barter - Transaction Issues, History of barter, Swapping

Trade conducted without the use of currency. Goods are directly exchanged for one another, each party to the exchange seeking to make a profit. In the absence of a currency, the relative value of goods must often be negotiated through haggling.

Barter is a type of trade in which goods or services are exchanged for other goods and/or services;

Barter and money are different means of balancing an economic exchange.

In finance, the word "barter" is used when corporations trade with each other using non-money financial assets (such as U.S. Treasury bills).

Transaction Issues

Bilateral barter is possible when there is a coincidence of wants between two economic actors. 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.

– 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.

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.

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.

Swapping

Swapping is the increasingly prevalent informal bartering system in which persons on internet communities trade items of comparable value on a trust basis.