Barter System

BARTER SYSTEM
In trade, barter (derived from baretor) is a system of exchange
where participants in a transaction directly exchange goods or
services for other goods or services without using a medium of
exchange, such as money.

Economists
Distinguish barter from gift economies in many ways; barter, for example,
features immediate reciprocal exchange, not delayed in time. Barter
usually takes place on a bilateral basis, but may be multilateral (i.e.,
mediated through a trade exchange). In most developed countries, barter
usually only exists parallel to monetary systems to a very limited extent.
Market actors use barter as a replacement for money as the method of
exchange in times of monetary crisis, such as when currency becomes
unstable (e.g., hyperinflation or a deflationary spiral) or simply unavailable
for conducting commerce.
The beginning of the barter trade originated at the time human societies
began to develop, and continues to exist in some societies today.
Modern day money developed through the trades and exchanges of
bartering with the primary exchange being that of "cattle.“ Cattle,
which included everything from cows to sheep to camels, was the
oldest form of modern day money. This developed into the trade of
shells and other items, and continued to evolve all the way to the
modern form of paper money in use today.

Bartering is traditionally common among people with no access to
a cash economy, in societies where no monetary system exists, or
in economies suffering from a very unstable currency (as when
very high rates of inflation hit) or a lack of currency. In these
societies, bartering oftentimes has become a necessary means of
survival.
In order 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.

Limitations
The limitations of barter are often explained in terms of its
inefficiencies in facilitating exchange in comparison to money.
It is said that barter is 'inefficient' because:
 No standard of measurement: Barter provides no standard of

measurement. In other words, it provides no measure of value. It
does not provide a method for estimating the relative value of two
goods.
 Absence of double coincidence of wants: Barter requires a
double coincidence of wants. That is, one must have what the
other man wants, and vice versa. This is not always possible. For
example, say I want a cow. You must have it. If you want a horse
in return, I must have it. But if I do not have it, exchange cannot
take place. So, I should go to a person who has a horse, and I must
have what he wants. All of this means a lot of inconvenience. But
money overcomes these difficulties. If I have an object, I can sell
it for some price. I get the price in money. With that, I can buy
whatever I want.
 Absence of subdivision: Sometimes it will be difficult to split up
commodities into parts. They will lose their value if they are
subdivided. For example, say a man wants to sell his house and buy
some land, some cows, and some cloth. In this case, it is almost
impossible for him to divide his house and barter it for all the
above things. Again, suppose a man has diamonds. If he divides
them, he will make a great loss.

 Difficulty of storage: Money serves as a store of value. In the
absence of money, a person has to store his wealth in the form of
commodities, and they cannot be stored for a long period. Some
commodities are perishable, and some will lose their value.

Lack of standards for deferred payments
This is related to the absence of a common measure of value,
although if the debt is denominated in units of the good that will
eventually be used in payment, it is not a problem.

History of Bartering
The history of bartering dates all the way back to 6000 BC.
Introduced by Mesopotamia tribes, bartering was adopted by
Phoenicians. Phoenicians bartered goods to those located in
various other cities across oceans. Babylonian's also developed an
improved bartering system. Goods were exchanged for food, tea,
weapons, and spices.

At times, human skulls were used as well. Salt was another popular
item exchanged. Salt was so valuable that Roman soldiers' salaries
were paid with it. In the Middle Ages, Europeans traveled around
the globe to barter crafts and furs in exchange for silks and
perfumes. Colonial Americans exchanged musket balls, deer skins,
and wheat. When money was invented, bartering did not end, it
become more organized.

Due to lack of money, bartering became popular in the 1930s
during the Great Depression. It was used to obtain food and
various other services. It was done through groups or between
people who acted similar to banks. If any items were sold, the
owner would receive credit and the buyer's account would be
debited.

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BARTER SYSTEM

In trade, barter (derived from baretor) is a system of exchange

where participants in a transaction directly exchange goods or

services for other goods or services without using a medium of

exchange, such as money.

began to develop, and continues to exist in some societies today.

Modern day money developed through the trades and exchanges of

bartering with the primary exchange being that of "cattle.“ Cattle,

which included everything from cows to sheep to camels, was the

modern form of paper money in use today.

a cash economy, in societies where no monetary system exists, or

in economies suffering from a very unstable currency (as when

very high rates of inflation hit) or a lack of currency. In these

societies, bartering oftentimes has become a necessary means of

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.

 No standard of measurement: Barter provides no standard of

above things. Again, suppose a man has diamonds. If he divides

them, he will make a great loss.

absence of money, a person has to store his wealth in the form of

commodities, and they cannot be stored for a long period. Some

commodities are perishable, and some will lose their value.

This is related to the absence of a common measure of value,

although if the debt is denominated in units of the good that will

eventually be used in payment, it is not a problem.

Introduced by Mesopotamia tribes, bartering was adopted by

Phoenicians. Phoenicians bartered goods to those located in

various other cities across oceans. Babylonian's also developed an

improved bartering system. Goods were exchanged for food, tea,

weapons, and spices.

item exchanged. Salt was so valuable that Roman soldiers' salaries

perfumes. Colonial Americans exchanged musket balls, deer skins,

become more organized.

during the Great Depression. It was used to obtain food and

various other services. It was done through groups or between

owner would receive credit and the buyer's account would be

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