Producer Bartering in Free-Market Ecology
Originally published on Botsfordism Substack on October 24, 2024.
An Unusual Problem that Completes the Free Market Ecology Puzzle.
This article serves as a follow-up to earlier pieces on Free-Market Ecology, specifically the “Introduction to Free-Market Ecology” and “Small Scale Free Market Ecology.”
Sher discusses a discovery made while conversing with William “Monty” James at Zelar.City regarding an interesting challenge within free-market ecology: “barter between producers” when “factors of production” cannot be universally exchanged for money.
The Barter Problem in Production
Sher presents a concrete scenario: an aluminum manufacturer closing a plant wishes to convert surplus aluminum into plastic pipettes for a biotech startup. The question becomes: how do non-consumable production factors transition efficiently between ventures in a barter-based system?
In traditional capitalism, such a transition might result in losses, with assets transferred to banks. However, within free-market ecology frameworks, the plant owner maintains a depreciated balance sheet. Profits from prior production could fund new material needs, while depreciated equipment sells at discounted rates through central exchanges—reflecting that consumers already paid for full resource value through product depreciation.
Sher proposes a practical mechanism: the aluminum manufacturer contacts a drone maker with thin margins. The manufacturer sells discounted aluminum while receiving crude oil and hydrogen allocations the drone maker uses. The drone maker produces fewer units but enjoys improved margins through cheaper materials, while production factor constraints naturally develop.
Complete resource transparency across businesses would facilitate optimal trade calculations. Sher suggests AI could theoretically determine ideal allocations automatically within competitive frameworks.
The approach differs from current capitalism because materials must actually serve new ventures rather than being hoarded for commodity speculation.