Thursday, May 2, 2013

non-monetary transactions

My wife is currently looking for a job; inter alia, this involves having "references", viz. people willing to discuss her with potential employers. This takes time (if nothing else) from the people serving as references, and does not directly benefit them; this is the sort of situation in which some sort of compensation is typically paid from the beneficiary to the benefactor, but if that is done in the case of job references, the payment is non-pecuniary; it follows more of a reciprocal-favors paradigm.

One possible reason for this that just occurred to me this afternoon is that perhaps it is easier to agree on terms-of-trade in a reciprocal-favors paradigm than for the usual unit of account. In bilateral monopoly situations, the possibility of costly bargaining creates an incentive to find default terms on which to focus; for many favors, it might be difficult to figure out a default dollar-price, and therefore costly to bargain to an agreed-upon dollar price for the favor, whereas different favors may seem apparently comparable; even if it's not clear, in dollars, how much each should be worth, it seems that the amount should be about the same. The expense of bargaining is therefore considerably reduced by (implicitly) agreeing on exchange of favors than trying to figure out how much money (or, for that matter, how many goats) a favor is worth.