one of us taking on one] for one thing, and [another] for another thing—[and all this] because of need [chreiai], since we are needing [deomenoi] many [things]—[now then,] when we have gathered many people as partners and rescuers into one settlement, as a name for this shared-settlement we put16 [down] ‘city,’ isn’t that right?” “Very much so.” “Does one [of us] give a share [of something] to one [person] and another [of us] to another, whenever he does give some share [of something]—or [again,] does one take a share [when one does take some share of something]—supposing that it is better for himself?” “Quite so.” “Come on, then,” I said, “let’s make a city in speech from the beginning/principle; and our need [chreia], as seems likely, will make it.” “Of course.” (369b7-c11)17

There are several points here worth noting. In the second chapter of An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith famously bases his theory of the division of labor on the simple “propensity in human nature . . . to truck, barter, and exchange one thing for another” (Smith 1904, 15). Socrates begins from a more fundamental principle that explains why people are inclined to exchange. He proposes that, even after they do what they can for themselves, individuals18 are needy; it is this sort of “need” [chreia], or being “in need” [endees], or “needing” [deomenoi], that founds a shared-settlement, or “city.” The opposite of need is self-sufficiency—not needing anything from outside oneself to be complete.

Having identified this founding principle, Socrates explains that each needy person will look around for a variety of people who each have a specific product he needs, and he will seek to induce them to help him. These are individuals who think and make decisions for themselves. Their actions build a network of mutual assistance with no central coordination. Such assistance requires considerable proximity, so they will live near one another, producing a “shared- settlement.” Like Weber and Mises, Socrates seeks to explain social phenomena, in this case cooperation, exchange, proximate habitation, and the formation of a city, by accounting for the experiences of individual decision makers.

Needy individuals do not “rescue” one another because they are generous, however; their own need motivates them to address others’ needs through exchange (Strauss 1978, 94; Hoffe 1997, 74; McKeen 2004, 84-85). Yet even here, Socrates does not refer simply to “exchange.” Instead, he carefully breaks down the exchange relationship into its four component decisions: Person A decides to give Product a to Person B, B decides to take a from A, B decides to give Product p to A, and A decides to take p from B. Each decision is motivated by an actor’s belief that the decision will contribute to a “better” outcome for himself than if he had not made that decision. In modern terms, rational actors engage in cost-benefit analyses in order to maximize their utility through trade. When both parties agree to the same set of four decisions—to a shared plan for exchange—they contract with one another and become “partners” (koinonoi) in fulfilling both of their needs.

This does not mean, however, that every actor, confronted by the scarcity of means at his disposal, can be understood to have a fixed set of specific, ranked, competing ends and to seek out only the particular means that will most satisfy those ends, as Lionel Robbins’s influential theory of the nature of economics would have it (Robbins 1932, 12-16, 23-24). In critiquing Robbins on this point, Israel M. Kirzner draws on the “Misesian notion of human action”:

The human-action concept, unlike that of allocation and economizing, does not confine the decision-maker (or the economic analysis of his decisions) to a framework of given ends and means. Human action, in the sense developed by Mises, involves courses of action taken by the human being “to remove uneasiness” and to make himself “better off’. . . . Human action treats both tasks—that of identifying the relevant ends-means framework and that of seeking efficiency with respect to it—as a single, integrated human activity. (Kirzner 2013, 26-27)

Socrates similarly identifies only the most general of goals toward which the citizens are pushed by their need: achieving a “better” condition and avoiding worse ones (369c), “being and living” (369d), and relative ease in productive work (370a, c). Citizens in Socrates’s city evaluate their actions and other goals with reference to these, and they seek and discover both new actions and new, more specific goals that would allow these most general goals to be achieved, as we will see in the following sections.

Let us also note that, by reducing exchange to its constituent parts, Socrates isolates what we would call the demand side and the supply side of any exchange. He draws attention to the fact that supply and demand are both variable and independently variable (at least at this level of analysis), conditional on the needs and decisions of individuals.

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