In economics, an economy of exchange is an economy in which goods are exchanged for money or other goods perceived to be of equal value. This is how it works: when you go to the supermarket to buy your weekly groceries, you exchange your hard-earned cash for products off the supermarket shelves. When you take a job, you essentially agree to exchange your time, effort, loyalty and expertise for cash and (if you’re lucky) other benefits.
An economy of exchange is a closed system in which everything has a price. It might also be described as a “zero sum game”: for the system to work, every gain must be offset by an equal loss.
It’s easy to understand this at an economic level. But the principle of the economy of exchange plays out at just about every level of society:
– We send our kids to school because we believe that in return for entrusting them to teachers for a set period of time, they will in return gain an education that will be of value (economic and otherwise) to them throughout their lives.
– We look for partners/mates on the basis of what we can offer them and what we stand to get back in return. For example, we might be willing to trade some of our freedom for companionship, or perhaps we are trading some of our money for someone to provide us with kids and look after the house. (Okay, I’m simplifying, but hopefully you see the point.)
– We have a justice system based on the belief that no crime should go unpunished.
These are merely the most obvious examples of how the economy of exchange operates in our world. But the principle plays out all the time, in all kinds of ways of which we’re not even aware. We’re constantly on the lookout for leverage, for how we stand to benefit in return for any given cost, for whether any given investment (in time, effort, finance or whatever) will generate a worthwhile return.