- Cafe Hayek - http://cafehayek.com -

Barter Exchanges are Mutually Beneficial

Tweet [1]

Steve Brecher sent to me the following e-mail in response to this recent post on unpaid internships [2]:

Your letter to Atlantic on the subject hereof seems off base to me: interns are working for their organization, providing services; while college students are primarily consumers of services provided by their schools.

With respect, I disagree that my letter to the Atlantic is off base.  Here’s why I disagree.

All voluntary exchanges are mutually beneficial.  (This claim is always true ex ante – that is, prospectively – if not always true ex post.  People do sometimes err, even by their own lights.  But because opponents of unpaid internships do not allege that unpaid interns consistently make mistakes in accepting such internships, error is not the issue in this discussion.)  Therefore, people who accept unpaid internship gain relative to whatever would be the payoff (however measured) of their next-best alternatives.  These people are made better off.  So, too, of course, are the organizations and firms that employ unpaid interns.

The fact that there are a class of exchanges that work well as barter exchanges does nothing to undermine the proposition that those exchanges are mutually beneficial.  Money is a medium of exchange; it is itself not wealth.

Unpaid internships are barter relationships.  The interns are not really unpaid; rather, they are paid in kind.  They are paid with experience, personal connections, perhaps enjoyment.  The totality of this pay sufficiently compensates these interns for whatever trouble and costs they incur in order to work as unpaid interns.  No cash payments need be added to these compensation packages in order for organizations that use unpaid interns to attract more such interns.

Obviously, too, the organizations that use such interns also gain – perhaps only narrowly (say, in the form of more output to sell today to paying customers) or broadly (say, in the form of increased goodwill from young men and women, their families, and other people who applaud firms and organizations for supplying these valuable opportunities to young people).

What’s relevant is the voluntary nature of the agreements between organizations that use unpaid interns and the unpaid interns that these organizations use.  What’s irrelevant is the currency in which the parties to the agreements are paid.  The fact that money is typically (in our highly specialized economy) the form of payment for specific goods and services received in no way implies that money is the only form of payment that is real or acceptable.

To complain about unpaid internships is to complain about the fact that barter happens to work for such voluntary exchanges.  But unpaid internships – no less than the supplying of educational services by colleges in exchange for monetary tuition payment from students – are mutually beneficial arrangements.