The Impact of Money-Free Computer Assisted Barter Systems

1
The Impact of Money-Free Computer Assisted Barter
Systems

• Article By David L. Parnas
• Presented By John D. Donath
• March 26, 2004

2
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

3
What is Money?

• Enables people to exchange goods and services
  without a double coincidence of needs.
• A way to store wealth (not really)

4
Problems with Money

• A persons 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)

5
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

6
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)

7
Problems with Money

• Uses a Scalar value to represent a Vector
• A persons 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

8
Using Barter

• Eliminates the sellers/buyers surplus
• Eliminates inflation/tight money supply
• Eliminates trade imbalance
• A person knows exactly what (s)he is getting in
  return for sacrificed resources

9
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

10
Foreign Trade

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

11
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)

12
Existing Barter Systems

• Ebarter.ca
• Recipco.com
• Onecer.net
• Barteryourservices.com

13
Has Barter been used?

• Heavy inflationary periods
• Germany early 1920s
• 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

14
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

15
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

16
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)

17
Turn theory into practice

• Phase in CABS gradually
• Enforcement of standards
• Maintain pseudo-currencies to buy bags of market
  goods
• Food certificates
• Stationary certificates

18
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

19
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

20
Effect of CABS

• Wealth measured in resources, not money
• Reduction of Poverty

21
Analysis

• Parnas not the first to see illness of society
  due to wealth
• Karl Marx advocated elimination of money through
  Communism

22
Marx vs. Parnas

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

• Bartering systems
• Gradual and peaceful development
• Phased in due to peoples desire for efficiency
  in business
• Rules of supply and demand set values of goods
• Differences still exist between people
  controlling more/less resources

23
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

24
Conclusions

• Article not technical, but like most of Parnass
  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

25
References
Parnas, David L., Impact of Money-Free Computer
Assisted Barter Systems. Shore, John.
Introduction to Impact of Money-Free Computer
Assisted Barter Systems. Marx, Karl and Engels,
Friedrich. The Communist Manifesto. www.eBarter.c
om History of Barter.