The direct exchange of goods and commodities between two or more groups.

For as long as civilisation can remember there has been some form of barter. In times gone by, and today, people have traded without the use of money. For example the local farmer who grew grain may have traded an agreed number of bushels with their neighbour for a set number of eggs. The amounts involved were purely between the two individuals, and any two transactions may have been different.



Benefits of Barter

Barter allows trade without money. Either party can exchange without funds if an acceptable arrangement can be agreed upon.

Barter may allow for a more advantageous transaction when selling to the market may produce a poorer result. Perceived value can result in a good trade result by not going to the market with money. An excellent example is of a Canadian man who bartered his way from a paperclip to a house in 2005. This is an extreme, but achieveable example of the power of bartering.

Shortcomings of Barter

Barter demands different exchange agreements per person that are being traded with, and keeping track of these exchanges is problematic. For example, the egg seller may ask for 5 bushels of maize per egg to the maize seller, and 6 logs of firewood per egg to a fuel seller. In a fixed market the agreement between the maize seller and the fuel seller would be 5 bushels to 6 logs, but what happens if the maize seller wants 10 logs for their 5 bushels?

A shortage may have given rise to disputes over the regular exchange agreement. Let's say it was a particularly cold winter and many hens died off, or a predator got into the hen's enclosure, and there is half the available eggs to trade. The egg seller still needs the same amount of goods for himself to live and thus can only give half the number of eggs for the same amount of maize. Negotiations would have been difficult and promises to make it up in future would have been many. People forget agreements, cheat, and generally outcomes are poor.


Aslo barter prevents taxation from being collected. Tax in a modern society is for everyone's benefit. Collective infrastructive, services, and protection would not be as widely available due to low or no taxation.

Improving on Barter

The availability of money and local marketplaces gradually moved people away from direct barter but it has never completely disappeared, nor will it ever. Adverts for money-less trades, swap-meets are common even with a small amount of money thrown in. Marketplaces provide a single place for all people to take their goods for sale. As society became more complex and the harvesting of commodities required less and less people, more people came off the land and needed to do new roles to get their basic needs met - food, clothing and shelter, amongst others. People began to specialise their skills more and more, builders constructed, educators taught others their skills, designers dreamed up concepts, problem solvers found a way to deliver, etc. The best way to distribute the work that specialists do is through money and not barter.