Can You Explain Barter System And Why Has This System Failed?

Some years ago, when Mademoiselle a singer of the theatre gave a concert in the Society Islands. In exchange for an air from Norma and a few other songs, she was to receive a third part of the receipts. When counted her share was found to consist of three pigs, twenty-three turkeys, forty-four chickens, and five thousand cocoa- nuts besides considerable quantity of bananas, lemons, and oranges.

This example describes the barter, which consists of the exchange of goods for goods. Barter contrasts with exchange through the use of money, which is anything that serves as a commonly accepted medium of exchange or means of payment. Although barter is better than no trade at all, it operates under grave disadvantages because an elaborate division of labour would be unthinkable without the introduction of the great social invention of money.

As economies develop people no longer barter one good for another. Instead, they sell goods for money and then use money to buy other goods they wish to have. At first glance this seems to complicate rather than simplify matters, as it replaces one transaction with two. If you have apples and want nuts, would it not be simpler to trade one for the other rather than to sell the apples for money and then use the money to buy nuts.

Barter is the direct exchange of goods and services without use of money as either a means of payment or a unit of account.

At the early stage of mankind wants were limited and usually satisfied by means of own resources. As the time passes by, wants become larger and larger. So man exchanges some of its excess commodities with those who had surplus goods with them. So direct exchange of goods for goods or services is called Barter or Barter system. e.g. If a weaver want to have a pair of shoe he can get that by giving cloth to cobbler and other exchanges like this. This type of direct exchange of commodity to commodity without use of money is called barter in economics.

In many countries barter system works for hundred years. Why to go for in Pakistan, in some villages people still do direct exchange. Woman of village get oil, toys, spices from village shopkeeper by giving him wheat, ghee, seeds and cotton. It is working in modern countries. Now because wants are so wide it is impossible to fulfil them with direct exchange. Money is used for this purpose. Anything can obtain by paying for it. Pakistan is entering in better trade agreement with many communist countries especially with China and Russia.