Homo homini rodentius est

Barter and the Brain

Barter and the Brain

Last week a lot of news sites carried stories about [a guy] who’s trying to barter his way to a new house, starting from having practically nothing of value to trade. It’s a brilliant scheme and, so far, he’s traded his way up from a paper clip to a year of free rent in Phoenix.

Like everybody else, I hope he succeeds in his quest and it’s exciting to think about the Net becoming a place to revive and extend an ancient economic model like barter — something that could make a lot of sense in a society awash in products, but where real wages are declining and debt has skyrocketed.

But the excitement is tempered by questions about how viable this could be over time. Could it involve a big X factor in the equation of relative value that involves the novelty and “fun” value of the exercise? Coincidentally, this month Harvard Magazine has [an article] on Behavioral Economics — an amalgam of classic econ theory and insights from cognitive psycholgy about how people actually make choices.

Among the insights are that ‘framing” of a person’s choices has as much or more to do with decision making as actual assessment of value. For example, people offered $5 today or $10 two weeks from now will almost always take the reward now, rather than wait. This “bird in the hand” effect is an example of a pervasive tendency to discount future value. It’s why the pain of going to the gym is something we’ll enthusiastically do next week (so long as next week never comes…) and why so often we’re satisfied to talk about making challenging changes at some time in the future because the distant reward of actually taking action is discounted against the smaller reward of making a resolution today.

This is what makes me think that people may indulge our friend with the paper clip not because they’re getting real value from the things they’re trading with him — but because the fun little kick they get now from engaging in something novel and fun makes up the difference. What happens when it’s not novel anymore? We’ll see.

Still, kudos to him for being first.

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