The allocation or exchange of goods and services within a local group or between different local
groups is known as distribution or a system of exchange.
Types of Exchange System
Karl Polanyi, an economic historian, has identified three different modes of allocation or principles of exchange: reciprocity, redistribution and market exchange.
This method refers to transfer of goods or services between two people or groups based on their role obligations.
Certainly the mother and the son attempt to give each other items they know will be appreciated, but the reason for the exchange is their obligation to one another, an obligation they assume when they take on the status of mother and son. If the son fails to give anything to his mother, she will be hurt and disappointed. Similarly, a mother who did not give gifts would also have to face very disappointed children. This exchange does not takes place among strangers.
Value of Goods
The value of the goods given need not be the same, but there is a tendency for an equality of value to characterise exchange between individuals of equal rank. As long as the value of items exchanged reciprocally is within the ran e of what is culturally defined as proper, the obligation of the parties to the exchange is met.
(i) Generalised reciprocity is gift-giving without any immediate return or conscious thought of return.
(ii) Balanced reciprocity In which goods and services of commensurate worth are traded within a finite period (direct exchange). This sort of exchange is motivated by the desire or need for certain objects.
Exchange Based on Redistribution
This system of exchange refers to the transfer of goods and services between a group of ' people and a central collecting source based on role obligation. Like reciprocity, redistributive exchange occurs because people are obligated to each other. In other words, goods collected or contributed from members of a group flow to some central point from which they are redistributed to the society.
It is the exchange of goods and services according to the law of supply and demand. The predominant feature of market exchange is that goods and services are bought and sold at a money price which is determined by the impersonal forces of supply and demand.