The Problems Of Barter

The Coincidence of Wants

The largest inefficiency of barter is called “The Coincidence of Wants”. This coincidence includes a variety of problems, both physical and practical.

A first physical problem is location. When you want to facilitate a trade with another person, you would need to physically be in the same place as the other party. You would also need to ensure that the other party actually wants what you have, you may want their silk, but they may not want your cows, so there’s another problem there. If you are lucky and other party wants to trade their silk for your cows, you have a practical challenge of divisibility. You may want one cut of silk, yet they may not want one whole cow. So, how do you divide a live cow?

So, you need to meet the right person (someone who has what you want and wants what you have), at the right time (meet them at a specific time and location) and have the right needs (you can trade at a fair rate of exchange). As you can see, a lot of things need to fall into place.

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