A gift economy is an economic system in which both goods and services are freely given, with no direct expectation of being paid back. A gift economy may make use of external incentives to giving, such as the idea of karmic rewards or an afterlife, or social rewards, such as increased standing in the community through giving. It may also use the idea that a healthier community benefits all members, so that giving to those in need is ultimately self-serving as well as community-serving.
The gift economy is really the third major type of economy, along with the market economy and the command economy. In a market economy, things are bought or traded directly, in a quid quo pro fashion, so that very little is ever actually given away. In a command, or planned, economy, a central organization, usually the state, takes control of all goods and services, and distributes them as they wish. In actual practice, very few economies are absolutely any one of these types, and more often merge a few aspects of each, with an emphasis on one type.
Within the US economy, for example, we see all three pillars. At its heart, the US economy is a market economy, with buying and selling accounting for the bulk of all transactions. At the same time, however, it integrates some elements of a command economy, with things like subsidies for farms and steel, and social services like Medicare and social security. And, elements of the US economy can be seen as embracing the gift economy. Within academia, for example, knowledge is looked at largely as something to be shared, making it a sort of gift economy, in which the gain is one of social privilege and respect from peers, rather than a quid quo pro gain of material benefits.
Some of the best examples of a gift economy can be found in tribal and pre-tribal systems. Most hunter-gatherer cultures, for example, are a gift economy, with food shared freely among members of the group. This works to ensure the overall health of the group by keeping all members strong, and protects individual members from their own times of famine. If a group goes out hunting, for example, and only one hunter finds any game, he could hoard that game, making themselves healthier, but condemning the rest of the tribe to malnourishment. From a selfish perspective, this might seem to be the best course of action, but if the next month that same hunter goes through a long period without finding any game, he could then suffer greatly. A system of universal sharing, a gift economy, protects every member of the group from ever suffering unduly, especially in relatively abundant environments, which typified most of early man’s habitats.
Many examples of a gift economy can be found with a religious justification, as well. Religious giving, for example, is widespread throughout most of the world’s religions, and is given without any expectation of a direct quid quo pro return. Instead, it is thought that the divine will somehow give a reward for the gift, either in the form of a karmic balance, or in the form of acceptance into some sort of paradise in the afterlife, creating a gift economy based on non-material gain.