Hi all,
Was talking with a friend recently and he posed an interesting question that got me thinking. Money arises via the market, basically as a hedge against uncertainty. You keep enough of the money commodity around and you can generally be assured that you can get your hands on what you want when you want it and not have to find a double coincidence of wants. Not so in barter. And there's a time element to it; it's a store of value over time. You pull an ounce of gold out of the vault thirty years after you put it in there, it's worth something. Maybe not exactly what it was when you put it in there, but you're going to be able to use it in exchange.
Now the question or scenario is this: as technology and specifically communications gets better and better, is it possible we'll see a transition back to barter to some extent? Money is still in a state of barter relative to everything else, but now with networks like eBay is it possible that such systems might develop such that goods can be evaluated and exchanged directly fast enough that the need for money drops significantly? Is it possible these networks will alleviate some of the limitations of barter by facilitating exchanges by: making it easier to find that double coincidence of wants; expanding the potential pool of traders?
My answer was I think money would always be there as a common denominator in the market, but that these systems might lead to tiered or niche moneys arising, and making it easier for these 'currencies' to compete and possibly surpass existing currencies. My reasoning behind this was that two other limitations of barter would be enough to keep money going strong, those being the need for economic calculation on a large scale and the other reason being you'd need people to constantly evaluate and barter and re evaluate and barter again such that the bartered items gain some velocity in the market before they could really gain any signalling power, that is affecting people's decisions.
Any thoughts?
I believe the transition is already taking place, albeit it still a tiny niche with huge potential, see:
http://www.tradeaway.com/
http://www.barterquest.com/
http://www.trashbank.com/
http://www.swaptreasures.com/
http://www.u-exchange.com/
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
One of the big problems with barter economics is the need for big stockpiles of whatever goods. Money is convenient because it does away with the need of devolving time and resources needed to stockpile goods: a bag of gold coins is easier to store than a few metric tons of grains. A hundred thousand dollars in electronic bits are much easier to store than a thousand barrels of crude.
Also money as a mean of exchange makes it much easier to price goods and allows for easier payments. Building up a barter system for many types of goods (for example how many bushels of hard Ukrainian grain is a barrel of low sulfur, light crude oil worth?) would be a monumental task, even in the present with immediately available information and pretty much infinite databases. It is just much more covenient to price everything in money.
The only time in history a money system officially went back to barter (at least partially) I am aware of is VII/VIII century Byzantium. Mind we don't know that much about the period and the decision probably came about out of necessity (having lost the richest part of the Empire to the Arabs and about a quarter of remaining population to the plague). It is supposed this system was partially controlled by the central government (through the kommerkiarioi) but as the few remaining sources tell us it was mostly market-driven, with supply and demand regulating the exchange rate. Part of the transactions were in gold coins (nomismata), since everybody needed gold coins to pay taxes and it is supposed thematic soliders (landowners who instead of paying taxes gave their services as professional soldiers) got "better deals" since they needed to arma and rquip themselves.
A barter economy is one absent of money, not just one where moneyless exchanges occur. So even if bartered spot exchanges became feasible via technology, firms like eBay would still be calculating profit and loss in terms of money. At the end of the day, instead of saying "we traded 100p, 200q, 300r, for 50x, 250y, 500z" they are going to say "we traded this stuff for that stuff and turned a $100,000 profit."
they said we would have an unfair fun advantage