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Voluntary Exchange as a Economic Concept

Page history last edited by Robert W. Maloy 4 years, 11 months ago

 

Focus Question:  What is a voluntary exchange when all participating parties expect to gain?


VOLUNTARY EXCHANGE: The process of willingly trading one item for another.

Voluntary exchange exists in a free market economy with little or no government control. It is the basis of a capitalist Free Market and is one of the grounding concepts in a US-style economy.

 

 

This article describes voluntary exchange as mutually advantageous trade in which both parties benefit and are better off after the trade.

 

  • The article gives an example of a coffee vendor selling a cup of coffee to a customer for $1 as a voluntary exchange. 

 

    • The customer values the cup of coffee higher than $1 and the vendor values $1 more than a cup of coffee. 

 

    • The trade benefited both parties (2).


This video explains the basic origins of voluntary exchange.

 

  • The video says that each voluntary exchange in a world with scarce resources makes both parties happier without altering the total wealth available.

 

  • It also emphasizes that more people benefit when they can have voluntary exchanges with a wider audience because there are more options. 
    • It also shows that there is no person in charge in a voluntary exchange, as it is a component of the free market, so an economy does not need to be tightly controlled to allow for mutually advantageous transactions (3).


This article explains how voluntary exchange operates within a market economy.

 

  • Voluntary exchange runs the market economy and transactions are not mandated by the government, but of the free will of the buyer and seller.

 

    • The distribution of goods is determined by the voluntary exchanges of individual parties and not controlled by the government (4).


This slideshow further explains the role of voluntary exchange within capitalist economies.

 

  • Both buyer and seller are better off after a transaction than they were before, encouraging exchange in the market without needing government interference. 

 

  • It also introduces the concept of "consumer sovereignty," which means consumers control the economy but also explains how governments can regulate the economy (5).

 




This "Crash Course" video explains how voluntary exchange works in a market economy and gives many examples of different voluntary transactions.

 

  • The video says that most markets are based on voluntary exchange and explains that competitive markets are best at allocating resources. 

 

    • Markets incentivize production and control prices based off of supply and demand (7).

 

 

Treaty of Fort Wayne 1809: An Example of Voluntary(ish) Exchange Gone Wrong

 

    • Several Native American Tribes sold 2.5 million acres of land for 2 cents an acre

    • William Henry Harrison(future President, governor of Indiana Territory at the time)

    • One of the major trade agreements that exploited Native American Tribes

      • Combination of Force and trickery

    • Led to a war between the US and the Shawnee, who also sided with the British in the War of 1812 under the leadership of Tecumseh

 

https://www.smithsonianmag.com/smithsonian-institution/territorial-grab-pushed-native-americans-breaking-point-180965142/

 

Collection of Treaties and Laws targeting Native Americans

 

A Game about trade and exploitation.

(1) http://www.notbeinggoverned.com/wp-content/uploads/2014/06/FreeMarket1.jpg
(2)http://seattlecentral.edu/faculty/jhubert/trade.html
(3) https://www.youtube.com/watch?v=W-qGYlRtCcM&ebc=ANyPxKrK4wiDz42Oi0QXaXbv63OnMzx_ixpkQ4s0WOEluoI-gqw0vMHtinIP9tF081Ec8Fv7XMCTlXbePPQtR41mu-ejFvsjQw
(4) http://smallbusiness.chron.com/principle-voluntary-exchange-operate-market-economy-78180.html
(5) http://www.slideshare.net/eben_cooke/capitalism-economic-freedom
(6) http://www.azquotes.com/quote/572166
(7) https://www.youtube.com/watch?v=g9aDizJpd_s

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