5. Value transferred and stored in non-monetary economies

By: Andrea Terzi

Private and commonly shared measures of value

Under any of the three means of transferring values discussed above, anyone giving or receiving subjectively measures the values of the objects exchanged: each individual, whether acting by force, gift, or contract, has a private belief of what something is worth. In hierarchy and gift-with-reciprocity systems, value may indeed remain exclusively an individual estimate of worthiness, as these systems can function with no commonly shared and publicly known measures of value, or “prices.”

Yet, value may become a quantitative record that individuals communicate to each other. Apart from monetary economies (see below), the use of commonly shared measures of value is an essential feature of organized barter, a special case of a gift-with-reciprocity system, where reciprocity requires that receiving is a condition for giving.

Although the barter terms of exchange between what is given and what is received may well be defined in each individual negotiation and no quantification of the values exchanged is necessary, there is evidence of human societies organizing transactions of a few selected goods using publicly accepted terms of exchange. Values are thus measured and communicated in real terms, either in terms of units of a certain valuable object or activity so that the value of any item is expressed relative to a standard unit or else relative to some abstract unit of measure. In either case, value is measured by comparison, not on an absolute scale. Thus, a cup of beer may be evaluated as twice the worth of a piece of fruit or of a given piece of gold, for example.

Trading and storing value in organized barter economies

Organized barter does not require that the acts of giving and receiving be simultaneous. People can choose to keep social inscriptions, or records, of the values of traded goods and services in such a way that any act of giving generates a real claim (a right to receive value) and any act of receiving generates a real debt (an obligation to deliver value). All real claims accumulated at any point in time must equal all accumulated real debts, and the net wealth of the consolidated community consists of the amount of valuable goods stored and the potential of using human labor to produce more valuable goods and services.

While the quality of life in such a system depends on people’s use of their labor power, their productivity, and how they are given access to the acquisition of goods and services, private individuals may develop a tendency to seek protection from the uncertainties surrounding their own future ability to acquire desired goods and services by accumulating any particular real asset that offers the prospect of being stored without significant physical deterioration. The use of labor to produce such a commodity (e.g., extracting gold) increases the amount that individuals can store.

A system of organized barter cannot, however, effectively manage to coordinate production specialization, where people significantly increase their use of objects they do not produce, without recourse to an authority. The ensuing rising complexity of transactions would require non-simultaneous exchange and thus a large volume of real claims and liabilities. Purely private economic initiative would inevitably be inhibited by the use of claims in real terms that are valuable only to the extent that the right to receive specific goods and services from others can be enforced at specific times. An authority enforcing delivery could not avoid gridlock situations (where a trader cannot deliver the real thing promised and the other party will not accept a substitute) unless that same authority became the organizer and manager of the system, sending orders to individuals as to what transactions they should be carrying on among themselves to achieve centralized production goals.

When a barter system is viewed as a special case of gift-with-reciprocity, as above, it bears very little resemblance to a monetary economy and can be an alternative means to organizing complex production systems only if managed hierarchically. An increased scale of operations would inevitably compel barter traders to yield coordination decisions to a higher authority.

Next module: Contracts in a monetary economy
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