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Bartering Systems: Definition & Concept

Instructor: Christopher Sailus

Chris has an M.A. in history and taught university and high school history.

In this lesson we explore one of mankind's oldest economic activities: bartering systems. Though they can be incredibly complex, most bartering systems are personal exchanges of value with no currency involved.

Childish Bartering

Most boys, at some point in their childhood, have traded cards with other boys. Be it football, baseball, hockey, or even cards to a role-playing game, most boys have made hundreds of shady back-room deals before they hit puberty, willing to trade several expensive cards merely to obtain one of their favorite player.

What these boys surely do not recognize, is that they are engaging in one of mankind's oldest economic systems: bartering.

Definition

Barter systems are different from most transactions which occur in our modern world because they never involve an exchange of money. Instead, we would probably characterize bartering today as 'trading.' In a barter system, for instance, instead of giving the cashier a set amount of paper and coin money for your groceries, you would give the cashier goods - your watch, your car keys - of equal value in return.

Bartering has its limitations, but it also has advantages. Honesty amongst traders is integral to a bartering system; participants must be assured of each other's accurate valuation and description of their goods, or the bartering system will surely break down. However, bartering can also have positive aspects that a market or commodity economy does not, specifically when it comes to the valuation of an item. An item that is worthless to one barterer may be incredibly valuable to another, and therefore still able to give its owner a positive return on his or her investment.

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