Barter Economy

Topics: Trade, Money, Commerce Pages: 3 (774 words) Published: March 19, 2013
Barter economy

The non-cash exchange of goods and services is known as barter. Bartering was common in earlier societies, but is rare in an advanced economy with a stable currency. Barter usually replaces money as the method of exchange in times of monetary crisis. This can occur when the currency may be either unstable or simply unavailable for conducting commerce. A barter exchange operates as a broker and bank. In this type of exchange each participating member has an account that is debited when purchases are made or credited when sales are made. Compared to bartering one on one, uncertainties over unequal exchanges are reduced in a barter exchange. A barter economy is one of the most basic and primitive ways to exchange money.

There are both positive and negative aspects of this type of economy as there are with just about everything. Barter economy is an efficient and hassle free type of exchange which can help people get what they want without spending the money they have saved for their future or simply something they have been saving up to purchase. Barter economy had a long history of evolution. It has existed since prehistoric times and is still used in our society today. Earlier human societies relied broadly on barter trades as they progressed from self-reliance to the full-scale use of money. This economy is most beneficial during times of economic downfall and particularly when a country has trouble evaluating the economic worth of various goods and services.

Bartering requires a double coincidence of wants. This basically means that each trader must have what the other person wants and wants what the other has. For example if Joe, a fruit farmer needs his drainage pipes fixed and can only trade fruit, he must find a plumber that is willing to fix his drainage pipes in exchange for fruit. Unfortunately for Joe, it may take a very long time for him to find someone who wants fruit in exchange for fixing his drainage pipes. The time Joe...
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