Gift economy

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A gift economy is an economy based on giving in the context of relationship rather than making transactions simply for profit or personal material gain. This is in contrast to barter or commercial economies which rely on exchange of goods or labor for money - or for goods and labor of equal monetary value.

Altruism is sometimes viewed as the basis for spreading wealth throughout a gift economy. However, the individual giver actually benefits indirectly. For example, social status and support in times of need may be obtained by those who give to others in the group or community. Most economies rely on both commercial aspects such as paid work and gift aspects such as volunteer or unpaid work.[1]

Gifting and profit

Some people like to use examples of selfless gift exchanges in "primitive" societies to contrast with the greedy behavior of modern markets. But a closer look at one famous exotic gift exchange, the Trobriand Islanders' Kula, actually reinforces libertarians' claims about the universal power of the profit motive.

In the elaborate Kula trade among the islands off the eastern tip of New Guinea, men sailed for many miles to receive ceremonial gifts of shell jewelry, apparently for the sole purpose of giving those gifts away again within a year or two. Such a journey was both costly and dangerous.

Each act of generosity was in fact a careful investment. Whomever you gave a vaygu'a to was obligated to repay you later with a "counter-gift" of a different artifact he owned. So a man planned out whom to give things to in order to control whom he would get things from. In this way, a patient and clever giver of vaygu'a could maneuver the most famous artifacts into his own hands.

The Kula was not pointless (contra Rothbard) and definitely not gainless (contra Polanyi). It was an organized search for personal profit. True, the profit was reputational, not strictly material. But ultimately, every "profit" — whether in fiat dollars, or NHL trophies, or shell necklaces — is a mental phenomenon, a fulfillment of our subjective whims greater than the costs we paid to achieve it. The remarkable thing about free exchanges like the Kula is that in every exchange both parties make a profit.

Yet the Kula also protected and encouraged extensive barter between the Trobrianders, the Dobuans, the Amphlett Islanders, and the several other cultures who took part in it. In each Kula journey, the visitors' canoes came packed full of food, or pottery, or artwork — whatever goods their community made best. And after the initial gift-giving ceremony on the hosts' beach, the visitors remained for several days of bartering over this stuff with their hosts.

As in much of Melanesia, the islands off the east coast of New Guinea were rife with the danger of warfare, which certainly threatened to disrupt trade and force each village into economic isolation. But the Kula mitigated this threat by providing a kind of "peace-making ceremony" between men of different communities and cultures.

A good Kula partnership between two men could provide a steady flow of vaygu'a through numerous gifts and counter-gifts over decades; the relationship could even be passed down as an inheritance to a son. Each man thus had good reason to protect his partners against theft or violence when they came to visit his island.

In short, the decentralized network of Kula gift exchanges provided the social scaffolding for international trade protected from robbery and warfare.[2]

Open source software

Main article: Open source software

In his essay "Homesteading the Noosphere", noted computer programmer Eric S. Raymond pointed out that free and open source software developers are a 'gift culture'.

He notes that gift cultures are adaptations not to scarcity but to abundance. They arise in populations that do not have significant material-scarcity problems with survival goods. We can observe gift cultures in action among aboriginal cultures living in ecozones with mild climates and abundant food. We can also observe them in certain strata of our own society, especially in show business and among the very wealthy.

In gift cultures, social status is determined not by what you control but by what you give away.

Within it, there is no serious shortage of the `survival necessities'—disk space, network bandwidth, computing power. Software is freely shared. This abundance creates a situation in which the only available measure of competitive success is reputation among one's peers.[3]


  1. "What is gift economy? definition and meaning", Business, referenced 2012-07-21.
  2. Mike Reid. "Even "Primitives" Pursue Profit", Mises Daily. Referenced 2012-07-21.
  3. Eric Steven Raymond. "The Hacker Milieu as Gift Culture", a chapter from Homesteading the Noosphere. Referenced 2012-07-21.