Why Doesn’t America Just Use The Barter System Again?

Want my cow?

I was recently browsing the web and came across a discussion about America going back to the barter system. The author of the discussion ranted, “let’s get rid of big evil business, money, oil, and go back to horse and buggy and the barter system !” This actually sounds like a decent idea at first. Many Americans long for a more simple government and financial system. Big business is public enemy number one to the common blue collar worker. But would reverting to the barter system actually do anything to address America’s ongoing problems?

A barter system is characterized by the trading of goods between two separate entities. I trade you some berries for a shell necklace. This seems like a fair and efficient method of payment, until you examine the situation more closely. There are a variety of problems that make the barter system archaic and inefficient.

One of these problems is what economists call a “double coincidence of wants.” What in the heck is that? Simply, it means that I may have those berries to trade for your necklace, but you don’t want them! I may have to search for an item you want, necessitating multiple transactions with many different individuals. Having a standardized commodity as a currency minimizes transaction costs. You may not realize it, but the dollar makes your life a lot easier!

Another problem with the system is the need for an enormous amount of different prices. How many shells equal a vegetable? How many cars equal medical care? Let’s take a look at a hypothetical country that uses the barter system.

In Williamsland, there are 1000 goods people trade with each other. With a standardized currency, like the United States has today, there would be… 1000 different prices! The standardized currency allows for simple pricing of a variety of products. Here is how many prices would be necessary in Williamsland:

1000(999)/2 = 499,500

There would be nearly half a million different prices! I don’t know about you, but that does not sound like the ideal marketplace to me. Financial innovation in the modern era has allowed the world to become more efficient. So sorry all of you who want to travel back in time 500 years; you would be making your life much harder!

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6 comments on “Why Doesn’t America Just Use The Barter System Again?

  1. Reblogged this on freeupcapital and commented:
    We will.

  2. Return to the barter system has already started friend. I know folks lending garden tools locally with the promise of “honesty” if it breaks and pay with another means.

    Simple.

    Why does America work? We trust each other… laws. However, our government wants to break that trust and divide us through simple socialist tactics like class warfare.

    My neighbor has more money than me, however, I will kill to save his kids… get it?

    Love ya bro.

    Good Night.

    • ericbrownfsu says:

      I don’t see your correlation between your neighbors and borrowing tools with a barter system as relevant to this article. A barter system in the US would be on a ridiculously large scale. Ryan said earlier 1000 goods would have 499,500 different prices. Imagine the goods we have in the US today. Also I don’t see how class warfare is going on in America. It’s not like we live in a dictatorship under a caste system. This is a free market society and social mobility is better here than most other countries in the world. Sorry if I sound harsh, but I was just a little puzzled from your response. Take care bud, and I hope you find some good garden tools to make yourself a tycoon in the ‘hood.

      • I agree social mobility is better here, in the US, than anyplace else in the world. I did not argue that. What I ststed was that people are bartering now because of the “forced”… UN… FED… crony international banking sstem that is eroding Americans as I write this.

        I agree with you.

  3. Reblogged this on allbusinessbarter and commented:
    Great article about bartering! Check it out!

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