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Barter is the basic form of trade. Seen "from above", all economies look like complex barter systems.

In a modern economy, with its huge network of inter-dependent, specialized producers, the actual mechanics of administering a good-for-good barter system would be far, far too complex. However, it's always instructive to remember that underlying all economic activity is the desire of all people, no matter what they produce individually, for a reasonably similar basket of goods and services (note I say "reasonably" similar).

The illuminating thing about thinking of an economy in terms of barter is that one sees the extraordinary need for information. In the modern economy, a person produces a small number of goods and services for many people. What she needs is the work product of even more people. Simple finding out what people want is a huge undertaking, so huge we don't even really do it.

Rather, economies more complex than barter have developed systems whereby many decision-makers act on guesses as to what people want. If people have enough money, they don't have to *know* what people want, they can act on a guess and those who guess well will be rewarded and those who guess badly will not - at least that's the idea. But this system is cumbersome and costly. As information becomes more widely available, the system becomes more efficient (note Wal-Mart's enormous investment in IT). Ultimately, there is the tantalizing prospect that a super-informed economy could return to something very like barter and still handle the millions of goods and services produced by a modern economy.

First principles demand that we look at barter, if only as an important thought experiment.Dlaw 11:43, 20 September 2006 (UTC)

See also: Forum:What is the best economic system?

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