Haolong Li – Week 5 – Systems of Exchange

For exchange, the first related words I think is “Money”, because in modern society, frequent liquidity let us habitually put money equally to exchange. In fact, exchange has different form in different society, even with culture develop, the form of exchange also changed.

The first form is reciprocity, also called reciprocal exchange. This is a kind of exchange that occurs between sides of equal status, not use constant currency as a medium of exchange. This can be a goods and service exchange, which has similar value. One to one exchange is the basic mode, and most stable one, which is also easily to achieve. More trading partners will lead a more complex model. This will deepen exchange difficulty to some extent, because cargo owners need to compare the value of different value and choose best one. The Kula Ring is a famous example of reciprocal exchange. The Kula Ring complete shows reciprocal exchange, goods exchange between different islands and become a circle to meet the different needs. This kind of goods circulation process also called “generalized exchange”.

With the advent of money, people can decide the price of commodities, and also decide the exchange rate between different currencies. At that time, commodity exchange become more convenient, and develops a new from of exchange, which is market exchange. This form directly expand the scope of exchanges, buyer doesn’t need any social relationship with seller. In Kula Ring, these islands have geographical link, which decide the trade circle. Price directly shows commodity value, which help buyer and seller to make better decision. The exchange of goods becomes a market, which leads the generation of profits (like buy in lower price and sell in higher price), because buyer and seller have more compare options. For example, Island A is produce apple, so the apple price is lower than other place, buyer could buy apple in low price in Island A, and sold them in higher price to people live in Island B, which doesn’t produce apple. There are many factors can affect price, which means add value. Person’s labor is an important part. For example, a luxury brand, like Hermes, will have handmade limited edition products, which always expensive than normal products and limit number, because this high price has add artisans’ labor cost and time cost. Transport fee, rent of stores, wages are all important factors to affect products’ price.

The last one is redistribution. This definition is collection of goods by central authority followed by distribution according to normative or legal principle. This form is really useful in some special period, like in recession, this help to control prices. Today, the world market has been formed, and this kind of form is not useful anymore.

Expect these three main exchange forms, these are also some exchange form. For example, barter system. This is a direct exchange of different objects, and doesn’t create on going relationships. Barter system has similar part with reciprocity and market exchange, but still has different part. Shadow economies and poverty at work are other two ways of exchange, both contacts to market. The first one is informal market system and second one need to looks at options in a past-industrial market system.


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