A barter economy is an economy that exchanges goods or services for other goods or services, without the use of currency. It is an economy that is based solely on trade. Value is then in the form of what one has to exchange and what one wants to obtain from a trade. Barter economies were used before money was invented but resurfaced when the monetary unit was not seen as valuable. It was only when an economy was entirely self-sufficient that barter economies were completely implemented.
Although almost all economies have evolved from using bartering systems to using fiat money, the trading that takes place in present day is a reflection of the barter economy. In barter economies, economic activity does not have any government regulation. For a trade to be completed, both participants must be satisfied with the exchange, which can be seen as a limitation. Another limitation of bartering systems is that there is no equal measure of value, like there is in money. Since there is not a common measure of value, delayed payments could present conflict.
On the other hand, bartering can also result in an individual being especially skilled in making a particular good and therefore specializing in that good. This could make people less dependent on the job market and therefore decrease the likelihood for inflation. The barter economy is especially unique from the other systems because it does not use money as a value and functions in a mostly unregulated economy.© BrainMass Inc. brainmass.com September 27, 2021, 5:26 pm ad1c9bdddf