Understanding the Gift Economy

Iconic Tiffany's Box with Question Mark

I received an interesting assignment a couple weeks ago: write an explanation of the gift economy. Since the request came from my dear friend Nipun Mehta, to whom I can refuse nothing, I agreed; but I knew from the outset how challenging this seemingly straightforward task would be. As U.S. Supreme Court Justice Potter Stewart famously observed about pornography, some things are easy to recognize and yet quite difficult to define.

The essay, now completed, is included in a new online reference, The Dictionary of Ethical Politics, a joint project of Resurgence and openDemocracy.

I have thought long-and-hard about the gift economy over the past five years, since my friend and colleague John Silliphant first introduced me to the concept. It was John who developed the Seva Café model to nurture and teach about the gift economy and to provide a space to promote and celebrate service within the everyday world. I was fortunate to be on the team that helped John and his angelic enablers, Jayeshbhai and Anarben Patel, launch the project in Ahmedabad. One of my tasks at that time was to write an explanation of the gift economy ideal for Seva Café customers.

I have also been privileged to witness the birth and success of two brilliant gift economy projects by Uma Prajapati’s Upasana Design Studio. In the wake of the 2004 Indian Ocean tsunami, Tsunamika dolls, made from scrap cloth by women from devastated fishing villages, quickly gained international recognition as both an important livelihood rehabilitation project and a poignant reminder of the resilience of the human spirit. The subsequent Small Steps project applied gift economy principles to high-fashion environmental activism to serve as a vital reminder of the complex, often-subtle consequences of our patterns of material consumption. Not surprisingly, Upasana Design Studio met with considerable consumer incomprehension when it decided to distribute its Small Steps shopping bags under a price-free model. Once again, I was in the right place at the right time: Uma allowed me to write a short piece (which was later incorporated in the website FAQs) that would introduce people to the pay-it-forward ideal and to understand the ethical and practical consequences of engaging in this gift economy transaction.

And then there is my beloved CharityFocus, which for ten years has been in the forefront of developing creative ways for people to play in the space of service. CF has of-late been working on a number of projects designed to bring attention to the gift economy. These include publication of Works & Conversations magazine and operating Karma Kitchen, CF’s take on the Seva Café concept. Indeed, everything CharityFocus has ever done is, in one way or another, an exercise in gift economy transaction.

So, I agreed to take a shot at producing a short essay. It would be an opportunity to see if I could synthesize anything of value from my considerable exposure to such high-practitioners of the gift economy art.

Difficult as the assignment might be, there was one extremely liberating aspect: The Dictionary of Ethical Politics is a wiki. Those with superior insight will, eventually, correct whatever errors and omissions might find their way into my attempt to explain the gift economy. Accordingly, I decided to approach this “definition” as a sui generis think-piece, devoid of any research or background reading. I wanted to try to compose rules-of-recognition from scratch, without allowing my ideas about the gift economy to be colored by the conceptions of others.

And there was another reason to stay away from prior work. Over the years, I have come across a number of short essays on the gift economy – and have been impressed with none of them. Unsurprisingly, it is a topic that appeals to well-meaning, good-natured, spiritually curious people. Unfortunately, this results in treatments that are often long on fuzzy-headed feel-good and short on rigor. I’m sure there are some very good essays on the gift economy to be found with a simple Google search; but I really had no stomach for a needle-in-haystack exercise that would subject me to the level of penetrating analysis found in the average Hallmark greeting card.

So, here’s my take on the gift economy. To watch as my essay morphs over time, as others improve it, read it online at The Dictionary of Ethical Politics.



In its simplest form, the gift economy is not hard to comprehend: it is an arrangement for the transfer of goods or services without an agreed method of quid pro quo. Indeed, there may be no expectation or mechanism of exchange whatsoever; hence, the “gift” aspect of the interaction.

But things get complicated quickly. Application of gift economy principles varies widely; and there is, perhaps, considerable disagreement about what constitutes a gift economy transaction. Is every act of generosity, in effect, a gift economy transaction? Does every transfer of goods and services that lacks a predetermined price or definitive method of exchange qualify? The assessment is sometimes complicated and confounding.

Essential Elements of a Gift Economy Transaction

There are three essential features to any gift economy transaction. The first is that there is an act of selflessness on the part of the producer of the goods or services. This does not necessarily mean that they intend to confer the benefit without remuneration, though that is often the case; but there must be some element of altruism that transcends calculations of self-interest as judged within the narrow perspective of the transaction itself.

The second element of a gift economy transaction is that it entails an element of “free play” in the transactional structure – particularly in opposition to the dominant modes of exchange in the prevailing market economy – which fundamentally alters the way in which the giver and the recipient measure value. Thus, while in the market economy prices are usually established by the provider of the goods or services, in the gift economy the roles are often reversed, with the recipient shouldering the responsibility to place a value on the benefit. Most importantly, the gift economy calls into consideration larger social objectives extending beyond the intrinsic value of the goods or services. Market-based exchange tends to focus on the inherent value of the product – measured by the material conditions of production, relative functionality or emotional satisfaction, and relative abundance or scarcity – and therefore tends to externalize both the true social costs and instrumental social benefits associated with consumption. By contrast, the producer in the gift economy is motivated by a systemic faith that giving freely strengthens the basic social fabric, benefiting everyone, even if the transaction is quite limited, specific, and without any broad, overtly social purpose.

The final component is, perhaps, more aspirational than actualized. Ideally, a gift economy transaction is not a single transaction at all; it aims to be a vector of giftings and re-giftings. Whereas market economy transactions tend to be bound within a single, reciprocal exchange, gift economy transactions involve catalyzing a process of selfless giving which induces the recipient of the benefits to, in turn, confer a benefit selflessly on another. This chain-reaction quality of the gift economy is commonly referred to by the phrase, “Pay it forward,” meaning that the moral obligation of the recipient is not to remunerate the giver, but rather to become the giver in an ongoing altruistic process.

Illustrations of Gift Economy Activity

There are a number of transaction models that are said to fall within the gift economy. How well do they fare against the rules of recognition described above?

Charitable Donation: unreciprocated philanthropic gifts of money, goods, or service. This mode displays the purest of altruism and a clear conferring of economic (or economically measurable) benefit. Donations of time or resources are clearly gift economy transactions. Ironically, these transactions generally evoke the gift economy ethos in less overt ways than the more contrived, innovative modes.

Collectivism: the common pooling of the society’s resources, redistributed without regard to contribution. Early collectivist hunter-gatherer societies are sometimes considered gift economies, but these forms of sharing are probably best described as embracing socialist ideals, rather than gift economy principles. Some collectivism falls nicely within the gift economy model, however; for example, the North American First Nations Potlach tradition or its modern, culturally agnostic, role-reversed namesake, the potluck dinner party. The differing levels of contribution people make to these collaborations reflect their differing assessment of the value of the events as well as differing decisions about how they will participate within the social networks.

Cooperativism: where individuals (rather than the entire social network, as in Collectivism) conspire to create things of social value, made openly available and free-of-charge. Famous examples include the open-source software movement, wikis like Wikipedia (and this site), citizen journalism portals, and collective volunteerism projects like charityfocus.org.

Donation Requested: where goods or services are ostensibly gifted, but come with moral suasion for remuneration. Does this mode more closely resemble Charitable Donation, Pay It Forward, or Pay As You Will? A case-by-case assessment would be required to pass judgment.

Pay As You Will: where the buyer, not the seller, sets the price of exchange. While this mode of establishing value may have an element of “free play” about it, this alone does not bring it within the gift economy. The expectation of exchange nullifies the gifting quality of the transfer and the focus remains on the intrinsic value of the goods or services, not on broader social utility. And not all Pay As You Will systems are transgressive of the market economy. Consider, for example, the common practice of tipping.

Pay It Forward: where the consumer receives a benefit with the tacit understanding that payment to the producer will be applied to the giving of similar benefits to others in the future. There can be legitimate debate about whether this conceit carries a transaction beyond the Pay As You Will model. In cases where meaningful social contribution is significant factor in the valuation exercise and the activity involves systemic participation rather than transactional participation, this mode is an archetype of the gift economy. Where the communitarian intention of the producer, the instrumental social value in the mind of the recipient, and the incentives or inspiration to carry the gifting forward are weaker, the gift economy bona fides are also weaker and the antithetical element of simple exchange is difficult to overlook.

Portion of Proceeds Donated: where the seller pledges to donate only a part of the proceeds of the sale, usually some or all of the profit margin. This model demonstrates the difficulty of identifying gift economy transactions. Is the gift component of the transaction simply a marketing ploy to increase the volume of sales, presently or in the future, or does it represent genuine philanthropy? Variants on this mode include such things as the difference between socially progressive retooling of production or distribution methods to achieve meaningful environmental sustainability and greenmail, the exploiting of token environmentalism as an advertising gimmick. Whether a transaction under this model qualifies as gift economy depends on the true selfless intent of the producer, which be may difficult for the purchaser to divine.

Proceeds of Sale Donated: where the seller gifts both their capital contribution and profit to a charitable or social cause. This presents a fascinating example because, although it is clearly an exchange-based interaction between buyer and seller, it meets all the criteria of a gift economy transaction.

Lessons of the Gift Economy

The common thread among the various modes of gift economy transactions is that the giver of goods or services contributes as much to a systemic appreciation of communitarianism and interdependence as to the individual recipient of the benefit.

The gift economy represents an optimistic perspective, engendering attitudes of compassion and generosity, favoring a outlook of relative abundance over relative scarcity, and based on faith that others will also be motivated to favor the common good over individual advantage, at least from time-to-time and in ways that are socially significant.

The gift economy shifts perspective in another important way, forcing a reappraisal of the manner in which we think about and measure value. This awareness can carry-over into to normal market transactions as well, sparking consideration of the consequential costs and benefits of specific acts of material consumption which are otherwise externalized from the price.

Finally, the gift economy reminds us of the interconnection of our lives to other human lives, to non-human lives, and to the non-living world. It offers a broader perspective on the ripple effects of our other-regarding actions, even if the specific consequences remain mostly invisible to us. It demonstrates, transaction-by-transaction, that each of us has the power to positively influence collective behavior within our communities and throughout the world.


12 Responses to “Understanding the Gift Economy”

  1. 2 mercerd 17 July 2009 at 11:56 am

    interesting material, where such topics do you find? I will often go

  2. 3 Anu 18 July 2009 at 7:30 pm

    Hi Mark,

    A beautifully thought provoking essay.

    A couple of thoughts- Sant Kabir had said, “Lower your eyes when you offer a gift so that you have no inkling who might be indebted to you.” Another way of donating anonymously.

    Even though the recipient does shoulder the responsibility of placing a value on the gift; somehow the value of the gift to the giver should also be a part of the picture. As an example, the value of 10% of earnings donated by someone who earns a thousand dollars per month should be much more than someone who also gives 10% of his earnings, though earns a hundred thousand a month.


  3. 4 C Sage 25 July 2009 at 11:37 am

    Very thought-provoking, thanks!! It made for interesting thinking related to the role of government in gift economies. Governments give, outright, to individuals, communities, and nations. Governments establish collectives, cooperatives, and even pay it forward-type programs. Citizens, however, often seem relentless in our criticism of government as self-serving; always having a hidden agenda, and/or endlessly seeking some advantage via an identified or unknown quid pro quo. Do we ever believe that governments, particularly those established by and for the people, engage in altruistic behavior solely for the purpose of promoting the general welfare (forgive my US-centric references)? Do government or government-funded programs fueled by other-than-altruistic agendas end up creating a gift-economy culture despite that agenda? What a wonderful idea, that awareness and commitment to the interconnectedness of the world might drive people to always look for a way to make lemonade from government lemons.

  4. 5 Stowe Boyd 27 July 2009 at 7:26 pm

    When you wrote “Pay It Forward: where the consumer receives a benefit with the tactic understanding that payment to the producer will be applied to the giving of similar benefits to others in the future.” I think you meant ‘tacit’.

    I find this piece very compelling. I’d like to interview you for a series I am doing on The Future Of Money, if possible.

  5. 6 Gayatri Devi 17 August 2009 at 12:03 am

    Brilliant summary here – really makes my job easier to see such a well crafted article written for the world.

    Thank you for following through and weaving the synthesis. So do you know of Genevieve Vaughan’s Temple of Goddess Spirituality ~ A Project for the Study of the Gift Economy?

    In abundance of spirit and the prosperity of the unlimited generosity of the communal ONE HEART!

    Living resources of possibility for ALL… Gayatri

  6. 7 Frieda Werden 17 August 2009 at 2:13 am

    This essay is well written but it lacks something very important, the origins of the gift economy in mothering, both biological and cultural, and the impossibility of an exchange economy without parasitism upon this fundamental economy of unilateral giving. In the so-called developed societies of the world, mothering has become invisibilized, but there have been quite a few publications and international conferences in recent years calling attention back to this source. Another one is coming up October 23-25, 2008, in Toronto, Canada. It’s called A (M)otherworld Is Possible. For information, visit http://www.gift-economy.com

  7. 9 Yvonne Wilson 27 October 2009 at 8:23 pm

    Potlatching is but one form of an economic system that is based not on barter or sale, but is based on compulsory gift giving. In the Kwakwaka’wakw (Kwakwala Speaking People) societies, children were raised with the idea of the gift giving firmly implanted in their worldview. For example, Franz Boas observed that when a Kwakiutl child is born, it is first given the name of the birthplace, which it keeps for 10 months. Then a relative of the child gives a paddle or a mat to each of the clan members to mark the occasion of his second name. When a boy reaches puberty, he takes his third name, by distributing gifts to everyone in his clan. It is in effect, his first potlatch. He is usually assisted in this ceremony by relatives, especially the nobility.

    To get to the “Gift Giving” section of the ceremony takes much preparation and is done by the “entire” family whether they contribute financially or physically from young to old. The amount you contribute is not determined by your status or rank in the family. It is the family’s responsibility to hold up the Chief by working in Unity. The status is determined by birthright, not how much money or monetary value you contribute to the event. Potlatch was a gathering of people on any number of occasions, including birth, puberty, marriage or death. During these gatherings, there would be feasting, dancing, and the redistribution of property or its destruction. Some of these events are handled in one Potlatch or over a feast, which is not as elaborate as a Potlatch gift giving, and the food the family feeds the community is the gift.

    There is also a structure in regards to the gift payment as well. Chiefs, Hamasta (Peace Keepers) Drummers/Singers and the Matriarchs and nobility are paid first and their gifts differ from the majority of gifts that are paid to the other guests of House. This form of gift giving was and is still today an integral part to our economy. In the past payment was ten fold back to the family. With the influences of Western Society, the gifts have only become much more accessible and elaborate as in form of Money, Blankets, and native art pieces and the best money can buy.

    The Potlatch still takes place today for all those reasons mentioned. I personally come from a family that is still quite active in the Potlatch Society. Actually, my family was part of the 1921 Potlatch that jailed men and women in Oakalla prison in 1922.

    DAN CRANMER’S POTLATCH: Around Christmas in 1921, a Namgis fellow named Dan Cranmer hosted a six-day potlatch at Village Island, near Alert Bay. The occasion was that of his marriage. Cranmer, being true to his Kwakiutl traditions, planned to celebrate the event with a long feast during which he would give everyone gifts. Some three-hundred guests (fellow Kwakiutls) were on hand to witness and receive Cranmer’s giving away of all his accumulated wealth.

    Cranmer reportedly started out on the first day by receiving much of this wealth from his wife’s family (a dowry from my birth Families Hanuse – Alfred). That night there was a dance. The next day he gave away twenty-four canoes, pool tables for two chiefs, four gasoline boats, and another pool table. He gave away blankets, gaslights, violins and guitars, kitchen utensils and three-hundred trunks. Women were given bracelets, shawls and dresses. Sweaters and shirts were given to youngsters, and coins were thrown in the air for children to collect. Another dance was held afterwards. He did not remember what he did on the third day (perhaps he was in a swoon). During the fourth day, he gave away sewing machines, gramophones, bed-steads, and bureaus, along with more boxes and trunks. On the fifth day, he gave away cash. And on the sixth he gave away about 1000 sacks of flour, each worth three dollars (a lot of money in 1921), as well as some sugar. It was one of the largest potlatches on record.

    Although it sounds like a good time for everyone, Cranmer’s potlatch was in fact against the law, and he, along with fifty other Kwakiutls, had criminal charges brought against them as a result. Twenty-two of those people were imprisoned for two months, and the rest were given suspended sentences on the condition that they surrender all their potlatch gear, which included dance masks, ceremonial whistles, and plaques of beaten copper (known as “coppers”).

    The law Cranmer had violated is known as Canada’s Indian Act of 1885, which specifically made any potlatching illegal. The reasoning behind this act was produced by a typical blend of missionary and governmental rationales, which had as their goal the assimilation of Aboriginals into modern society, and the extinction of their cultures. The motives behind these goals were hardly just misguided altruism. In reality, The Canadian government (as did the American government) was seeking the absolute extension of the rule of property. Potlatching was a threat to this rule because among other things, potlatching was an economic system of distribution that followed along communal lines. It took commodities and turned them into gifts, thus mocking the entire system of capitalist production. Potlatch destroys property. It is the old story of the “lazy Indian,” the one who is indolent and thriftless. The big project was figuring out how to get these people to work. Forcing practices of private property on them seemed the obvious choice.

    Potlatching was perceived by Canadian legislators as a “mania,” an “insane exuberance of generosity” that had to be stopped.

    Hope this offers some insight to “My Peoples” definition of Gift Giving.

  8. 10 Gayatri 1 September 2010 at 1:29 am


    Mark I sent your article to my friend Michael Torres from Texas today since his tag line for World Wide Maniac is “A World Where Creators Pay it Forward.”

    Please get in touch with him since you have important pieces to share with each other… for I mentor many Corporate Shamans that have a higher destiny for the new Compassion Economies on Earth.

    Thank you so much for so brilliantly mapping this out for many people who are just starting to remember that we have other choices available to us if we expand our scope to include all possibilities.

    I’m in Utah, Zion right now on my way to my annual International Association of Near Death Studies conference, and I’m writing you on the way because your work is a part of why I came back from the other side twice in my two childhood NDEs.

    My work email is above and my cell phone is 858-229-3822. Your writing style is phenomenal for ears like mine that never reads a newspaper because most of the pieces are too limited for my scope.

    “It is written” Slumdog Millionaire blessings,

    Michael Torres: Founder & Chief Executive Officer

    Michael Torres founded Worldwide Maniac in 2008 based on the concept of conscious capitalism and a “pay it forward” vision. Today, Worldwide Maniac brings together the entertainment, sports and fashion industries to co-create a unique business platform where success is measured not only through maximizing profits, but by fulfilling a greater purpose in support of humanitarian efforts and the environment.

    Austin, Texas
    Phone: 512.608.9077
    Fax: 713.481.8739

  9. 11 mbjesq 1 September 2010 at 9:40 am

    Thanks for the kind words, Gayatri.

    As the gift economy generates increasing interest, it is inspiring to see what people are doing with it. Of course, gift economy “transactions” have always been with us, even if they were not identified and labeled as such; but it is wonderful to see the power of this very positive meme.

    Best of luck to you and your friend Michael.


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