The Superiority of Monetary over Barter Exchange: Experimental Results and Policy Implications
24 Pages Posted: 9 Jul 2008 Last revised: 25 Nov 2009
Date Written: November 9, 2009
William Stanley Jevons suggested that monetary exchange is socially superior to barter exchange because agents’ optimization is simplified by the use of money. We experimentally study how subjects perform under monetary and barter exchange and find that a majority of subjects achieve a higher utility level in the monetized economy. Our laboratory findings indicate that, at least, government has a role in promoting a common unit of account.
Keywords: Advantages of monetary exchange, experimental monetary economics, bounded rationality
JEL Classification: E40, C91, D60
Suggested Citation: Suggested Citation