In this regard, the article shows the existence of a barter economy or the existence of an exchange economy. The article represents the P.O.W economy as an alternative for the Robinson Crusoe economy. In the article, cigarettes are chosen to be the medium of exchange. In other words, cigarettes perform the function of metallic currency in the P.O.W economy. The importance of the article lies in the fact that the standard of living of an individual can be enhanced through a mode of exchange. (Radford)
The article “The Suntory and Toyota International Centres for Economics and Related Disciplines’ by Radford’ lays emphasis on the existence of barter system and the importance of an exchange economy in enhancing the welfare of the economy. The barter system provides the base of exchange. In earlier days when money was not invented, people would still trade among themselves using a standard form of currency as a substitute of money. Rice used to be a medium of exchange. For example, if anyone were in need of milk, then he would obtain one liter of milk from another person in exchange of rice. That is the person who needed milk, would give one quintal of rice to the person from whom he would obtain milk. In this way, trade used to take place in earlier days. However, there was a problem with this system. The problem is regarding the mode of exchange. In the above example, the person who was in need of milk may not always find a person who would be ready to give milk in exchange of rice from him. In such a situation, the concept of using a commodity, say, rice, wheat, milk etc. as a medium of exchange fails. These problems soon lead to the invention of money. Thus, the process of exchange became faster and easier and enhanced the living standards of people.
Trade is beneficial because of comparative advantages in production. David Ricardo proposed the theory of comparative advantage. The theory states that an economy should produce