Market exchange involves a quid pro quo, i.e. an exchange of private property rights between individual agents. The terms of the exchange are clearly specified: “I will give you this if you will give me that.” The goods to be exchanged are clearly specified, as are the terms of the exchange. The participants in the exchange do not need to know each other: they only need to know the terms of the exchange. The information requirements are quite low. In many cases, the exchange may be made easier by social institutions. Laws that protect buyers and sellers may facilitate the exchange. Trust may be an important element as well.
MARKET EXCHANGE
Market exchange involves a quid pro quo, i.e. an exchange of private property rights between individual agents. The terms of the exchange are clearly specified: “I will give you this if you will give me that.” The goods to be exchanged are clearly specified, as are the terms of the exchange. The participants in the exchange do not need to know each other: they only need to know the terms of the exchange. The information requirements are quite low. In many cases, the exchange may be made easier by social institutions. Laws that protect buyers and sellers may facilitate the exchange. Trust may be an important element as well.
