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The documentation states:
> In non-blocking mode, if a recv() call doesn’t find any data, [...], a error exception is raised; [0]
Which is wrong. If no data is available recv() does not raise an exception but returns an empty string.
[0] http://docs.python.org/library/socket.html#socket.socket.setblocking 

I think you're mistaking a closed connection with "no data available".
Small demo that this works as intended:
>>> s = socket.socket(socket.AF_INET, socket.SOCK_STREAM)
>>> s.connect(('localhost', 1234))
>>> s.recv(10)
^CTraceback (most recent call last):
 File "<stdin>", line 1, in <module>
KeyboardInterrupt
>>> s.setblocking(False)
>>> s.recv(10)
Traceback (most recent call last):
 File "<stdin>", line 1, in <module>
socket.error: [Errno 11] Resource temporarily unavailable
The corresponding server:
>>> x = socket.socket(socket.AF_INET, socket.SOCK_STREAM)
>>> x.bind(('', 1234))
>>> x.listen(1)
>>> x.accept()
(<socket._socketobject object at 0x7f4211e997c0>, ('127.0.0.1', 39146))