Barter System and its Defects

The primary change of one thing or service for another without use of income is called barter system. So a barter system is that in which no income exists. It is income less economy.
According to G. Nomas:
“Barter system is a form of trading in which things are traded right for different things without the use of income as an intermediary”
In words of R.H.Parker:
Barter system is really a primary change of things and solutions without the use of income as either a means of cost or perhaps a product of account.
Defects of Barter System
Double co-incident of needs:
The barter system needs the matching of wants. The change of things is possible if the needs of two parties coincide. Like a person having a dining table needs to exchange it with the chair. He has to locate someone else who wants to change his seat with table. It is the greatest problem of the barter system. For this reason problem trade below barter system was really limited.
Economic proportions:
Under barter system it wasn’t possible to calculate economic parameters equally at macro & micro level. There is no system to calculate particular revenue or micro level and GDP on macro level.
Future obligations:
Under barter system it’s very difficult to lend things to different people. With the passing of time the value of things might fall. Therefore it becomes difficult to make obligations in future.
Opinion and budgeting problem:
Under barter system it’s very difficult to estimate expenses and income. Individuals & the government cannot produce any estimate of these revenue & revenue since it’s not possible to outlook the value of things with any sensible certainty.
Contrast of living requirements:
Living common of men and women is really a calculating pole of the economic development of nay country. It is not possible to assess the living requirements of men and women below barter system because there is no product expressing the wealth of people.
Popular way of measuring value:
The barter system has no common way of measuring value. There is no medium to calculate the value of goods. Like a person includes a cow and another has goats and equally are ready to trade. The master of cow estimates the value of one cow corresponding to the five goats. But the owner of goats estimates the value of one cow means to four goats. The change cannot get position until equally of them estimate exactly the same value.
Tax series:
The taxes are collected for the economic development. The quantity collected is allocated to training, hospitals, streets etc. when tax is collected in the shape of things it’s really difficult for the federal government to spend such things for growth projects. Yet another issue is that the quantity of storage and series costs might become more than the quantity of the tax collected.
Transfer of wealth:
The barter program doesn’t help move wealth from place to another. The movable and immoveable wealth can’t be moved from place to another because occasionally the carriage cost is a lot more than the particular cost of wealth. The action of land and creating is extremely hard at all.
Saving of wealth:
The barter program doesn’t provide the features of storage of wealth for lengthier time period. Some commodities are perishable in nature like plant, fruits etc. these things eliminate their full value if kept for lengthier time period. While other things like rice eliminate their sum and quality if kept for lengthier time period. Yet another issue is that the storing of things also increases the storing cost.
Sub department:
Many things aren’t divisible. Often this fact becomes an extremely serious issue in exchange. For instance if your individual has a horse and wants to acquire a pen. The worth of the horse is a lot greater than a pen. In this case the exchange is extremely hard as the horse can not be divided in to smaller pieces.
Specialization issue:
Below barter program each person is port of all trades and master of none. A high level of specialization cannot be achieved under barter program because everyone tries to attain home sufficiency.
Increase in international expense:
Money has created probable the enormous expense in today‟s world. Below barter program the international expense was impossible but the utilization of income caused it to be probable because in income economy wealth can simply be shifted from place to another.
Ease of specialization:
In barter program specialization is extremely hard because everybody tries for home sufficiency. Specialization not just helps in reducing cost of production but additionally results in larger production. The upsurge in production then could be dealt to get other goods.
Saving of wealth:The issue of storing wealth has been removed by the utilization of income because wealth can simply be kept in the shape of money.

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