In a – -based economy, transactions require that each party have something the other desires.
IntroductionThe words “exchange” and “trade” refer to the same activity–people who have one thing and want a different thing can exchange or trade it voluntarily with each other. The word “exchange” tends to emphasize trades within a single country or locale. The word “trade” tends to emphasize international aspects. Regardless, the activity of exchanging or trading is the same, whether it is with your neighbor or someone living clear across the world. Economists disagree about some things, but they universally agree that free trade–meaning the opportunity to engage in voluntary exchange or trade–is beneficial on all sides. To summarize this mutual benefit, economists often say “There are gains from trade.” In the case of individuals, exchange obviously won’t take place unless both parties benefit. See Comparative Advantage and the Benefits of Trade for a discussion of how free exchange benefits the participants. In the case of whole countries, no matter how large and complex the world or no matter how interconnected the worldwide economies–which is sometimes called “globalization” or “interdependence”–the underlying individuals who engage in trade all benefit. Despite the evident benefits, government restrictions on free trade are common. The arguments for and against restricting trade and exchange are discussed at Barriers to Trade. “Buying local” has become a hot topic. Buying local evokes local or national pride. Buying from local producers saves on transactions costs, such as the costs of transportation. However, it can also result in the tradeoffs of paying higher prices or limiting the opportunities available to local citizens. You can learn more about the arguments for and against buying local at Globalization, Interdependence, and Local Trade. This page focuses on the basic meanings of exchange and trade. Definitions and BasicsBarter, by William Stanley Jevons. Chapter I in Money and the Mechanism of Exchange. On Econlib.
Exchange, by William Stanley Jevons. Chapter II in Money and the Mechanism of Exchange. On Econlib.
The Importance of Trade, at SocialStudiesforKids.com.
Free Market, by Murray N. Rothbard, from the Concise Encyclopedia of Economics
Free Trade, by Alan S. Blinder, from the Concise Encyclopedia of Economics
Foreign Trade, or The
Wedding Gown, by Jane Haldiman Marcet.
Transportation costs and the costs of middlemen:Spatial Economics
Concise Encyclopedia of Economics
Interdependence and the division of laborI, Pencil
In the News and ExamplesClassroom experiments reveal a lot about exchange.Vernon Smith on Rationality in Economics
Brook on Vermeer’s Hat and the Dawn of Global Trade, podcast on EconTalk
Poverty and Market Exchange. Youtube. LearnLiberty video.
Don Boudreaux on Globalization and Trade Deficits, podcast on EconTalk
Licit Globalization, by Ibsen Martinez on Econlib
International Trade Agreements, by Douglas Irwin. The Concise Encyclopedia of Economics
Munger on Fair Trade and Free Trade, podcast on EconTalk. December 2007.
Munger on Middlemen, podcast on EconTalk. October 2008.
Leamer on Outsourcing and Globalization, podcast on EconTalk. July 2007.
A Little History: Primary Sources and ReferencesWilliam Bernstein on the History of Trade, podcast on EconTalk, April 2008.
Nye on Wine, War and Trade, podcast on EconTalk. May 2008.
Of the Division of Labor, by Adam Smith. Book I, Chapter 1 from the An Inquiry into the Nature and Causes of the Wealth of Nations
Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home, by Adam Smith. Book IV, Chapter 2 from the An Inquiry into the Nature and Causes of the Wealth of Nations
Advanced ResourcesMarglin on Markets and Community, podcast on EconTalk
Studies in the Theory of International Trade, by Jacob Viner
Related TopicsDivision of Labor and Specialization |