Jeff Wang Blog

Is there such a thing as “equivalent exchange”?

Yes, if you trade one $10 bill for another $10 bill, but that doesn’t really accomplish anything

In economics, more trade is better

More trade means more producer and consumer surplus, which contributes to overall economic welfare, which is just economic jargon for “the world is better when we exchange goods”

But we wouldn’t really conduct equivalent exchange every time

No, I buy that carton of milk for $5 because I think that milk is worth MORE than $5. The seller is also willing to make that trade because he believes that milk is worth LESS than $5. They’d rather have the money.

That’s where we get the surplus.

Let’s talk outside of economics now, and into social interactions.

Does equivalent exchange exist?

Does it even matter?

If my friend holds the door open for me, an equivalent exchange would be for me to hold the door open for him the next time.

But when it gets into bigger social transactions, things get much more difficult to pinpoint

If my friend does my a favor and invites me over for thanksgiving.

If I help my friend get a job by prepping him for interviews.

Tutoring friends, giving them a ride to the movie theater or buying them a birthday gift.

I don’t believe in equivalent exchange. I believe that equivalent exchange is meaningless, because why would I trade $10 for $10?

More trade is better. Exchange is good because they are not equivalent. We want to trade to produce more surplus.