The Impact of Money-Free Computer Assisted Barter

Systems

Article By: David L. ParnasPresented By: John D. Donath

March 26, 2004

What are Computer Assisted Barter Systems

(CABS)?Enable people to trade goods and services without using money

Can help eliminate the ills of society associated with a monetary economy

What is Money?Enables people to exchange goods and services without a double coincidence of needs.

A way to store wealth (not really)

Problems with MoneyA person’s valuation of goods and services is subjective: (Buyer or Seller Surplus)

I would like to sell my car for $100, and a buyer is willing buy it for $150, one of us will be cheated

Exchanges that may take place with barter may not take place because of prices the market places on items.

Leads to idleness of resources (unemployment)

Problems with MoneyInflation (large money supply)

Money loses its value over time

Tight money supplyPrevents businesses from having the liquidity they need to manufacture and circulate goods

Problems with MoneyTrade imbalance

People who produce more than they consume have the impression that they are getting richer

People who consume more than they produce have the impression that they are getting poorer

Neither of these is true (the opposite is in fact the case when measured in resources)

Problems with MoneyUses a Scalar value to represent a Vector

A person’s gain or loss from a deal should be measured in all the resources involved, not just one value (doing so causes a loss of information).

I worked for 5 hours and got paid $100.00 I worked for 5 hours and got a turkey sandwich, soda, a night at the movies, and 10 gallons of gas

Using BarterEliminates the seller’s/buyer’s surplusEliminates inflation/tight money supplyEliminates trade imbalanceA person knows exactly what (s)he is getting in return for sacrificed resources

Saving with BarterBarter enables you to trade not just for immediate goods and services, but for future goods and services as well (similar to a futures contract)

No Inflation/loss of valueEliminates risk of lending/borrowing in order to produce a goodPeople are forced to plan for savings by considering what they will needInsurance will help reduce any risks associated with the unknown future

Foreign TradeEliminates the risk of trade deficits between countriesEliminates the problem of concluding contracts between countries where multiple, fluctuating currencies are involved

Technical IssuesIn 1985, Parnas, 10 students built a CABS system as part of a course.

Technology feasible to run on centralized or personal computers

(Internet makes this even easier)

Existing Barter SystemsEbarter.caRecipco.comOnecer.netBarteryourservices.com

Has Barter been used?Heavy inflationary periods

Germany early 1920’sHungary 1946

Unstable timesNo trust in government certifying money

People bought jewels and other stores of value

RationingMoney not enough to meet demand for resource

Has Barter been used?Recession (tight money supply)

People did not have liquidity necessary to pay for goods and services with money

1935 Mosanto sold saccharine to China in return for MackerelBarter Theater in Virginia, performances for food

Has Barter been used?International Trade

Avoid Currency Fluctuations2000 Thailand sold Rice to South Africa in return for Cattle1972 Pepsi for Vodka

Children Baseball CardsToys

Turn theory into practiceAll new technologies come with problems that need to be solved

Electrical theoryGeneration (Power Plant)Delivery (Power Grid)Application (Light Bulb)

Turn theory into practicePhase in CABS graduallyEnforcement of standardsMaintain pseudo-currencies to buy bags of market goods

Food certificatesStationary certificates

Turn theory into practiceInsurance to reduce risk and enforce qualityTaxation for shared needs

People will view taxes not as a burden, but rather as their share of purchasing public goods and services

Effect of CABSReduce unemployment

Increase liquidityDecrease hoarding of resources

Allow people to better plan for futureInsure that goods that are needed will be producedMaintain relative values of goods

Effect of CABSWealth measured in resources, not moneyReduction of Poverty

AnalysisParnas not the first to see illness of society due to wealth

Karl Marx advocated elimination of money through Communism

Marx vs. ParnasCommunist Manifesto

Violent overthrow of existing systemGovernment enforcement of moneyless systemCentral planning of consumptionAll people have same wealth

Bartering systemsGradual and peaceful developmentPhased in due to people’s desire for efficiency in businessRules of supply and demand set values of goodsDifferences still exist between people controlling more/less resources

ConclusionsLike any revolutionary idea, sounds good in theoryHuman nature is to simplify matters to a bottom line

E-bay has been more successful than any of the online bartering systems

It is hard to eliminate a habit that has existed and controlled people for thousands of years

ConclusionsArticle not technical, but like most of Parnas’s articles, pioneering with new ideas that have some impact on the Computer IndustryPeople should be encouraged to barter more

Tax incentivesPromotion through advertisements

ReferencesParnas, David L., Impact of Money-Free Computer Assisted Barter Systems.

Shore, John. Introduction to Impact of Money-Free Computer Assisted Barter Systems.

Marx, Karl and Engels, Friedrich. The Communist Manifesto.

www.eBarter.com History of Barter.