Bartering

Written by Anuar Burkitbayev and Alexey Dudarev

In earlier times, when currency and money were not yet invented, people would exchange goods and services for other goods and services. For example, a farmer that needed clothes would pay a tailor in rice or apples. There were several implications with this system. 

Firstly, in order for bartering to be successful, a double coincidence of wants was needed. This is when both parties want the good that the other is offering. You wouldn’t want to trade for something that you don’t need. This, of course, was rare. Secondly, it was hard to put a value on goods. You cannot state that 1 boot costs 2 apples or vice versa, and there was no widespread system to place a value on goods. This lead to people having arguments about the goods traded as everyone viewed the prices of goods differently. Thirdly, goods such as apples and pears were perishable and thus, could not be saved for later use or trading. 

In order to solve the issue of bartering, basic currencies such as coins were created. They had a fixed value which made it easy to determine the value of goods and services. They could be easily stored without degrading or losing value and most importantly, they were widely accepted. Soon after the creation of coins, bartering fell out of fashion.