The following are the common disadvantages of barter:
1. Lack of Double Coincidence of Wants
Persons must have matching requirements for barter to work
Our Response
The following workmen are necessary to make the shears used to clip the wool to make the coat: The miner, builder of the furnace for smelting the ore, The feller of the timber, The burner of the charcoal used in the smelting-house, The brick-maker and the brick-layer, The workers who attend the furnace The mill-wright, forger, and smith. All of them must join their different works to produce the shears.
A
2. Lack of any common unit of measure
If A has rice, and B has wheat, then how much of rice will exchange for how much of wheat? If there are 500 goods, we will have to work out 124,750 possible ratios of exchange which is an enormously difficult task
Our Response
1 : 3. This leads to less inflation and more price stability.
In exchanging the produce of different sorts of labour, some allowance is commonly made for both hardship and ingenuity. It is adjusted by the higgling and bargaining of the market, according to a rough equality sufficient for carrying on the business of common life.
A
The colonies sell their own produce chiefly to purchase European goods. The more they pay for the European goods, the less they get for their own produce. The dearness of the European goods is the same thing with the cheapness of their own produce.
A
3. Lack of Means of Subdivision
One coffee mug cannot be exchanged for half a shirt.
Our Response
The man who wanted to buy salt and had nothing but cattle must have been obliged to buy salt to the value of a whole ox. He could seldom buy less than this because his cattle could not be divided. If he wanted more salt, he must buy more oxen. If he had metals, he could easily proportion the quantity of the metal as he needed. Wealth of Nations Book 1, Chapter 4
A
4. Lack of Way for Future Payments
There is no way to write contracts for future payments.
Our Response
Give me that which I want, and you shall have this which you want, is the meaning of every such offer. In this way, we get most of what we need. Wealth of Nations 1, Chapter 2
A
5. Lack of Way to Store Purchasing Power and the Perishable Nature of Some Goods
Money can be stored but not all goods, such as eggs, can be kept until one retires.
Our Response
The returns of the fixed capital employed by land improvers are much slower than the returns of the circulating capital. Such undertakers or projectors may, with great propriety, carry on most of their projects with borrowed money.
A
6. Possible big difference in delivery times and costs for items involved
Company A might trade a single expensive item for many of Company B’s cheap items to be delivered many times, exposing Company A to more risk than Company B.
Our Response
The labourer’s coarse woollen coat is the produce of the joint labour of many workmen: The shepherd, wool-sorter, wool-comber or carder, dyer, scribbler, spinner, weaver, fuller, dresser, and many others must all join to complete the coat. Merchants and carriers must be employed to transport those materials from far away! Many ship-builders, sailors, sail-makers, rope-makers, must be employed to bring the drugs of the dyer coming from the remotest corners of the world!
A
7. Global Price Fluctuations
Prices can fluctuate in the world market very quickly.
Our Response
A public mourning raises the price of black cloth and increases the profits of the merchants who have black cloth. It has no effect on the wages of the weavers [regular workers] because the market is under-stocked with black cloth, not with long-term labour. It raises the wages of journeymen taylors [contractual workers] because the market is under-stocked with short-term labour. The mourning creates an effective demand for more short-term labour.
A
Leave a Comment
Thank you for your comment!
It will appear after review.