|
Barter is a type of trade where goods or services are exchanged for a certain amount of other goods and/or services; no money is involved in the transaction. It can be bilateral or multilateral as trade. It is a word frequently used as a synonym for 'negotiate/negotiation', but this usage is incorrect. A common form of barter during colonial times was tobacco. Also bushels of grain and wampum were popular forms. Barter and money are two different means to balance an economic exchange. Barter is used in societies where no monetary system exists. When there is one, it is also used, especially in economies suffering from a very unstable currency (as when hyperinflation hits). In finance, the word "barter" is used when two corporations trade with each other using non-money financial assets (such as U.S. Treasury bills). Alternatively, the standard definitions of money could be seen as being too narrow and needing to be expanded to increase near-money assets.
Transaction Problems Bilateral barter is possible when there is a coincidence of wants between two economic actors. Before any transaction can be undertaken, each party must be able to supply something the other party demands. This mutual coincidence problem can be solved by different ways: – Some communities develope a system of intermediaries who can store, trade, and warehouse commodities. However, the intermediaries often suffer from economic risk, – Others develope a system with a virtual value unit, the Barter Dollar for example, to measure and balance exchanges, very similar to a local monetary system, – The last solution is multilateral barter, more complex to settle than bilateral barter, it also allows trades that would not be possible with bilateral barter. This complexity can be greatly reduced by a openbarter, a software that does not use any value reference. History of barter To organize production and to distribute goods and services among their populations, many pre-capitalist or pre-market economies relied on tradition, top-down command, or community democracy instead of market exchange organized using barter. Relations of reciprocity and/or redistribution substituted for market exchange. Trade and barter were primarily reserved for trade between communities or countries. It is also used when the monetary system failed to measure the economic value of goods. Barter becomes more and more difficult as people become dispossesed of the means of production of widely-needed goods. For example, if money were to be severely devalued in the United States, most people would have little of value to trade for food (since the farmer can only use so many cars, etc.) It is used on important transactions between firms or countries to exchange economic values, when monetary constraints are too expensive for the economic actors. A famous example of multilateral trade is the triangular trade. Money is used to be considered as simpler for small trades; but recently, the use of web is changing the complexity of barter compared to the use of money in the form of swapping. Swapping Swapping is the increasingly prevalent informal bartering system in which persons on internet communities trade items of comparable value on a trust basis. While swapping is an excellent way to find and obtain items that are inexpensive, it is reliant upon honesty. On occasion, person can find that they've been swaplifted; ie. they've sent their end of their swap, but the recipient does not complete the transaction. Often recourse is limited to shunning or small claims court. See also | ||||||||
|
| |||||||||
 |
|
| |