Exchange is a voluntary interaction between two individuals in which both forfeit ownership of an object to the other, to the benefit of both. A common misconception about exchange is that it occurs when the value of the two objects being traded are equal. However, were the values equal in the eyes of either party, no exchange would take place, as they would be just as well off without it. Thus, when an exchange takes place, both parties gain from the transaction: they are better off with the object they have attained than with the one given up. This is a fundamental source of wealth, and illustrates the value of the division of labor.
Murray N. Rothbard imagines a state of affairs where exchange is nonexistent to illustrate its importance:
- "If anyone wishes to grasp how much we owe to the processes of exchange, let him consider what would happen in the modern world if every man were suddenly prohibited from exchanging anything with anyone else. Each person would be forced to produce all of his own goods and services himself. The utter chaos, the total starvation of the great bulk of the human race, and the reversion to primitive subsistence by the remaining handful of people, can readily be imagined."
- The Ethics of Liberty, p.35