EXCHANGE. - A basic phenomenon of associated life and the specific object of economic science, which could even be defined as "the science of exchange": that is, of contract, insofar as every free operation of exchange presupposes, tacitly or expressly, a contract expressing the conviction of the contracting parties that the things exchanged have, for them, at that moment, equivalent values. The greatest problem, therefore, of an economic science thus defined is the measurement of value, an indispensable premise for the concrete realization of commutative justice, and therefore also of distributive justice.
I. EVOLUTION OF THE FORMS OF EXCHANGE
The evolution of the forms of exchange, from exchange in kind, or barter, to monetary exchange and then to credit exchange, marks the great stages of social evolution (v. PROGRESS). The law of exchange has increasingly come to be seen as opposed to the law that governs production: whereas in the latter practical success is directly proportional to the forces employed, and the yield is bound to a growing division and specialization of labor, in exchange the result appears inversely proportional to the number of those engaged in it (merchants, intermediaries, shopkeepers, bureaucrats, etc.), and the yield, in terms of the quality and low cost of services, seems to depend on the concentration of means, on the coordination of those same services, and on the standardization of types and contracts (v. TIPO).
This is essential in economic life, inasmuch as, through the anarchic swelling of the machinery of exchange, the growing cost of buying and selling succeeds in neutralizing to a great extent the benefits of industrial progress, which consist mainly in the continuous reduction of production costs: hence the paradox of the persistence of misery and unrest in a world continually gratified by marvelous scientific and industrial conquests, which have made it capable of immense and highly varied production.
II. THEORY OF OUTLETS AND OTHER THEORIES
The phenomenon of exchange, whose practical manifestation is commerce, is dominated by the celebrated theory of outlets which G. B. Say (v.)
formulated as far back as 1806: products are exchanged, in the final analysis, for other products, so that each product will find buyers all the more easily the higher the production of all the other products with which it wishes to be exchanged. But the increase of each production finds a limit in the fall of price, brought about by the very increase of supply. Restrictive procedures, which form the rich patrimony of economic policies, combat the fall of prices by reducing supply, that is, production, and by obstructing exchange in a thousand ways. They ignore the means of increasing, instead, all productions in parallel and in proportion, by influencing the formation of capital and the territorial and qualitative distribution of investments.
The solution of the problem requires a central direction of the economy, and can be found only along two opposite paths: either such a central direction is actually constituted, identifying it with a political government, which will follow its own particular criteria, translating them into planned programs by which it will intend to interpret the true needs and tastes of all individuals; or each individual is placed in a position to intervene in the market and to choose there the best offer or the best demand, thus indicating to producers, through the language of market prices, the productions to be increased, marking out the directives of an automatic economic government of production.
The first of the two paths is the socialist-communist one, centralizing and authoritarian: the second is that of national freedom and economic automatism. If the latter, however, does not find a way to be actually realized by solving the problem of the measurement of value and by exhausting the totality of present supply and of possible future supply, it will leave open only the other path, apparently easier to travel (v. PREZZO). The third ways, today in fashion, are nothing but transitory attempts of scant effectiveness with which one tries, without hope, to delay a total identification of economic authority with political authority.
The rational solution is at present seen by certain modern economic schools (v. HALLESISMO), and by international politics itself in its desperate attempts at reconstruction and organization of the world, as a demand for a greater technical, organizational and unifying perfection of exchange and of credit, and for a rapid elimination of obstacles to commerce.
Although the vicissitudes of a difficult economic life have suggested or imposed the expedient of regulated exchanges (v. PIANIFICAZIONE), the general intuition and the common aspiration of producers and merchants always remains the complete freedom of exchange. Although not realizable by itself, that is, without the preparation and the aid of decisive advances in economic technique in general and in monetary and credit technique in particular, with the consequent elimination of the risks of investment, of immobilization and of devaluation (v.), such freedom constitutes the mirage toward which all economic forces tend: in confirmation that no political expedient can replace, in the trust of men, the scientific and technical progress of the economy, and the power, the readiness and the elasticity of free initiative, once it has been relieved of the weight of ignorance and of fear.
III. EXCHANGE PRODUCTION AND CONSUMPTION
Economic science has so far given greater importance to production and has paid less and insufficient attention to exchange. The infatuation with production, productivity and producers is not yet extinguished: wealth and well-being were made to depend solely on the productive potential of the nation. It was natural that the phenomena and needs of exchange should remain in the shadows, and that few, apart from practical men, should concern themselves with the problems and laws of commerce.
It is today finally clear that well-being and wealth are measured by consumption (v.). Consumption is indeed fed by production, but if the mechanism of exchange is insufficient or comes to a halt, production too is forced to halt, and there is misery for all. It is well known, moreover, that easy exchange stimulates production, whereas exchange made difficult, costly or risky has the opposite effect.
The products that can be exchanged among themselves are of three kinds: products of present labor (goods and services), of past labor (capital) and of future labor (incomes). Exchange normally takes place between products of the first kind and products of each of the three kinds: resulting respectively in cash commerce, short-term or credit commerce, and long-term and capitalization commerce.
Cash commerce and credit commerce have reached a notable, if not complete, technical-contractual perfection, with a sufficient complement of intermediary institutions, both contracting and insuring, on the national as well as the international plane. Capitalization commerce, on the other hand, although of vital importance for the growth of the other two and for the achievement of an economic equilibrium and a rational governance of production and exchange, possesses an equipment still primitive in comparison with the by now practical worldwide unification of the market: for which reason entrepreneurs and savers remain distant and distrustful, or ignore each other completely, with the necessary transformation of a part of annual production into new productive capital being gravely hindered thereby. It is precisely the growth of this form of exchange that should and could ensure the total sale at remunerative prices of the products of present labor.
The solution of the problem can only be of a contractual nature; and the continuous and growing interferences of economic policy, not all of them necessary and not always prudent, as well as planning schemes, dirigisme and third forces, do nothing but divert minds and activities from the rational solution: delaying that natural process of unification in the field of contracts which has already been developing naturally for centuries, but by now too slowly in relation to the rapid rhythm of events and of world economic evolution.
Bibliography6 works
Mario Baronci