From My Notebook no. 15

The reference by Smith in Wealth Of Nations to “truck, barter and exchange” in the context of the 1760s (and before then too) was, and should remain self-evident.

“Of the Principle which gives occasion to the Division of labour

1 This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion to.

It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

2 Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire.  It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts” (WN I.ii.1: 25).

Smith refers in his speculations about the origins of the propensity in humans to “truck, barter, and exchange one thing for another” to a minority of the Earth’s landmass.  He itemised “exchange” and did not mention “to trade”, and it would have been absurd for him to do so, though I read, occasionally, of modern authors mistakenly eliding Smith’s propensity to “exchange” into the specific behaviour of “trade”. 

Trade was not an original propensity that appeared in human societies, though exchange was a behaviour endemic to all humans, and remain so.  It was tens of millennia before exchange by trade evolved socially in a small geographical area first that very slowly expanded thereafter over many millennia.

Until very recently trade was not a universal trait among human societies and I dare say recent sightings of some unknown tribes along the Orinoco River along the Brazil/Venezuela border area suggest they may still have no experience of trade, in common with all human societies until 4 or 5 millennia ago.  Even a few centuries ago trade was unknown except in a minority of regions in the Euro-Asian landmass.

This distinction is important.  Exchange is the universal behaviour in all human societies.  It is not just in economic theory that exchange operates; such a belief is too narrow a perspective of how humans have behaved since proto humans speciated from our common ancestor with the chimpanzees (humans did not descend directly from chimpanzees; our species both descended from the now extinct ancestor of both of us 4 to 6 million years ago).

Why then did Smith tag on exchange with “truck” and “barter”?  Well, I think he wrote (and taught) that way to inform and educate his readers and students by relating exchange to meanings they could recognize.  “Truck” and “Barter” were common words in the vocabulary at the time.  To “truck” meant to exchange something for labour in kind with something else, such as goods from the company store (of “16 tones and whadya get?/Another day older and deeper in debt” of modern fame).  It was a method deeply given to exploitative fraud that was made illegal in the 1820s in the UK.

To “barter” meant to exchange goods for some other different goods.  It is still prevalent though on a small scale, with occasional utopian attempts to bring it back to replace monetary transactions.

“Exchange” is on quite another scale.  It goes deeper in long history. Smith was conscious of its antiquity and its generality into all aspects of social behaviour.  For example in his essay on the Origins of Language (1761), a necessary consequence of acquiring the “faculties of reason and speech” distinguishes the human lineage, though I read a paper recently that deduced from Neanderthal remains and their DNA that proto-speech may have been possible in our nearest relatives.   It certainly flowered in the human species.  Linguists study speech and languages in humans.

James Otteson: Marketplace of Life, 2002, identified exchange, as a common behavioural facility in various forms across all of Smith’s Works.  I discussed examples of this in the first edition (2008) of my: ‘Adam Smith: a moral philosopher and his political economy’. Palgrave-Macmillan.

Exchange is strongly supported as a general human behaviour by anthropologists, for example Mailinowski, B. ‘Argonauts of the West Pacific’. London: Routledge, 1932).

I conclude that exchange is a general human trait and Smith was right to credit exchange as the dominant characteristic that is “the necessary consequence of the faculties of reason and speech” and the great precursor of bargaining behaviour.   I would go further and assert that the anthropological study of the roles of “gift” and “reciprocation” behaviours are also common to humans and are examples of exchange behaviours that are deeply embedded in human behaviour (see my MBA course text on “Influence”, Edinburgh Business School, 2000; Influencing for Results, Random Business (out of print; available from Abe Books and Amazon).