QM: 604A: UNIT III: MODES OF EXCHANGE

 Exchange refers to the transaction of labour, resources, products, and services within
a society. It is not limited to the market economies of industrial societies. For small
scale economies, it is necessary to consider modes of exchange other than market
exchange.
• When goods and services are given away, purchased, sold, or traded, there are
potentially two components of the exchange – (a) pure economic gain, (b) social gain
• Both of these motives usually occur at the same time in non-market economies. In
market economies, the social component is often missing except when the exchange is
between relatives or friends.
• Important exchange items in non-market economies - courtesies, entertainment (e.g.,
songs, dances, and speeches), curing, military assistance, women (to be wives), and
children. In the Western World today, the idea that women and children could be
given away as gifts is shocking. However, that was not always the case in Europe.
 Gift exchanges are usually reciprocal. Reciprocity results in a continuing sequence
of giving, receiving, and repaying gifts. Breaking this obligation to continue the
reciprocity is commonly seen as a slight or even a rejection of the other person
involved in the exchange.
• Reciprocity is a binding mechanism
• Reciprocal exchanges generally do not redistribute a society's wealth in a way that
causes some people to become richer than others. Rather, they usually result in a
circulation of goods and services. There is not a net economic loss for individuals
because they ultimately receive gifts in return.

 The idea of exchange was first explained by Marcel Mauss in terms of two types of
exchange: (a) Non-capitalist gift exchanges (which have to do with social relations
and building, which require a gift for exchange), and (b) Impersonal commodity
exchanges. Impersonal commodity exchanges are more common in Capitalist
societies which do not link those who are exchanging with one another, aside through
the use of cash. These aspects are also characteristic of egalitarian societies.
 Karl Polanyi identified and defined three modes of exchange: reciprocal,
redistributive, and market. The three modes of exchange are found singly or in
combination in the economic organizations of the diverse societies of the world.
• The three modes subsume all the types of exchange recognized in any society.
• A society can be structurally integrated by its social, political, or economic
organization, or by some combination of these organizations.
• When one of these structures predominates -
• social economy is one in which the social organization integrates economic
life; here reciprocity is the prevailing mode of exchange.
• political economy, the political organization integrates economic life;
redistributive exchange prevails.
• market-integrated economy, market exchange prevails.
• No economy in the contemporary world is reciprocity, redistribution, or market
exchange the sole mode of exchange, although typically one of the modes may
predominate. In many societies, there is a mixture of the three modes. In many other
societies, the three modes of exchange have frequently coexisted as separate spheres
that have remained relatively compartmentalized. These have been termed
“multicentric” economies by Bohannan and Dalton

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RECIPROCITY
 The oldest mode of exchange is Reciprocity which is seen in egalitarian societies
 Reciprocity is the exchange of goods and services of equal value.
 It refers to the non-market exchange of goods or labour ranging from direct barter
(immediate exchange) to forms of gift exchange where a return is eventually expected
(delayed exchange).
 Marshall Sahlins identified three main types of reciprocity (generalized, balanced and
negative) in the book Stone Age Economics (1972). Reciprocity was also the general
principal used by Claude Lévi-Strauss to explain the Elementary Structures of
Kinship (1949), in one of the most influential works on kinship theory in the post-war
period.
 Sahlins typology: dyadic back-and-forth exchange and pooling.
 ‘Between’ and ‘within’ reciprocities
 There are three different types of reciprocity:
(a) generalized,
(b) balanced, and
(c) negative reciprocity
 Generalized reciprocity is an exchange where return is not expected right away and
the value of this return is not specified.
 Based on the assumption that all exchange balances out, like that between family
members. This is largely based on trust as social situations can become hostile as an
individual could use an exchange to build a debt in their favour.
 Nothing is expected immediately and a value of return is not established before the
exchange is made. This type of reciprocity occurs often between parents and
children.
 Balanced reciprocity (or also known as Symmetrical reciprocity) is when exchange
is made with the expectations that those who give an amount will get the same in
return.
 This, unlike generalized reciprocity, has a specified time limit as to when the return
should be made.
 The Ju/’hoansi Bushman – barter and hxaro
 Negative reciprocity is when a party tries to exchange without having to give up any
value, which is the opposite of balanced exchange.
 This can range from haggling prices to outright seizure.
 Negative reciprocity is the exchange of goods or services when at least one party
attempts receive something for nothing in return without suffering consequences.
 Marshall Sahlins – kin distance determines type of reciprocity.
 Tim Ingold – considering emotion and kin distance is not an appropriate model.

REDISTRIBUTION
• Redistribution is the accumulation of goods or labour by a particular person or
institution for the purpose of dispersal at a later date.
 Redistribution is found in all societies. For example, within households we pool our
labour and resources, yet we rarely distribute these outside of our family. For
redistribution to become a central economic process, a society must have a centralized
political system to coordinate and enforce the practice.
• Process where goods and services flow to a strong central authority (king,
government, kinship based leadership), where they are sorted, counted and reallocated
according to culturally specific principles.
• May be voluntary or involuntary

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  Elman Service - redistribution develops in agricultural societies that contain sub-
regions suited to different kinds of crops or natural resources and the area being large
it is difficult for direct exchange so it might need a central coordinating mechanism.
 Marvin Harris agreed that redistribution becomes more likely with agriculture but
the idea behind redistribution originates as a hedge against uncertainty in future.
• agricultural societies have to produce large amount of food in case there is failure next
season. The groups that make feasts maybe indirectly ensuring themselves against
crises by storing up social credit with other villages, who will reciprocate by making
feasts for them in the future.
 Buins of Melanesia and pig feasts
 “Big man” of New Guinea
 Potlatch of Northwest Coasts of Canada
• Potlatch shows that tribal economy does not follow modern economic principles such
as profit maximisation, demand supply principle and principle of rationality. Rather
tribal economy is embedded in social matrix.

MARKET
 Markets are social institutions with prices or exchange equivalencies. Markets do not
necessarily have to be localized in a geographic place (e.g., a marketplace), but they
cannot exist without institutions to govern the exchanges.
• Market and reciprocal exchange appear to share similar features: one person
gives something and the other receives something.
• A key distinction between the two is that market exchanges are regulated by
supply and demand mechanisms. The forces of supply and demand can create
risk for people living in societies that largely distribute goods through market
exchange.
 Market exchanges are based on transactions, or changes in the status of a good or
service between people, such as a sale.
 Mostly impersonal - generally short-run, closed-ended transactions with few
implications for the future.
 Exchange of goods and among many buyers and sellers directly, by barter, or
indirectly, by money and pricing.
 Markets include – (a) buyers and sellers, (b) Instant information on prices, (c)
Freedom of market entry and exit
• Buying and selling of goods and services: prices set by supply and demand
• Usually happens at specific times and places
• Money exchange instead of goods
 Market exchange: Actors: (a) Suppliers – whose willingness to sell is directly
proportional to price increase; (b) Purchaser – whose willingness to buy is directly
proportional to price decreases
 Money - Value is assigned based on a standard symbol, typically money. While
general purpose money is not a prerequisite for market exchanges, most commercial
transactions today do involve the exchange of money. It serves as a medium of
exchange, a tool for storing wealth, and as a way to assign interchangeable values.
• gold, silver, stocks, bonds, crypto-currencies, ithaca hours
 Marketplaces in Non-Western societies are full of excitement; they are vibrant
places - friendships are made, love affairs begin, and marriages are arranged