For some years now, the thought of the Hungarian economic historian and social scientist Karl Polanyi (1886–1964) has attracted renewed interest. Polanyi, who, just like Illich, was well acquainted with Erich Fromm, is perhaps best known for his unorthodox notion of markets as socially embedded, and he is regularly cited when it comes to their increasing separation from societal needs. In his famous book The Great Transformation ([1944] 2001), which is much indebted to Mauss’ conception of premodern social forms, Polanyi points out that market economies rely upon demanding conditions of social dislocation and are historically a rare and very young phenomenon: before the 19th century, he asserts, economic activities were still firmly embedded in social life.

Polanyi is considered the founder of the substantivist school of economic anthropology. In his essay “The Economy as an Instituted Process” (1957), he criticizes economics for its too formal understanding of economic processes. Neoclassical economists proceed from the notion of the homo oeconomicus: they believe that all human beings think in terms of individualism and utilitarianism and ascribe all economic decisions to means–ends deliberations. Even though we know that in some historical societies there were no markets to speak of and some did entirely without money in our current sense, economists tend to treat these historical societies as if people had already made their decisions according to supply and demand. By contrast, Polanyi looks at the exact empirical conditions under which people then engaged in exchanges with others. He considers the economic activities of humans to be “embedded and enmeshed in institutions” (1957: 50) and points to three patterns of behavior that constituted the archaic and the premodern economy: householding, redistribution, and reciprocity. For him, reciprocity is a symmetrical form of exchange between equals, be it persons or groups. Redistribution presupposes a principle of hierarchy and centricity: goods were accumulated in a central space (for example, in the house of the leader) and then distributed among members of the group. Householding (Gr. oikonomía), that is, production solely for the individual household, is the oldest of the three patterns. Markets, Polanyi states, only played a minor part in economic life before the early modern era, and even as late as the 18th century they were primarily used in long-distance trading.