Economic Exchange

It has been said that all human activity consists of exchanges. We will study the theory of exchange in extensive detail throughout this website.

You can consider everything that you do is an exchange. You eat breakfast in the morning in exchange for hunger. You get dressed in exchange for being naked — or wearing your pajamas all day long. Then, when you go to the store, you exchange something of value for something you value more.

Since most exchanges the modern world consist of an exchange of money for goods, I have decided to put the details of the theory of economic exchange in the category of Money & Banking. You will see from the brief outline below that my description of the theory of economic exchange leads from voluntary exchange to the use of money.

You will find that the description of economic exchange follows this outline.

Introduction to Exchange

Exchange provides the basis for all market activity. Making any progress whatsoever in a free-market require some form of exchange.

Voluntary Exchange

Provides a foundation for free markets. In order for markets to be free exchanges we must conduct exchanges without intervention.

Direct Exchange

The simplest type of voluntary exchange consists of direct exchanges — the exchange of one economic good for another. Although this type of exchange seems simple on the surface, it has severe limitations.

Indirect Exchange

Indirect exchanges consist of those in which a person accepts an economic good in exchange for the express purpose of exchanging that good for one they prefer over the first good exchanged. Indirect exchange eliminates some of the problems inherent indirect exchange, but even with the indirect exchange of goods difficulty still arise.


An economic good that people generally accept for the purpose of indirect exchange frequently becomes what we refer to as money. Money opens the door for the most effective and efficient methods of exchange available and free markets.

Read a more complete description of economic exchange in the Money & Banking section.

Draft or Summary Page

In order to maintain continuity in the structure and navigation of the site we have posted a number of pages in a draft or summary format. We are working on the final edition and will post it as soon as possible.