Barter

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Barter is a type of trade in which goods or services are exchanged for other goods and/or services; no money is involved in the transaction. It can be bilateral or multilateral as trade. "Barter" is sometimes (incorrectly) used as a synonym for "negotiate/negotiation." Common subjects of barter during colonial times were tobacco, grain, and wampum.

Barter and money are different means of balancing 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 corporations trade with each other using non-money financial assets (such as U.S. Treasury bills). Some however would like to see the standard definition of money expanded to cover near-money assets.

1 Transaction Issues
2 History of barter
3 Swapping
4 See also
5 External links

[edit] Transaction Issues

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 coincidence issue can be resolved by different ways:

– Some communities develop a system of intermediaries who can store, trade, and warehouse commodities, but who may suffer economic risk.

– Others develop a system with a virtual value unit ("barter dollars," for example) to measure and balance exchanges, very similar to a monetary system.

– Multilateral barter is more complex to settle but allows trades that would not be possible with bilateral barter. This complexity can be reduced by openbarter software.

– On the west coast of the United States one can find an extension of barter, characterized by free sharing, without the use of barter dollars or credits. In this system what a participant receives is independent of what that participant gives, but controls prevent exploitation by any participants.

[edit] 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 well-known example of multilateral trade is the triangular trade.

Money used to be considered as simpler for small trades; but use of the Web has changed that perception, especially in respect to Swapping.

[edit] 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.

[edit] See also

Simple living
Natural economy
Reciprocity
Marketing

Private currency
Local currency
Local Exchange Trading System

International trade
Hyperinflation
List of international trade topics
Business
Commerce
Hazel Henderson

[edit] External links

Categories: Business | Commerce | Alternative economy | Pricing | Simple living