The Impact of Money-Free Computer Assisted Barter Systems Article By: David L. Parnas

The Impact of Money-Free Computer Assisted Barter Systems

• Article By: David L. Parnas

• Presented 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 Money

• A 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 Money

• Inflation (large money supply)

• Money loses its value over time

• Tight money supply

• Prevents businesses from having the liquidity they need to manufacture and circulate goods

Problems with Money

• Trade 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 Money

• Uses 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 Barter

• Eliminates the seller’s/buyer’s surplus

• Eliminates inflation/tight money supply

• Eliminates trade imbalance

• A person knows exactly what (s)he is getting in return for sacrificed resources

Saving with Barter

• Barter 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 value
• Eliminates risk of lending/borrowing in order to produce a good
• People are forced to plan for savings by considering what they will need
• Insurance will help reduce any risks associated with the unknown future

Foreign Trade

• Eliminates the risk of trade deficits between countries

• Eliminates the problem of concluding contracts between countries where multiple, fluctuating currencies are involved

Technical Issues

• In 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 Systems

• Ebarter.ca

• Recipco.com

• Onecer.net

• Barteryourservices.com

Has Barter been used?

• Heavy inflationary periods

• Germany early 1920’s
• Hungary 1946

• Unstable times

• No trust in government certifying money
• People bought jewels and other stores of value
• Rationing
• Money 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 Mackerel
• Barter Theater in Virginia, performances for food

Has Barter been used?

• International Trade

• Avoid Currency Fluctuations
• 2000 Thailand sold Rice to South Africa in return for Cattle
• 1972 Pepsi for Vodka

• Children

• Baseball Cards
• Toys

Turn theory into practice

• All new technologies come with problems that need to be solved

• Electrical theory
• Generation (Power Plant)
• Delivery (Power Grid)
• Application (Light Bulb)

Turn theory into practice

• Phase in CABS gradually

• Enforcement of standards

• Maintain pseudo-currencies to buy bags of market goods

• Food certificates
• Stationary certificates

Turn theory into practice

• Insurance to reduce risk and enforce quality

• Taxation for shared needs

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

Effect of CABS

• Reduce unemployment

• Increase liquidity
• Decrease hoarding of resources

• Allow people to better plan for future

• Insure that goods that are needed will be produced

• Maintain relative values of goods

Effect of CABS

• Wealth measured in resources, not money

• Reduction of Poverty

Analysis

• Parnas not the first to see illness of society due to wealth

• Karl Marx advocated elimination of money through Communism

Marx vs. Parnas

• Communist Manifesto

• Violent overthrow of existing system
• Government enforcement of moneyless system
• Central planning of consumption
• All people have same wealth

Conclusions

• Like any revolutionary idea, sounds good in theory

• Human 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

Conclusions

• Article not technical, but like most of Parnas’s articles, pioneering with new ideas that have some impact on the Computer Industry

• People should be encouraged to barter more

• Tax incentives
• Promotion through advertisements

References