IDEAS home Printed from https://ideas.repec.org/p/cer/papers/wp162.html
   My bibliography  Save this paper

Barter Economies and Centralized Merchants

Author

Listed:
  • Jose Noguera

Abstract

The main goal of this essay is to analyze the emergence of a barter economy, and the rise of centralized merchants and a barter redistribution system out of a primitive barter system. The environment is a spatial general equilibrium model where exchange is costly. Since exchange becomes more complicated as the scope of the economy increases, we prove that, after the economy reaches a critical size, the cost of trade expansion surpasses its benefits. This imposes limitations on the scope of the economy and the production level. To overcome these limitations, rational individuals can develop a more advanced barter system leading to the appearance of centralized merchants. This more sophisticated system is the redistribution system. We also show that under some circumstances, in the presence of transaction costs it may be optimal for individuals to keep using barter instead of adopting a monetary system. This result explains why some primitive economies, like the Incas in Peru and ancient Egypt, did not evolve to a monetary system, and kept barter as their main exchange system.

Suggested Citation

  • Jose Noguera, 2000. "Barter Economies and Centralized Merchants," CERGE-EI Working Papers wp162, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp162
    as

    Download full text from publisher

    File URL: http://www.cerge-ei.cz/pdf/wp/Wp162.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, April.
    2. Solow, Robert M. & Vickrey, William S., 1971. "Land use in a long narrow city," Journal of Economic Theory, Elsevier, vol. 3(4), pages 430-447, December.
    3. Berliant, Marcus & Konishi, Hideo, 2000. "The endogenous formation of a city: population agglomeration and marketplaces in a location-specific production economy," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 289-324, May.
    4. E Borukhov & O Hochman, 1977. "Optimum and Market Equilibrium in a Model of a City without a Predetermined Center," Environment and Planning A, , vol. 9(8), pages 849-856, August.
    5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    7. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633.
    8. Hicks, John, 2017. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198796237.
    9. Wang, P., 1990. "Endogenous Market Structure and the Use of Money in a Spatially Heterogeneous Economy," Papers 12-90-6, Pennsylvania State - Department of Economics.
    10. Clower, Robert W, 1995. "On the Origin of Monetary Exchange," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 525-536, October.
    11. Howitt, Peter & Clower, Robert, 2000. "The emergence of economic organization," Journal of Economic Behavior & Organization, Elsevier, vol. 41(1), pages 55-84, January.
    12. Anas, Alex, 1992. "On the birth and growth of cities: : Laissez-faire and planning compared," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 243-258, June.
    13. Robert W. Clower & Peter W. Howitt, 1976. "Money,Credit and the Timing of Transactions," UCLA Economics Working Papers 072, UCLA Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jose Noguera S., 2001. "The Appearance of Carriers and the Origins of Money," Macroeconomics 0012014, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jose Noguera S., 2001. "The Appearance of Carriers and the Origins of Money," Macroeconomics 0012014, University Library of Munich, Germany.
    2. Bengtsson, Ingemar, 2005. "Transaction Costs, Money and Units of Account," Working Papers 2005:29, Lund University, Department of Economics.
    3. Starr, Ross M., 2002. "Existence of Uniqueness of "Money" in General Equilibrium: Natural Monopoly in the Most Liquid Asset," University of California at San Diego, Economics Working Paper Series qt660465rm, Department of Economics, UC San Diego.
    4. Starr, Ross M., 2003. "Monetary general equilibrium with transaction costs," Journal of Mathematical Economics, Elsevier, vol. 39(3-4), pages 335-354, June.
    5. Tse, Chung-Yi, 2010. "Thick market externalities in a spatial model," Regional Science and Urban Economics, Elsevier, vol. 40(2-3), pages 92-105, May.
    6. Starr, Ross M., 2001. "Why Is There Money? Endogenous Derivation of "Money" as the Most Liquid Asset: A Class of Examples," University of California at San Diego, Economics Working Paper Series qt2rt3k4r7, Department of Economics, UC San Diego.
    7. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
    8. Anas, Alex, 2001. "By Alex Anas. Forthcoming in Regional Science and Urban Economics. The Spatial Economy: Cities, Regions, and International Trade, Masahisa Fujita, Paul Krugman and Anthony J. Venables, MIT Press, Camb," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 601-615, September.
    9. Ross M. Starr, 2012. "Why is there Money?," Books, Edward Elgar Publishing, number 13763.
    10. Starr, Ross M., 2000. "Why is there Money? Endogenous Derivation of "Money" as the Most Liquid Asset: A Class of Examples," University of California at San Diego, Economics Working Paper Series qt9bm927sh, Department of Economics, UC San Diego.
    11. Laura Resmini, 2003. "Economic integration and regional patterns of industry location in transition countries," ERSA conference papers ersa03p399, European Regional Science Association.
    12. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
    13. Carl Gaigné & Jacques-François Thisse, 2013. "New Economic Geography and the City," Working Papers SMART 13-02, INRAE UMR SMART.
    14. BEHRENS, Kristian, 2004. "Market size and urban hierarchy," LIDAM Discussion Papers CORE 2004029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    15. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    16. James R. Markusen & Thomas F. Rutherford & David Tarr, 2000. "Foreign Direct Investments in Services and the Domestic Market for Expertise," NBER Working Papers 7700, National Bureau of Economic Research, Inc.
    17. Pierre Philippe Combes & Gilles Duranton & Henry G. Overman, 2005. "Agglomeration and the adjustment of the spatial economy§," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 311-349, August.
    18. Alberto Franco Pozzolo, 2004. "Research and Development, Regional Spillovers and the Location of Economic Activities," Manchester School, University of Manchester, vol. 72(4), pages 463-482, July.
    19. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    20. Salle, Isabelle & Yildizoglu, Murat & Zumpe, Martin & Sénégas, Marc-Alexandre, 2017. "Coordination through social learning in a general equilibrium model," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 64-82.

    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp162. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucie Vasiljevova (email available below). General contact details of provider: https://edirc.repec.org/data/eiacacz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.