The exchange of goods — barter

Chapter V The exchange of goods – barter T o respect the logic of our work, we must now move on to the part where we will talk about the actions and activities inherent in trading. W e will first discuss barter, the primary as well as essential part of the trading business which was in the past referred to as exchange. The first kind of barter was the simple exchange of one commodity for another without monetary compensation being due. The other way to barter was to exchange one commodity for another with one party providing a monetary compensation for any difference in value. The first kind of barter is intended to mutually benefit both parties. If they both wish to dispose of certain items they have in their possession – and it cannot be done with monetary means – then this kind of exchange is the only way. Each party offers the other something, and in turn they obtain from one another the things they consider to be more in need of, and as a result needs are met on both sides. For this reason I described this kind of exchange as having the aim of benefiting both parties, which is evident in daily practice. Since this practice can be easily illustrated with numerous examples, we will now present a case which proves that exchange is the most useful and necessary. Florentine merchants were known for their frequent visits to the Kingdom of Sicily for the purpose of selling them cloth and silk for ready money. However, ready money was not easily obtained (especially not for certain commodities which were not

easily sold). So, while being in Sicily, they were forced to think of a way to exchange these commodities for some others that would sell better than cloth and Damask silk in their own country if they took them back home, since they could not get ready money for them (and to avoid wasting time and fail completely in their endeavor). Through a middleman or using some other service, the Florentine received wheat in exchange for his merchandise, and thus he would certainly have more of a chance of making a profit upon his return to his country. The other party profited equally because the middleman only needed to put in minimal effort and he could successfully exchange his goods for the wheat the Sicilian had a surplus of and wished to dispose of. Since there was no cash involved in this transaction, he agreed to the exchange with the Florentine because he would sell the silk and cloth more easily than the wheat. This was how an agreement on this kind of barter was reached. As disputes often arose as to whether it was indeed proper to exchange things without any monetary compensation, another way of barter was developed, again with the aim of achieving a mutual benefit. Without this new method of exchange, many a trader would have rather chosen not to be involved in such transactions. The fact is, however, that when this kind of trading operation takes place, one must be careful not to fall victim to fraud and suffer great damages. This is why traders came up with a proverb: “He who barters is fooled.” Among other things, it is important to exchange your goods

for those you could sell with less trouble than those you offered. Furthermore, make an effort to drive a hard bargain. If you want to succeed in this, you must always consider how much your wheat is worth, and how much you will raise the price in barter. The percentage exceeding the price in ready money is equal to the amount that the opposite party will in fact pay. The same applies if cloth or silk are in question. When this issue is carefully considered, you must compare who conducts the most advantageous exchange and what the percentages are. It is of the utmost importance to take into account the marketability of the goods you are offered in exchange. Although it might seemingly be worth less at the location the agreement is settled, you should consider what its price will be at the place where you intend to offer it. As the terms are most likely to be more favorable there, your profit will turn out to be equally so. After these three factors are all carefully considered, the exchange can be carried out. If at all possible, you should be the second to quote the price, and it is customary that your offer matches what he asked for his merchandise. W e all tend to make the same mistake and readily accept the winning price for our goods after considering all the positive and negative features of the merchandise as well as other circumstances. The other party is very enthusiastic about the sale after inferring that he is doing good business, and often he mistakenly believes this to be the result of the inflated price he charged. He, on the contrary, is convinced that his price is nothing but correct after he calculates that the money obtained by selling the goods accepted

in exchange will not cover the costs of his merchandise, even if transported by sea or by land. He assumes that business is successful, which is, after all, not an evil thought. Therefore, if you want to profit from an exchange, you must offer a good price. Fourth, you should put effort into getting the money to reimburse any difference in value, and if you fail, do everything to ensure such a requirement is waived so you yourself are not obliged to offer compensation. If you are forced to recompense in money, carefully calculate and learn the correct amount of wheat that can be bought for the ready money you are paying in addition to the goods you offered in the exchange, because this is the amount the other party earns on account of your reimbursement. Thus, you should increase the price of your merchandise for the same amount because this is the profit he reaps from your exchange. The increase in price should be equal to the increase in the amount of ready money that was paid as reimbursement. Profit earned after the goods are sold is added to this amount and then how much the other party’s price exceeds yours can be calculated (by adding the two figures). If you examine the figures and the whole situation in this manner, your attentiveness will be rewarded because in the end the exchange will be in your favor. As barter was already discussed in the preface, we should now proceed to mention the situation of selling for ready money.