Economics of Barter

gerry87

Hey, I've just set up the website in my sig and i'm looking to do up a 'Benefits of bartering' section. I'm just trying to explore any economic arguments for and against bartering.

For - current economic climate a lot of skilled people are becoming unemployed and so are time and skill rich but cash poor.

Possible against - I've to look into the tax implications of bartering, but if people do have to declare barter trade for tax, then it would encourage service providers to start quoting much lower prices to let them pay lower tax, lowering tax revenue and maybe GDP. But, this could work to bring price of services in the country back to more reasonable levels.

Can anyone think of any more?

asdasd

I cant barter my half completed software project, so I starve and die in the meantime?

silverharp

you could do a search on google/wiki of community currency and schemes like LETS.

gerry87

asdasd wrote: »

I cant barter my half completed software project, so I starve and die in the meantime?

I don't get what you mean.

asdasd

I don't get what you mean.

you asked for the disadvantages of barter. I gave one. There are plenty others: will post tomorrow.

(that is , in general. Your website might work on the margins of the economy and good luck with it.)

thebman

The main disadvantage of a barter system is someone has to exchange first and once they have, why would the other person fulfill their part of the bargain?

Bartering online leaves the potential for the person that fulfills their side first to get screwed.

If exchanging face to face, you can exchange at the same time. I don't see how that works online. You can't exchange face to face and if postage is required you have no guarantee's that it has occurred before you fulfill your side of the barter.

In short, you need an exchange protocol or a trustable middle man to hold both sides and pass on the others part of the barter or return to sender if the other person fails to provide the goods.

That's my take on it anyway.

gerry87

thebman wrote: »

The main disadvantage of a barter system is someone has to exchange first and once they have, why would the other person fulfill their part of the bargain?

Bartering online leaves the potential for the person that fulfills their side first to get screwed.

If exchanging face to face, you can exchange at the same time. I don't see how that works online. You can't exchange face to face and if postage is required you have no guarantee's that it has occurred before you fulfill your side of the barter.

In short, you need an exchange protocol or a trustable middle man to hold both sides and pass on the others part of the barter or return to sender if the other person fails to provide the goods.

That's my take on it anyway.

I'm looking into putting some sort of protocol together, a standardised contract of some sort maybe. But entering into a barter contract is as legally binding as say, someone painting a house and then sending out the invoice. The same laws that stop people from not paying the bill will stop them from not carrying out there side of the deal.

That is definitely something i'll have to address people's concerns of.

K4t

Disadvantages:

Double Coincidence of wants - two people want to give away something but they don't necessarily want what the other person has.

Value - very hard to put a value on completely different items.

nesf

I've got a pig and you've got some corn. I want some corn so I offer to trade a pig for a pig's worth of corn. Unfortunately you've only got half a pig's worth of corn.

What happens?

gerry87

Well, 2 possible outcomes.

The first - the same as if your pig was worth €100 and i only had €50... nothing.

The second depends on more pure supply/demand and utility factors... how much do you want the corn? If you're deciding to barter the pig, you've decided barter is the better choice then selling it (for whatever reason)... If you have loads of pigs and no corn, then you might happily trade the pig for that amount of corn.

Obviously, if you had easy access to a market to sell the pig and could get a better price on that market in cash then then that would be the better choice to barter.

(just want to say, i don't mean to come across as highly defensive of bartering because of the site... i'm just thinking that when i tell people about the site i'm going to get some of the criticisms that will come up here, so i'm really just preparing answers to them)

thebman

gerry87 wrote: »

Well, 2 possible outcomes.

The first - the same as if your pig was worth €100 and i only had €50... nothing.

The second depends on more pure supply/demand and utility factors... how much do you want the corn? If you're deciding to barter the pig, you've decided barter is the better choice then selling it (for whatever reason)... If you have loads of pigs and no corn, then you might happily trade the pig for that amount of corn.

Obviously, if you had easy access to a market to sell the pig and could get a better price on that market in cash then then that would be the better choice to barter.

(just want to say, i don't mean to come across as highly defensive of bartering because of the site... i'm just thinking that when i tell people about the site i'm going to get some of the criticisms that will come up here, so i'm really just preparing answers to them)

There is a third outcome, the person with the corn finds something of alternative value to add to the deal with the corn that is acceptable to the pig owner in exchange for the pig assuming he really wants the pig.

In modern world terms, the best example would be a games console where a person could include games and controllers with a Wii in exchange for a PS3 which is of higher value.

Swapping for a laptop, include some software that you own, CD player include some CD's to make up the value.

With the pig and the corn, the farmer probably has something other than half a pig's worth of corn which would be acceptable to the pig owner who is probably also a farmer.

You argue that it is an advantage of the barter system as people will be more likely to trade an additional item they don't really want that is lying around the house that might be of more value to someone else (like a cable) where as if you were to purchase in a shop or ebay, the price isn't as negotiable.

thebman

thebman wrote: »

There is a third outcome, the person with the corn finds something of alternative value to add to the deal with the corn that is acceptable to the pig owner in exchange for the pig assuming he really wants the pig.

In modern world terms, the best example would be a games console where a person could include games and controllers with a Wii in exchange for a PS3 which is of higher value.

Swapping for a laptop, include some software that you own, CD player include some CD's to make up the value.

With the pig and the corn, the farmer probably has something other than half a pig's worth of corn which would be acceptable to the pig owner who is probably also a farmer.

You argue that it is an advantage of the barter system as people will be more likely to trade an additional item they don't really want that is lying around the house that might be of more value to someone else (like a cable) where as if you were to purchase in a shop or ebay, the price isn't as negotiable.

You know that third commodity is normally called money right?

thebman

Deleted User wrote: »

You know that third commodity is normally called money right?

It can be money, it can be anything. What if the person doesn't have the money but they have a cable and a computer game the other person needs?

gerry87

thebman wrote: »

There is a third outcome, the person with the corn finds something of alternative value to add to the deal with the corn that is acceptable to the pig owner in exchange for the pig assuming he really wants the pig.

In modern world terms, the best example would be a games console where a person could include games and controllers with a Wii in exchange for a PS3 which is of higher value.

Swapping for a laptop, include some software that you own, CD player include some CD's to make up the value.

With the pig and the corn, the farmer probably has something other than half a pig's worth of corn which would be acceptable to the pig owner who is probably also a farmer.

You argue that it is an advantage of the barter system as people will be more likely to trade an additional item they don't really want that is lying around the house that might be of more value to someone else (like a cable) where as if you were to purchase in a shop or ebay, the price isn't as negotiable.

I like that point about the advantage of the barter system - sort of helping to increase efficiency.

nesf

gerry87 wrote: »

I like that point about the advantage of the barter system - sort of helping to increase efficiency.

It's money that increases the efficiency though. It is merely a token that can be exchanged for a certain amount of goods and services. It allows exchanges to happen in a distributed fashion rather than require people to bring all the goods in question to each and every transaction and transport them around the place and store them etc.

Money in itself has no value, it is only worth what it can be exchanged for.


Edit: What you might want to look at is whether having a barter system or alternative currency system in parallel with normal money is an improvement. There are real world examples of this going on at the moment like silverharp mentioned. A barter only system would be worse than a money only system.

I like the JapaneseHureai_kippu for instance.

gerry87

nesf wrote: »

It's money that increases the efficiency though. It is merely a token that can be exchanged for a certain amount of goods and services. It allows exchanges to happen in a distributed fashion rather than require people to bring all the goods in question to each and every transaction and transport them around the place and store them etc.

Money in itself has no value, it is only worth what it can be exchanged for.

True, but i probably meant efficiency in a different sense. I'm not advocating barter replace money... but surely it can't be making the world more inefficient by using them in tandem.

By efficiency i meant more of a distribution of utility kind of thing, like the cable example above.

nesf

gerry87 wrote: »

True, but i meant efficiency in a different sense. I'm not advocating barter replace money... but surely it can't be making the world more inefficient by using them in tandem.

In tandem barter works or (better) complementary currencies work. Barter on its own is horribly inefficient, that was what I was talking about.

nesf

Topical?

http://www.rte.ie/news/2009/0312/funeral.html

Joey the lips

I have spent a little time looking into barter I think it works best on grocery goods. Meat/milk/fish/eggs/bread etc. I never think it works well on the
you swop your 1997 playstation for my 1992 xbox or the you swop your black and decker 12 volt cordless for my Whal hair trimmer.