Barter Economies and Centralized Merchants
نویسنده
چکیده
This essay analyzes the circumstances under which a barter system based on merchants and centralized markets dominates an unstructured primitive barter system. For that purpose, we set up a spatial general equilibrium model where exchange is costly. In an unstructured barter system, as population increases, the transaction costs may become cumbersome and the cost of trade expansion surpasses its benefits. This imposes limitations on the scope of the economy and the production level. To overcome these limitations, rational individuals can develop a more advanced barter system based on centralized merchants. This may explains why some economies, like the ancient Egypt and the Incas in Peru, did not evolve to a monetary system, and kept barter as their main exchange system. JEL: E0, R10, R11
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