User:Cessite/Exchange Systems

Every arrangement that helps us exchange our things (goods, services, information or whatever) for other peoples' things is an exchange system. Using money is just one of these arrangements and so the monetary system that we know is thus a type of exchange system. It is a specific exchange system that has been around for a few thousands of years but it was not the first and is certainly not the only possible exchange system. Let's call it the money-based or monetary exchange system - MES (plural: MESS!).

Exchange came before money so money is subsumed under exchange. Exchange is a property of life on earth and not something special or unique to humans. Nature itself provides all sorts of feedback mechanisms to regulate and control exchange but what is unique about human exchange is that humans consciously developed their own systems to regulate and control it.

Human exchange activities are not some trivial epiphenomenon arising out of the but an essential part of our social existence

Long before anything resembling money appeared in the human record people were exchanging things. Even our hunter gatherer ancestors who didn't specialise in anything much exchanged gifts, favours and the bounty of nature with each other. The valley people might have shared some of the fruits of the valley with the mountain people on the understanding that the mountain people would provide some of the mountain fruits later in the year when they ripened. To receive goods without immediate recompense like this there would have been the need for some kind of an exchange system, albeit a very simple one. A mental record would have been kept of the valley fruits given/received and the 'debt' would have been expunged when the mountain people delivered the mountain fruits later on. It could be said that the valley people gave the mountain people 'credit' by permitting them to settle their 'debt' at a later time, though perhaps the valley people were just settling their 'debt' of the mountain fruits received the previous year. In the cycle of life 'credit' is mutual and so long as it remains like that the 'debts' will cancel out and the system will run harmoniously. It is only when there is not mutual benefit (the 'debts' are not cleared) that a situation of disharmony is created.

Anthropologists tell us that the predominant mode of exchange of hunter gatherer communities was gifting. This is perhaps a misnomer as it creates the impression that there was just random giving and no reciprocity, and hence no exchange. Even though no accurate records were kept of values given/received, every gift came with implied obligations and residual expectations so there was a constant 'memory' or 'reminder' of the value of what was given/received. It was a kind of chicken and egg situation with no beginning and no end. Gifts could either be seen as an initiating gift or as a reward or recompense for a previous gift. The recipients of gifts were expected to gift the givers at a later time with values equal to or greater than what they received. In many cultures there was competition to always outdo one's givers with gifts of even greater value.

Over the millennia humans developed a multitude of mnemonic devices to help them remember what and how much of a particular resource was given/received or what favours were granted. A few examples are the recording of exchanges (keeping a tab) on clay tablets by the Mesopotamians, the use of knotted chords (Quipus) by the Incas, notched bones and tally sticks by early peoples all over the world. Numeracy and writing arose out of the need to keep records of exchanges (accounting).

Where there was/is regular, organised exchange but no exchange medium is used we could call it an information-based exchange system (IES). Information (memory) is the organising principle, not 'stuff' as in the MES.

The simplest and most basic IES is that which governs our own domestic lives. Family life is characterised by exchange, much of it arising out of our different gender roles and between parents and children. Family life could not function if it operated on a monetary basis. There is usually no formalised mechanism for recording what partners do for each other and what parents do for their children so it is perhaps inaccurate to say that an 'exchange system' operates. Nonetheless partners do keep a mental record of their respective contributions and if there is a feeling of imbalance by one side it can lead to family strife. The imbalance of the parental contribution to the upbringing of their children turns into an expectation on the part of the parents that their children will reward them by taking care for them in their old age.

An unrecognised and unnamed 'exchange system' governs most of the relationships that we have with our friends and colleagues. Social life would not be possible if there was no reciprocity or if all inter-personal transactions were mediated with an exchange medium.

It is impossible to say when humans first started to use what is called 'commodity money' to mediate exchange but it is legitimate to surmise that when attempting to exchange things and the other side did not want what was offered, they would have accepted some other thing that they knew they would be able to swap with someone else who had what they wanted. At any time there would have been something that was generally desirable and tradeable even if the traders had no direct use for it themselves. The history of money records hundreds of different things that were used and accepted as exchange media. Many of these were temporary and applied to only one transaction while others were generally accepted over long periods of time.

In some places precious metals became the exchange media of choice. This was because they were hardy, divisible and portable, as only small quantities were required. This led on to the development of coins, symbolic money to represent the coins (deposit receipts, paper money, etc.), credit money, banking and all the paraphernalia of modern money systems.

All exchange systems serve one fundamental purpose, and that is to facilitate exchange. We need to offer/give something in order to receive something, we have to sell to buy. An exchange system allows us to do this without having to find buyers for our specialisations who have what we need, or to find sellers of what we want but who do not want what we sell. In other words, all exchange systems help us circumvent the inconveniences of direct barter, or to put it in other words, they help us overcome the fact that simultaneous gratification in exchange is a rarity. We exchange in the expectation of mutual benefit, and exchange systems help us achieve this. Exchange systems not only facilitate exchange but ensure its continuity. A once-off exchange does not require a system but continuity of exchange involving many people does.

While there have been a multitude of different exchange systems throughout history, all of them can be sorted into the two general camps that we have identified: those that relied on information about exchanges to facilitate exchange (IES) and those that used a medium to symbolize value against which anything could be exchanged (MES).

Modes of exchange and modes of production

An identified type of exchange system with historical continuity is referred to by anthropologists as a 'mode of exchange'. 'Modes of exchange' and 'exchange systems' could be equated, in the same way as the concepts of 'modes of production' and 'productive systems' are equated. When we talk of the 'capitalist mode of production' and the 'capitalist system' we mean pretty much the same thing, and so when we talk about the 'gifting mode of exchange' and a 'gifting exchange system' we also mean pretty much the same thing.

The concept of 'modes of production' is central to economics, even though most modern economics textbooks assume the capitalist mode of production because they deal with the here and now and so do not discuss other modes of production explicitly, except when the need arises to dismiss them as being inferior to the capitalist mode of production.

'Modes of exchange', however, are not given any recognition by economists whatsoever because money as we know it is assumed to be one of the constants of the universe. There have never been any serious challenges to the current money system so why even consider any alternatives? Sure there are complementary currencies and local currencies and emergency currencies and all sorts of quirky, quasi money systems but essentially they are all still money. There cannot be another way of 'doing' money because money is money is money. It is as absurd as saying there is another kind of electricity or another kind of chemistry.

The concepts of 'modes of exchange' and 'modes of production' are tightly bound together. It is difficult to say that the one is primary and determines the other, such as that each mode of production has produced a particular mode of exchange or that each mode of exchange has resulted in a particular mode of production. If one were to argue that exchange comes after production so the mode of production is primary, another could argue that production might only take place with the knowledge that what is to be produced can in fact be exchanged, or that what is produced is dependent on the prevailing mode of exchange.

However, we can notice that each historical mode of production has been tied to a particular mode of exchange and that each mode of exchange has had a profound impact on the. The gifting mode of exchange was prevalent in hunter gatherer society, or perhaps we could say that each mode of exchange has been tied to

I would like to postulate that 'mode of exchange' is a grander concept than 'mode of production', though they are obviously inter-related. The latter is a sub-set of the former. Each mode of production has been characterised a

The functions of exchange systems

The most basic form of exchange is person-to-person exchange. This could either be something given or done with only a vague, undefined expectation of some future recompense, or an explicit trade as in barter, such as 'I give you a bunch of carrots for your bag of apples', or 'I fix your bicycle if you mow my lawn'. Barter hardly requires a 'system' to control or manage it, except when there is a time delay between the respective transfers. If I give you carrots now in expectation of your fresh apples that will only ripen in six months' time, then there needs to be some mechanism of recording that. When there are many such time-separated transfers a community might decide to use some common form of IOU and these IOUs could be transferable. That is, if you give me an IOU for your apples that will sweeten in summer, I could swap that IOU for a pair of shoes from the shoemaker right now, who could then use my IOU to claim the apples owed to me.

From this we can see that an exchange system must fulfil at least one fundamental function: it must provide some mechanism to facilitate exchange, particularly when there is going to be a time delay in settlement. To be really useful it must allow traders to be able to transfer their IOUs. Buyers should not be directly obligated to their sellers but should be able to 'pay' for what they have received by giving/doing something else to/for somebody else.

All books on money and economics tell us that the prime function of money is that it is a medium of exchange. This is true of money but when we consider money as just one type of exchange system this is another way of expressing the prime function of exchange systems, which is that they serve as a means of facilitating exchange.