barter

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Related to Barter economy: Monetary economy

Barter

The trading/exchange of goods or services without using currency.

Barter

To trade one item for another of roughly equal value. That is, bartering occurs without a medium of exchange like money. For example, one may trade 10 apples for 10 oranges. Bartering exists in all societies, though it is less common than monetary transactions. See also: Horizontal Security Exchange, Payment-in-Kind.

barter

an exchange mechanism for buying and selling goods and services which involves the physical ‘swapping’ of one product for another. Generally, barter is a cumbersome and inefficient means of organizing exchanges in an economy, since a large amount of time is wasted in seeking out and finding compatible ‘swap’ partners (i.e. each selling what the other wants to buy), and then haggling over an appropriate exchange rate (for example how many tomatoes equal a sewing machine?). All these difficulties can be overcome by the use of MONEY as a common denominator to conclude transactions and ‘price’ individual products.

For all its disadvantages, barter (or COUNTERTRADE as it is often referred to) is still widely used in the context of INTERNATIONAL TRADE. Firms which are unable to obtain the necessary foreign currencies they require to finance a trade deal (because the government operates FOREIGN EXCHANGE CONTROLS or because the country has simply run out of currencies due to a balance of payment deficit), often enter into a bilateral ‘swap’ deal with firms in other countries arranging a suitable product exchange.

barter

the EXCHANGE of one economic good or service for another. Barter as an exchange mechanism, however, suffers from a number of serious disadvantages:
  1. for barter to take place, there must be a ‘coincidence of wants’, that is, each party to the barter must be able to offer something that the other wants. For example, an apple-grower wishing to obtain oranges must not only find an orange-grower but must particularly find an orange-grower wishing to acquire apples. Finding appropriate exchange partners can involve lengthy search activity, which reduces the time available for actually producing goods;
  2. even if the parties meet up, they then have to agree on an appropriate ‘rate of exchange’, for example, how many apples are to be exchanged for one orange? Haggling over exchange terms is again time-consuming, and where agreement cannot be reached between the two parties each will then have to seek out new exchange partners.

Overall, barter is a very inefficient means of organizing transactions in an economy and has been largely superseded by the PRICE SYSTEM in modern economies, using money as a medium of exchange. See COUNTERTRADE, BLACK ECONOMY

References in periodicals archive ?
The CIA constraint introduced above, also known as a Clower constraint, is a convenient way to distinguish a monetary from a barter economy.
Tobin's error comes from viewing a monetary economy as simply a barter economy with money.
In a pure barter economy as considered in Li [1998], when only high-quality output is produced, middlemen get the same payoff as producers but they need to pay cost [Delta] for the quality-testing technology.
Moscow's suspension of payments on its foreign debt spooked world credit markets and helped turn the former Evil Empire into a barter economy.
They traded with the British, Dutch and French, fought off pirates, and stubbornly retained a barter economy, as well as their own language and customs.
The Soviet economy in practice was always a barter economy.
While many retailers are reporting a decline in seasonal sales for 2009, our trading volume is quite consistent with last year, as our secondary barter economy continues to enhance the businesses and lifestyles of our members.
Can you imagine a barter economy where each day you have to find people with an excess of the product or service you want and a matching demand for the excess of the product or service you have to trade?
It's unofficial, but a week of reading Gulf News leads to one reasonable conclusion: we are in a barter economy.
The low cash-based collections characteristic of Russia resulting in a large barter economy with tax and wage arrears;