Extending your budget with the barter economy

Bartering, and other forms of “informal” economy are as old as, well, people and cultures. Conventional economists will say the barter is inefficient, and thus we have the rise of currency, either in terms of a physical object (like gold) or fiat currency which has no value except what we agree it has (like the US dollar). While running a country or a business on barter is nearly impossible, if physical and generally accepted currency is in short supply, barter has much to recommend itself to the frugal household.

A strange thing has been happening in the United States since the start of the Great Recession: there has been a boom in the informal, or “shadow” economy. In a 2011 study (PDF file), $2 trillion dollars in trade went through unofficial channels.  From undocumented workers to trades of goods on Craigslist, the informal economy is in full swing.

Barter is simple.  You have a good or a service, you trade it for another good or service.  For example, I recently traded excess pork sausage for fresh eggs.  Since the trade will take place out of real time — i.e., she has all the sausage now but I have a promise of a given number of eggs as I need them — this trade includes a component of trust.  If you are trading a bushel of apples for several pumpkins, there is less need for trust than if formal money exchanges hands, because we can both examine each others’ goods and deem them acceptable.  I can’t reliably tell funny money when I see it, plus there is the added uncertainty — albeit minor in 2013 — that the money will have less value by the time I spend it for another physical good.  Hyperinflation is a spooky Halloween story for modern frugal households in the global north, but a stark reality in both recent and decades-old history.  Just ask Zimbabwe.

A step past simple barter is what is referred to as the “gifting economy.”  This, too, I find myself participating in.  In the gift economy, you give a product or service with no explicit agreement to receive anything in return, and you may not even really think of it as a “gift.”  But healthy human societies have a strong impetus toward reciprocity, directly or indirectly.  Entire cultures have been built on the concept that the ability to give defines one’s social status, and while that is incompatible with modern capitalism which defines worth as having things, it has its uses.  Recently, I gave a household the gift of my knowledge and opinions regarding permaculture and landscaping their new home.  I went home with a lovely gift of honey from their bee hives.

A funny thing happens on the way to a barter or gift exchange: the participants tend to undervalue what they have to offer, so both parties usually end up with what they believe is either a fair deal or one weighted in their favor.  Everyone is happy.  In the last example the honey I received was worth far more to me than the opinions I shared.

If you have skills, knowledge or physical goods that you don’t need or have an excess of, then bartering can be a way to acquire things you do need (or want) for little effort and cost.  It takes time, however, to develop the kind of relationships that foster bartering.  One of the most difficult things about barter is finding someone who has what you need and wants what you have.  Things we call “money” are more universally exchanged as value in our culture.  So bartering tends to be an ongoing project.  You have to put yourself out there and network with other people in the community.  Depending on where you are and what you are doing, you may be able to join an existing network of Preppers, Homesteaders, Homeschoolers, Small Farmers or other like-minded folks.

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