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Abstract

We will try to show the potential of a research perspective that we have tentatively called an Institutional Economics of Gift (IEG). For this purpose, we dwell on two key issues that any nascent research perspective is expected to address: the subject matter and the method. Without any claim to exhaustiveness, the subject matter of an IEG will be explored through the analysis of three important forms of institutionalized gift-giving: the welfare state, the third sector, and the percentage philanthropy tax scheme. All of them raise the issue: to what extent gift-giving can be institutionalized and even legally enforced without losing some of its characteristics such as spontaneity, freedom and/or voluntariness? Moreover, this investigation points to the need to reflect more on the relationship between obligation and freedom as well as to go beyond the State/Market dichotomy. Methods will be explored by addressing the question: which methodological approaches are most suitable for an IEG? Methodology is a contentious issue between Original Institutional Economics and New Institutional Economics. However, both approaches, New Institutional Economics implicitly and Original Institutional Economics explicitly, tend to rely on qualitative and mixed empirical research methods. Particular emphasis is placed on anthropology and ethnography.
© 2021, Journal of Economic Issues /Association for Evolutionary Economics
954
An Institutional Economics of Gift?
Paolo Silvestri and
Stefan Kesting
Abstract: We will try to show the research potential of a research perspective that we have
tentatively called an Institutional Economics of Gift (IEG). For this purpose, we dwell
on two key issues that any nascent research perspective is expected to address: the subject
matter and the method. Without any claim to exhaustiveness, the subject matter of an
IEG will be explored through the analysis of three important forms of institutionalized
gift-giving: the welfare state, the third sector, and the percentage philanthropy tax scheme.
All of them raise the issue: to what extent gift-giving can be institutionalized and even
legally enforced without losing some of its characteristics such as spontaneity, freedom
and/or voluntariness? Moreover, this investigation points to the need to reflect more on
the relationship between obligation and freedom as well as to go beyond the State/Market
dichotomy. Methods will be explored by addressing the question: which methodological
approaches are most suitable for an IEG? Methodology is a contentious issue between
Original Institutional Economics and New Institutional Economics. However, both
approaches, New Institutional Economics implicitly and Original Institutional Economics
explicitly, tend to rely on qualitative and mixed empirical research methods. Particular
emphasis is placed on anthropology and ethnography.
Keywords: methodology, social anthropology, welfare state, third sector, percentage
philanthropy
JEL Classication Codes: B52, D02, D64, Z13, H53, L33
Gift-giving practices can be observed everywhere in modern societies. A prominent recent example
is the charity founded in the UK by Sir Captain Tom Moore. On an impulse to help the tax-funded,
but cash strapped British National Health System (NHS) during the COVID-19 pandemic,
this centenarian British army officer started to pace up and down his garden and by publicly
advertising this activity raised more than £32million for NHS charities. In the UK, Captain
Tom was publicly perceived as a symbol of solidarity and altruistic spirit during the health
crisis and has even been knighted in a formal ceremony by the Queen.1 However, though
Captain Tom’s is an extraordinary story, gift-giving is ubiquitous. Just think of Christmas
and birthday presents or beggars in the street. Moreover, there is the whole “industry” of
Paolo Silvestri is in the Department of Economics and Statistics, at the University of Turin, Torino, Italy
and acknowledges funding from the People Programme (Marie Curie Actions) of the European Union’s Seventh
Framework Programme (FP7/2007–2013) under REA grant agreement no. 609305. Stefan Kesting is at the
University of Leeds, Department of Economics, Leeds, West Yorkshire, UK.
1 For a critical review of the institutionalization of the British honors system over time, see Tobias Harper
(2020).
JOURNAL OF ECONOMIC ISSUES
Volume LV No. 4 December 2021
DOI
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An Institutional Economics of Gift
charities like Oxfam, the Red Cross, NGOs like Greenpeace and Amnesty International as
well as a whole raft of foundations, sponsorships, and all the volunteer work provided in
soup kitchens and other charitable organizations. All these more organized versions of the
gift are usually governed by institutions like social norms, habits, and customs and sometimes
enforced by some sort of moral obligation or even legal sanction. Hence our starting
questions are: How can Institutional Economists apply their particular theoretical skills to
the phenomenon of gift-giving and provide effective explanations for this vast area of the
economy? And vice versa, how can a focus on the realm of the gift in modern economies and
an employment of appropriate methods of inquiry further develop Institutional Economics?
The foundation for theorizing the gift was laid by Social Anthropologists like Bronislaw
Malinowski ([1922] 2002) and Marcel Mauss ([1925] 1990) and later further developed by
Karl Polanyi ([1947] 1968 and [1947] 1968a), Richard Titmuss ([1970] 1997), Marshall
Sahlins (1974), and more recently, Annette Weiner (1992). The French economist François
Perroux (1961) engaged fruitfully with the ideas proposed by anthropologists of the gift
as an alternative form of distribution. Moreover, some productive debates were happening
between economists and anthropologists in the 1960s (Firth 1967). While anthropologists
focused on reciprocity, the sociologist Alvin Gouldner (1973) stressed “the importance
of something for nothing” in gift-giving. Both ideas—reciprocity and pure gift-giving were
further developed and combined with some standard utilitarian concepts by Kenneth
Boulding in his Grant’s Economics (1981). However, when at all taken seriously, most
mainstream economists regarded the ideas put forward by anthropologists as a threat to
their dominant utilitarian paradigm and tried to incorporate them as just a variant of self-
interested market exchange especially in the growing and already quite advanced field of
economic analysis of philanthropy and charitable giving. From Gary Becker (1974) to the
most refined works of James Andreoni (1988, 1989, and 1990), most of the time, such giving
was modelled as private contribution to public goods (examples for this approach are Ribar
and Wilhelm 2002; Andreoni, Payne, and Smith 2014; Andreaoni, Payne, Smith, and Karp
2016; Andreoni and Payne 2011; Kaplan and Ruffle 2009; Karlan and List 2008; and List
2011).2 This attitude of “economic imperialism” led to decades of unproductive paradigm
disputes between mainstream economists and anthropologists (Marchionatti and Cedrini
2017). Apart from Perroux and Boulding it was mainly Institutional Economists who took
the anthropological work and concepts seriously and used them in their own theorizing (e.g.,
see Vayda 1967; Dalton 1968; Bhardwaj 1972; Dowling 1982; Greenfield 1982; Neale 1984
and 1990; Stanfield 1986; Hodgson 1988; Schaniel and Neal 1994 and 2000; Adams and
Neale 1997; Billig 2000; Yonay 2000; etc.3). There have also been attempts to review classical
anthropological literature from a New Institutional Economics perspective (Landa 1994).
For a renaissance of a strong and effective collaboration between Institutional Economists
and Social Anthropologists it is very encouraging that some recent work by the latter turned
to engaging with the modern capitalist economy in an attempt to provide an alternative
analytical framework to mainstream economics (Hann and Hart 2009 and 2011; Gudeman
2 However, there are also attempts to go beyond the utilitarian paradigm introducing a notion of reciprocity
(Sugden 1982 and 1984) or to broaden the economic perspectives in these fields as evidenced by several contributions
to the Handbook on the Economics on Reciprocity and Social Enterprise (Bruni and Zamagni 2013).
3 A search in JEI on JSTOR on July 30, 2020 produced nine articles with keywords “anthropology” or
“anthropological” in their title referenced here. Note that there is engagement of institutional economists with
anthropology spread over several decades. And this selection is only a fraction of the JEI articles relevant for us.
A search for the same keywords in all content of JEI on JSTOR on the same day found 301 articles. A lot of these
articles deal with topics like: culture, Karl Polanyi, methodology, etc.
956 Paolo Silvestri and Stefan Kesting
2016). Interestingly, Stephen Gudeman’s conceptual work (2016) is deeply influenced by
Thorstein Veblen’s dichotomy of instrumental and predatory institutions.
In previous publications we (Kesting, Negru, and Silvestri 2020) and other contributors
(Elder-Vass 2020; Cedrini et al. 2020; Hudik and Fang 2020; Taylor and Goodman
2020; Goodman and Herzberg 2020) have already shown the possibility of opening up
a research perspective by linking together gift and gift-giving studies and Institutional
Economics, broadly understood (allowing for both Original Institutional Economics and
New Institutional Economics views). We have tentatively called this research perspective an
Institutional Economics of Gift” (henceforth “IEG”) (Kesting, Negru, and Silvestri 2020, 7).
Moreover, we have edited a book (Kesting, Negru, and Silvestri 2020a) containing further
contributions to an IEG.4
Much of this possible connection between the two research fields depends on our
understanding of “gift” and “institutions” on the one hand, and on their possible overlapping
zones and/or lines of tensions on the other. We propose two important areas or angles
to further develop the institutional analysis of gift-giving and, therefore, an IEG: (1) the
subject matter that is, certain broad policy fields or important general social contexts: the
welfare state, the third sector, and percentage philanthropy tax scheme and (2) the method,
that is a clear understanding of the most appropriate way of theory building and empirical
investigation.
The article is split into two parts dealing, respectively, with the subject matter and the
method of an IEG.
In the first part—”Forms of Institutionalized Gift-Giving”—we will explore the following
issues: what are the lines of tension between gift-giving practices and certain institutional
settings, and in which case studies are they more or less present and, therefore, useful to
further explore the subject matter of an IEG? In particular, we will focus on the problematic
tension between obligation and freedom on the one hand, and on the state/market
dichotomy on the other. The three forms of institutionalized gift-giving analyzed by us—the
welfare state, the third sector, and the percentage philanthropy tax scheme—show how there
are different nuances of this tension, susceptible to further research.
In the second part—”Method”—we will be mainly concerned with the following issue:
which methodological approaches would be most suitable for an IEG? Across the range of
different types of institutional economics (New and Original5) there seems to exist an at
least implicit agreement that qualitative cases studies play a major role in accounting for
the empirical relevance of or for “measuring” institutions (Voigt 2013). However, it may be
advisable to use mixed methods (Negru 2016) and to rely also on quantitative data. There is
less agreement when it comes to methods of theory development. While New Institutional
Economics is somewhat wedded to a deductive approach aiming at generalizable abstractions
and starting from, but departing in incremental steps from standard neoclassical assumptions
(Rutherford 1996, Original Institutional Economics explicitly employs an abductive
approach—a circular combination of deductive and inductive methods (Bush 1993). However,
for empirical accounts and also for theory development, the ethnographic methods used by
anthropologists and the theorizing based on the gift can play an important role in advancing
4 We are most grateful for roughly two years of productive collaboration with our colleague Ioana Negru and
want to thank her for providing numerous constructive comments to a previous version of this article.
5 We prefer the label “original” to “old.”
957
An Institutional Economics of Gift
Institutional Economics as a whole. This was already highlighted in Karl Polanyi’s later works
([1947] 1968a).
The article ends by providing some (tentative) conclusions regarding the research
implications for an Institutional Economics of Gift.
Forms of Institutionalized Gift-Giving
A good starting point to understand the overlapping zones and/or lines of tension between
gift and institutions that a future IEG should attempt to address is to reflect on the following
issue: to what extent can gift-giving be institutionalized and even legally enforced without
losing some of its characteristics, such as spontaneity, freedom and/or voluntariness? We
will try to explain the importance of this question, its different nuances, the theoretical and
practical implications, through the analysis of some relevant (and possible) institutional case
studies and/or policy areas: the welfare state and the third sector. Moreover, we will add
some remarks with regard to the hybrid case of the tax percentage philanthropy institution.
The choice of these case studies and policy areas is guided by their significant institutional
dimension and overall welfare implications. This institutional dimension allows us, on
the one hand, to avoid the risks inherent in some reconstructions that see the presence
of the gift in modernity relegated to the sphere of private present-giving (see, for example,
Cheal 2015), and on the other hand, to better see problems that seem to us to be of some
importance for a future IEG. The first question for these case studies and policy areas is
the always problematic relationship between obligation and freedom. Douglass North’s
(1990) insistence on institutions as “constraints” as well as their influence on “economic
performance” ends up conveying a merely functional conception of institutions: rules have
been reduced to nothing more than structures of incentives (rewards and punishments). From
this perspective, a rule would be obeyed or followed by virtue of a cost-benefit calculation.
Consequently, this functional conception of institutions ends up obfuscating the more
general problem of legal-political obligation, namely the problem of why to follow a rule or
obey authority and therefore, inevitably neglects the problem of the relationship between
obligation and freedom. An issue that is crucial for understanding the phenomenon of gift
and reciprocity as well as of institutions.
The functional conception of the rules and the neglect of the obligation issue are two
sides of the same coin, and are due to some behavioral assumptions of the NIE which in
many ways remain tied to the model of the utility maximizing individual. Starting from this
model, it is in fact difficult to explain rule following behaviors based on habits, morality,
sense of duty, justice, beliefs or perceived legitimacy of authority (Sen 1982; Searle 2001;
Hodgson 2013 and 2014; McCloskey 2015; McCloskey and Silvestri 2021). On the other
hand, the failure of the self-interested homo oeconomicus paradigm has long been exposed. The
literature on homo reciprocans (see at least Fehr and Gächter 1998 and 2000; Fehr, Fischbacher,
and Gächter 2002) has shown how people can obey/disobey the law and/or respond to the
behavior of other subjects starting from a certain sense of duty or fairness or reciprocity, even
if this is “costly” for them. Above all, and quite paradoxically for IE, the utility maximizing
assumption compromises the possibility of a full understanding of the origin, evolution,
and persistence of institutional rules. It is not surprising that especially NIE, starting from
the aforementioned functional conception of norms and from their behavioral premises,
has mostly neglected the theme of the gift: in truth, with its specific type of microeconomic
lenses, it can hardly see it.
958 Paolo Silvestri and Stefan Kesting
On the other hand, the anthropological literature itself tried to overcome some of
the problems left unresolved by Marcel Mauss, in particular the question of the presence of
the gift in modern society (Godbout and Caillè 1998; Caillè 1998), but ended up, almost
paradoxically, with over-emphasizing Mauss’s insistence on the universal obligation to
reciprocate. This universal obligation to reciprocate has been criticized as “manifestly false”
(Testart 1998) from an empirical point of view, and may therefore not be an “essential”
characteristic of the gift (Elder-Vass 2019). If one considers the gift between strangers as a
typical gift of modernity, as the heirs of Mauss themselves recognize (Godbout and Caillè
1998; Caillè 1998; but see also Silber 1998), it must be admitted that there are different
forms of circulation of the gift, such as the gift of blood and the gift of organs, not to
mention other forms of institutionalized mediation of gift to strangers, such as charities
and the philanthropic sector, which leave no room for reciprocation. Furthermore, this
insistence on the universal obligation to reciprocate risks confusing different degrees and
types of obligation, moral and legal obligation, as well as different types of sanctions and
related enforcement mechanisms. It is nevertheless true that the distinction between the
legal and the moral is much more blurred than is believed, not only because some legal
norms are the crystallization of moral norms over time, but also because laws can be obeyed,
not only and not so much because they are “legal,” but insofar as their moral foundation is
recognized.
Therefore, if we assume that the gift can be understood as an institution, the
aforementioned issues appear to be fundamental both for a reflection on the normative
foundations of institutions and for a better understanding of the “normative” and
“obligatory” character of the gift. It seems to us then, that reflecting on the normativity of
gift and institutions and on the type of obligation that both create can constitute a fruitful
meeting ground for anthropological and IE approaches.
The second issue of some relevance for the development of an IEG is the need to
overcome the State/Market dichotomy. We will dwell a bit more on this issue in the second
part of this paper. Here we will limit ourselves to note that even if the third sector is the locus
classicus where this need is more urgent and pressing, the other case studies here analyzed
point in the same direction.
With the aforementioned anthropological, institutional, and methodological
considerations in mind, let us see why the questions raised by the three case studies and/or
policy areas seem relevant to us for a future IEG.
Welfare as Institutionalized Gift?
Can Welfare Institutions be understood as institutionalized forms of gift circulation?
Marcel Mauss replied in the affirmative in the conclusions of his famous work, but without
giving further explanations. Richard Titmuss, in the now classic The Gift Relationship ([1970]
1997), has tried to tackle the problem going beyond Mauss’s account of mutual obligations
created by the gift in archaic societies. Nonetheless, Titmuss ended up raising “philosophical”
questions, regarding the “morality of society and of man’s regard or disregard for the needs
of others,” to which he had failed to provide an answer, as he himself acknowledged: “Why
give to strangers? [...]Who is my stranger in the relatively affluent, acquisitive and divisive
society of the twentieth century? What are the connections then, if obligations are extended,
between the reciprocals of giving and receiving and modern welfare system?” (Titmuss [1970]
1997, 57–58).
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An Institutional Economics of Gift
So, Titmuss’s work raised more questions than it gave answers. For example, he started
from the conviction that a “socialist social policy” is essential to foster altruism and the sense
of community in society, even though this assumption is never demonstrated. He simply
assumes a tabula rasa conception of man (Titmuss [1970] 1997, 59) and a corresponding
holistic and “organicistic” (Fontaine 2002, 404) view of institutions. Again, it has been
noted that in Titmuss’s thought there is a “Manichean bipolarity: [...] he never accepted
that the market could complement welfare and need not be its enemy” (Reisman 2004, 780).
Such “Manichean bipolarity” can be traced back to his attempt “to distinguish the social
from the economic” (Titmuss [1970] 1997, 57), which, in turn, leads him to be trapped in
ideological counter-positions—between gift and exchange, state and market, altruism and
egoism—tempting him to fall into a dualistic fallacy (Silvestri 2019).
Identifying the welfare state outright with altruism means either generalizing too much
or asking too much from both the welfare state and altruism.6 Not surprisingly, even those
who worked in the shadow of the “quasi-Titmuss paradigm” end up mitigating Titmuss’s
insistence on altruism, trying to justify redistributive policies through other argumentative
ways such as distributive justice and/or citizens’ rights and duties (Deacon 2002, 22ff).
To understand what the issues and dilemmas are that emerged in the post-Titmuss
debate, we first propose to regard the welfare state as an institution made up of a bundle of
rights and duties. This implies, for example, that some welfare insurance schemes, such as
pensions, may be closer to a logic of economic (guaranteed) return than to a gift. However,
note that the label “insurance” may be used to make welfare distribution schemes politically
more palatable. Furthermore, these rights and duties rest on some informal, historical, and
cultural foundations which are different from each other and case specific. The “worlds of
welfare capitalism” (Esping-Andersen 1990) are not easily generalizable.
Secondly, such issues and dilemmas can be clarified by breaking down our starting
question into a series of sub-issues.
The Welfare State as a Bundle of Citizens’ Duties and Rights
If we conceive the welfare state as a bundle of citizens’ duties and rights, how can the
gift be reconciled with such a logic of duties and rights? Let us first look at the two sides of
the circulation of the gift—giving and receiving—implicit in redistributive policies. On the
“giving” side, the gift/duty dilemma is the following: if the citizen has a duty to pay taxes,
and if the freedom implicit in voluntary giving implies the freedom to give and not to give,
then paying taxes is not a gift. As Jacques Godbout and Alain Caillé argued, criticizing
Richard Titmuss: “a gift that’s imposed is not a gift” (1998, 60). On the “receiving” side, the
rights/gift dilemma is linked to the previous one: “if one cannot have a right to a gift, and if
one has a right to welfare, then welfare cannot be a gift” (Harris 1987, 67).
However, apparently reality is more nuanced than portrayed in such dilemmas, as are
possible “solutions.” A first “solution” consists in excluding the gift from the domain of
welfare and therefore, also from the rights and duties institutionalized by welfare regimes.
Gift and gift-giving are only present in other spheres of society that have a greater vocation
to give: the third sector, charities and voluntary work as well as the primary social support
networks, such as families and communities. This “solution” usually gives rise to two other
configurations of the relationship between the institutional sphere of the state and the
institutional spheres of society. This relationship can be conflicting or cooperative, and
6 See also Scott and Seglow 2007.
960 Paolo Silvestri and Stefan Kesting
in several cases it has been conceptualized in terms of an institutional “crowding out” or
“crowding in.” Empirical inquiries of these phenomena produced very different results
depending on the historical context in which they were carried out,7 thus showing the weight
of the cultural background in which both the welfare state and the “other” spheres of gift are
located. We will return to this point in the section dedicated to the third sector.
Another solution consists in seeing the terms of the duties/gift and rights/gift dilemmas
in a non-oppositional but complementary way with reference both to the character of the
legal obligation and to the role played by the enforcement of rights and duties. First of all,
even those who see a strong contradiction between gift and taxation have to admit that
the “constraint” of taxation is “to some extent freely consented to in democratic societies
where [...] there is ‘no taxation without representation’” (Godbout and Caillé 1998, 60).
Therefore, if free consent is admitted, and in so far as we consider freedom as essential
characteristics of gift-giving, then, it cannot be excluded, at least a priori, that some citizens
pay taxes freely and with a gift-giving spirit. Furthermore, reducing the duty to pay taxes to
coerced obedience is somewhat naive. The literature on tax compliance and tax morale has long
shown that the motives behind taxpayer’s compliance go well beyond the deterrence model,
à la Becker, and the associated cost/benefit analysis of the simple binary choice to pay/evade
taxes (Andreoni, Erard, and Feinstein 1998; Alm, McClelland, and Schulze 1992; Alm and
Torgler 2006; Torgler 2007).
Furthermore, from an institutionalist perspective, if we assume that the duty to pay
taxes is a rule, and that this duty has taken on the character of a custom or “immanently
normative disposition” and that therefore this rule is “followed without much thought,”
this means that the real “normative issues will emerge” only “if the rule is scrutinized or
contested” (Hodgson 2006, 3). Such scrutiny can occur, for example, if taxation is perceived
as unfair, vexatious, or confiscatory. Finally, in a system that works well, coercion is a sort of
“guarantee of last resort”: it is addressed “not to the free rider, but to the citizen respectful of
the law” (Menéndez 2001, 145), to instill reassurance that there will not be many free riders
who break the virtuous circle of contributions and of legality.
Finally, the “solution” to the rights/gift dilemma can be thought of in terms of
complementarity as well:
A properly constituted welfare state in which there existed a strong sense
of community would depend, first, on altruistic behaviour to supply
need-satisfying resources and, second, if necessary, on a backup system
of enforceable rights if ever there were a shortfall of resources. If altruism
fails, rights take over; if altruism works, rights do not need to be invoked.
(Harris 1987, 73)
Welfare Regimes and Norms of Reciprocity
Probably the most promising line of research on the welfare state is the growing literature
that has emphasized the role of reciprocity in welfare regimes (Bowles and Gintis 2000; Wax
2000; Ullrich 2002; Goodin 2002). Reciprocity refers to exchanges that are neither reducible
to people’s generosity nor to their self-interest, thus, overcoming their sterile opposition
and explaining the motives in support (or in opposition) to redistributive policies in a more
articulated way. Few studies, however, have attempted to explore in what sense we can speak
7 For a survey of this literature see Victor Pestoff 2008, 225ff.
961
An Institutional Economics of Gift
of institutionalized norms of reciprocity as the normative foundation of the welfare state.
Among these, the perspective put forward by Steffen Mau (2003 and 2004), which conceives
the redistributive transfers of welfare regimes as “norms of social exchange,” deserves to be
mentioned. This approach has a twofold advantage. On the one hand, it provides an account
of the role played by welfare institutions: “although institutionally validated reciprocity
norms do not fully determine people’s attitudinal stances, there are good reasons to assume
that people tend to accommodate themselves within a given institutional set and that their
interpretations of fairness are ‘institutionally biased’” (Mau 2004, 54). On the other hand,
it seeks to build a (Weberian) typology that better distinguishes the different types of welfare
exchanges in relation to the norms of reciprocity and justice they entail, according to the
different historical, cultural, and economic welfare regimes. For example, in the case of
universal welfare provision we can speak of “generalized reciprocity” (Sahlins 1974, 193),
in which “transactions are putatively altruistic with some vagueness about the obligation to
reciprocate” (Mau 2004, 64). For instance, in the case of the Bismarkian social policy model,
mainly based on social insurance schemes, there is a “balanced reciprocity, where payments
are made with the expectation of equivalent returns” (Mau 2004, 67).
Institutions matter, IE scholars have repeatedly insisted. In light of this promising line
of research, and paraphrasing the title of a work by Bo Rothstein (1998), we can say that Just
Institutions and the conception of the gift and norms of reciprocity matter, too.
The Third Sector as an Institutionalized Form of Gift Circulation
In what sense can the third sector be understood as an institutionalized form of
gift circulation? There is a substantial agreement in the anthropological and sociological
literature about the centrality of the third sector as one of the paradigmatic “places” for the
circulation of the gift in modernity (Godbout and Caillè 1998; Caillè 1998; Adloff and Mau
2006). Yet it is not entirely clear whether and in what sense this sector is an institution. It is
emblematic that this sector has been neglected by IE scholarship, with very few exceptions.
While considerable analytical efforts in understanding the third sector phenomenon have
been made in Social Economics,8 as well as in studies on social capital dating back to the
works of Robert Putnam, Leonardi and Nanetti (1994), the third sector has also been under
the spotlight of an economic approach closer to the mainstream. Let us try to understand
why an IEG might and should be interested in the third sector phenomenon.
To answer the aforementioned question, at least four sub-issues are of some relevance
for a future IEG.
Identity of the Third Sector
Can the “third” sector be “identified” with the logic of gift and reciprocity and in this
way, go beyond the state/market dichotomy? The problem of the “identity” of the third
sector does not only concern its definition, it also refers to a methodological problem, namely
the difficulty of applying the concept of the “third sector” and even more of “non-profit”
universally to very different historical, cultural, associative, and institutional experiences.9
8 For an introduction see Davis and Dolfsma 2008.
9 The research developed by the John Hopkins Comparative Nonprofit Sector Project since the 1990s (see Salamon
and Anheier 1996), constituted the benchmark for many other subsequent studies and statistical surveys (United
Nations 2003). A side effect of these studies is that they ended up neglecting important associative and organizational
experiences developed in the European context such as cooperatives and mutuals. Hence, other studies aimed at
balancing the focus in a more European perspective, more attentive to national varieties and specificities and more
historical-dynamic oriented (see Evers and Laville 2004; Monzon and Chaves 2008).
962 Paolo Silvestri and Stefan Kesting
The “third sector” risks being perceived as either a residual between the state and the market,
or merely as functional to the state and the market (i.e., designed to make one and/or the
other work better) (Donati 2008). It could therefore be said that the third sector has fallen
victim to its own “thirdness”: “that which is in between” rather than being defined by its
specific identity.
It seems to us that being able to conceptualize the place of the gift and reciprocity in
the third sector as its own identifying element is a way of removing the third sector from
these conceptual difficulties and ambiguities and at the same time, of thinking of it beyond
(and not in between) the state/market dichotomy.
Gift and Reciprocity in the Third Sector
How have the dynamics of gift and reciprocity historically been developed and
institutionalized through the statutes, cultures, social practices, and organizational
characteristics of third sector organizations? For example, one can reasonably think that
while cooperatives operate mainly on the basis of reciprocity rules, voluntary associations are
closer to the logic of gift-giving. It is clear, however, that the dynamics of reciprocity and gift
can overlap, even considering the variety and breadth of the typology of entities belonging to
the third sector: pro-social foundations, pro-social associations, family associations, etc. On
the other hand, in a very generic sense these organizations act as institutional mediators for
the circulation of the gift. This circulation can have different degrees of amplitude depending
on the degree of outward openness of these organizations.
Furthermore, there are even more hybrid cases, such as the so-called social enterprises,
where the dividing line between the state and the market completely fades as they implement
a mix of social goals and business goals.
Organizations and Rules
In what sense can we speak of institutions in the third sector? What types of rules are
governing the third sector and at what institutional level do they operate? It is clear that third
sector organizations are a particular type of institutions, equipped with their own systems
of rules (and shared beliefs and values)10 and that they can at the same time be actors in a
different context or on a specific institutional level when, for example, they interact with
other superordinate institutions or with other actors within certain frames of rules.
In this regard, the third sector often simultaneously answers to two different forms
of regulation: private law and public law. The first is based on forms of self-regulation, for
example, through the statutes. These are usually rules aimed at clarifying the reciprocity rules
governing relations between members, the shared values and the mission of the organization.
Public sector regulation of the third sector, on the other hand, is more oriented towards
regulating the freedom-responsibility nexus related to organizations’ action in the public
sphere and/or in relation to other actors that is, when it is necessary to take on a legal role
and fulfill institutional obligations (in contracts, in economic accounting, social reporting,
etc.). The third sector needs this regulation both to be recognized and legitimized and to
establish a certain degree of certainty in mutual expectations (see Evers and Laville 2004).
However, Pierpaolo Donati states that there is a difficulty in institutionalizing the private
10 See, for example, Amendola, Garofalo, and Nese (2011) who, drawing inspiration from Masahiko Aoki’s
definition of institutions (2001 and 2007) as a bundle of formal rules and subjective shared beliefs, have attempted
an explicit conceptualization of the third sector as an institution.
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An Institutional Economics of Gift
social [...] due to a sort of intrinsic difficulty [...] in finding effective, lasting forms of
regulation suitable for its purposes. [...] the private social can only be institutionalized up to
a certain point, because there are limits beyond which it loses its thrust and its spontaneous
nature (Donati 2004, 15–16).
Third Sector Interaction with State and Market
How does the third sector interact with the other two institutional pillars: the State
and the Market? It is known that in America the third sector is closer to the Market, while
in Europe it is closer to the State, but it is also necessary to better understand the dynamics
of complementarity and/or conflict (and/or crowding in or crowding out effects) between
the third sector and the State as well as the Market which we mentioned in the previous
section. A few IE studies on the third sector have focused precisely on these aspects,
especially emphasizing the cases of complementarity (Valentinov, Hielscher, and Pies 2015)
or synergy (Christoforou 2010) between the third sector and the State and on how such
complementarity (Amendola, Garofalo, and Nese 2011) contributes promoting a culture
of cooperation, altruism and solidarity. Other more recent studies have instead focused on
how some forms of institutionalized gift-giving provided by some churches or third sector
organizations seems to be more “efficient” (at least in some respects) than the State and the
Market, thus capable of overcoming some social dilemmas, such as the Samaritan’s dilemma
or welfare dependency (Taylor and Goodman 2019; Goodman and Herzberg 2019).
Tax Percentage Institutions
Perhaps the most striking, hybrid as well as least known, case of cooperation and
complementarity between the State and the third sector are the Percentage Tax Designation
Institutions, better known as Percentage Philanthropy institutions. They exist in some Southern
and Central-Eastern European countries such as Italy, Spain, Portugal, Hungary, Romania,
Poland, Slovakia, and Lithuania.11 They are a particular type of fiscal institution by which
taxpayers can freely designate a certain percentage of their income tax to entities whose main
activity is of public interest: churches and, above all beneficiaries belonging to the third/
voluntary sector and/or other entities pursuing social purposes such as scientific research and
universities, health research, environmental protection, local municipalities, and political
parties. If taxpayers do not express their choice then, that percentage of income tax will go
to the State’s coffers by default. Such mechanisms are very peculiar types of institutionalized
gift-giving, resting on very simple rules regarding taxpayers’ choices. However, the eligibility
criteria for beneficiaries and the redistributive mechanism are managed by the State, which
merely acts as a mediator between the citizen-taxpayer and the beneficiaries. In Italy, for
example, the legislator introduced this fiscal institution, the so called “Otto per mille” or
“8x1000” thus, the 0.8% of the income tax which can be designated to a State’s fund (for
social purposes) or religious confessions in 1985 (but it came into force in 1990).12 Later in
2006, a new institution was introduced, the so called “Cinque per mille” or “5x1000” (0.5%
of income tax) where a certain such portion of taxes can be given to several beneficiaries. To
get an idea of the impact and scope of such institutions, consider that only in the last five years
11 See Bullain 2004; Gerencsér and Oprics 2007; Török and Moss 2004.
12 For a recent attempt to provide a theoretical account of the 8x1000 institution, see Robert Sugden (2018,
168-173) who, following the contractarian approach in the tradition of Wicksell, Lindahl, and Buchanan, interprets
the 8x1000 as a mechanism of private contribution to public goods, understood in the light of the principle of
“mutual benefit” among members of society. For a further development of Sudgen’s account see Silvestri (2021).
964 Paolo Silvestri and Stefan Kesting
the 8x1000 and the 5x1000 have generated and redistributed revenues of approximately 8.5
billion, or approximately 1.7 billion per year, and that almost 50% of taxpayers express their
choices, and that the vast majority of these choices are addressed to the third sector. The
“Cinque per mille” was introduced in the name of the principle of fiscal subsidiarity, meant
as horizontal subsidiarity and to provide a relief to the never-ending crisis of the welfare
state by relying on the goods and services provided by the third sector. For this reason, this
institution can be read as complementary to the welfare state and, given the central role
played by the third sector and the hybrid characteristics of this institution, it challenges once
more the State/Market dichotomy.
A recent theoretical and empirical study of the Italian “5x1000” percentage tax
designation system (Silvestri, Chiadò, and Lo Presti 2020), based on a mix of quantitative
and qualitative research methods, has shown that such an institution is interpreted by
taxpayers as a “quasi-voluntary taxation” mechanism, in so far as it guarantees the exercise
of their own “fiscal sovereignty,” meant as the autonomy to choose the beneficiary of their
own taxes. Alas, such an understanding would cast a new light on the tension between the
obligation (to pay taxes) and the freedom (to give) and its nuances of grey, well beyond the
abovementioned debates over the welfare state and the third sector. Above all, as emerged
in the survey delivered with the aim of understanding taxpayers’ motivations for giving the
0.5% of their income tax, the answer that received the highest score was: “[by giving the
5x1000] ‘I do good to others/help those who are less fortunate.’” This is the answer that
was assumed as proxy of gift-giving and altruism. Such altruistic motivation is also logically
consistent with the rules governing taxpayers’ choice, as choosing to give or not to give a
share of income tax to a specific beneficiary makes all the difference both for the taxpayer
and for the beneficiary. From the beneficiary’s point of view, what is received cannot but be a
gift. From the taxpayer’s point of view, if s/he truly wants the beneficiary to receive this gift,
then s/he will have to choose to give (Silvestri 2021).
In any case, it seems to us that all the above mentioned approaches and case studies
show how the time for an IEG is ripe.
Methods
This section will turn to the question: which sort of methodological approaches are
suitable for an IEG? What can institutional economics learn from an analytical focus on
the gift? To answer these questions, we will first discuss the core function of the gift for
theory construction in economic anthropology followed by a description of its ethnographic
method to gather data in field work and by interpretative participant observation. Moreover,
we will contrast the methods of New and Original Institutional Economics to show that
both approaches implicitly or explicitly rely a lot on qualitative data and in particular on
storytelling and narrative case studies as well as mixed methods to develop and modify
theory and to gather evidence to demonstrate the relevance and explanatory value of their
institutional frameworks for understanding real world economic phenomena.
The Gift in Theory Construction
The gift has iconic status for theory construction in social anthropology. Mauss who
has never been in the field or done any ethnographic research himself takes Malinowski’s
observation of the Kula Ring ([1922] 2002) and numerous other examples from a diverse
range of cultures dispersed widely in time and space to develop his theory of the gift and
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An Institutional Economics of Gift
its tendency to create reciprocity to draw conclusions for the industrial society of his time
(France in the 1920s). At the end of Mauss’s book ([1925] 1990) and in search for a third
dimension filling the void between State and Market. Note, that we have discussed this in
some detail in the first part of this article and will explore the epistemological relevance of
“thirdness” at the end of this part. Mauss presents these conclusions in three parts. (1) He
uses this distilled theory of the gift to propose particular policy solutions: a social welfare
state underpinned by a socialist society. Note, that we discussed the special relation between
the gift and the welfare state in the first part.
Moreover, Mauss’s analysis of the gift was meant as a re-education program to secure
sustainable peace. We have to keep in mind, he wrote the book under the impression of the
bloodbath of the first world war. He ends the book on a very optimistic note which is totally
antagonistic to homo oeconomicus: “It is useless to go looking for goodness and happiness
far away. It is there, in the imposed peace, in well-balanced work, alternately together and
alone, in the wealth that has been amassed and then redistributed, in the mutual respect and
reciprocal generosity that education teaches us” (Mauss [1925] 1990, 197).
Moreover, (2) he presents the moral and ontological implications of the gift as an
alternative to utilitarianism, and (3) he proposes the ethnographic, historical, inductive
method as the best way to understand economic and social institutions in a holistic fashion.
So, as a method for theory construction certain case observations gain a particular
pronounced status in anthropology. The Kula Ring described by Malinowski ([1922] 2002)
has been generally regarded as the iconic example for the gift inducing reciprocity which
is totally different and distinct from economic exchange in the neoclassical sense. Though
this interpretation of the Kula Ring has been critically examined and questioned (Weiner
1992; Landa 1995; and Testart 1998, 101–102) and led to other critical reviews (Gouldner
1973), it has nonetheless inspired scholars in diverse social sciences (Bataille [1967] 1988;
Boulding 1981; Perroux 1961; Dillon 1968; Polanyi [1944] 1957 and [1947] 1968a), as well
as decades and even centuries of methodological battles fought within anthropology (Firth
1967; Sahlins 1974) and paradigm wars between anthropologists and economists (Polanyi
[1947] 1968; Hann and Hart 2011; Marchionatti and Cedrini 2017).
Epistemologically, there is a tradition of anthropological and sociological reflection on
the gift as a “third paradigm” transcending both the individualism/holism methodological
dichotomy (Caillé 1998) and beyond t he State/Market dualism (Adloff and Mau 2006).13 Even
though these two oppositions do not always mean the same thing (see our exploration in the
first part), the critique of such simple dualisms presents an overlap between anthropological
and institutional economic analysis. Moreover, North and others demonstrated the theoretical
limits inherent in an understanding of society, economy and institutions founded on a
simple State versus Market dichotomy (North 1990 and 2005). Elinor Ostrom, in particular,
urged us to look “beyond a market and state” dichotomy (Ostrom 2010) because it leaves us
ill equipped to grasp the specificity of the diversity of hybrid cases. Finally, Hodgson (2001),
referring to the Weberian notion of ideal-types suggested that from a methodological point
of view, the use of ideal-types based on a range of ontologies and theoretical preconceptions
allows us to better grasp the historical specificity of certain institutions precisely because
13 For another way of understanding the gift as the emergence of a “thirdness” see Marc Anspach (2002),
or in a legal-philosophical perspective and in connection to the structural “thirdness” of institutions, see Paolo
Heritier (2020).
966 Paolo Silvestri and Stefan Kesting
ideal-types help “to map out the theoretical space within which hybrid or intermediate cases
can be located” (Hodgson 2015, 685).
Stephen Gudeman’s work (2016) presents an excellent example for theory development
based on anthropological and institutional thinking. Gudeman has turned a lifetime spent
on ethnographic field work and social theorizing into an insightful institutional framework
of the economy influenced by Thorstein Veblen, Fernand Braudel, Paul Bohannan and Karl
Polanyi (see his endnote, Gudeman 2016, 193) which engages critically with mainstream and
Marxian economic concepts throughout his book.14
Gudeman distinguishes five spheres in the economy and starts from the “house” as
the basic one where most people practice economizing focused on preserving resources
in their private households. Strength or vital energy is used in a circular fashion in the
house to build livelihood and to fulfill the needs of those living together under one roof.
This strength needs to be recuperated and sustained, but in analogy to the physical laws of
thermodynamics it is never lost. Thrift and sharing are the principles guiding the house
economy and its sister meta-sphere, the community which “encompasses more extensive
relationships” (Gudeman 2016, 17). According to Gudeman: “Communities include lineage
and ethnic groups, cooperatives, unions, states, and alternative economies built on modes
of sharing” (2016, 17). Maximization of profit or consumer satisfaction are quite foreign
concepts in the house and communities. Gudeman’s analysis is based on and supported by
detailed reviews of his own and other anthropologists’ field work. The sphere of the market—
characterized by the profit motive—stands somewhat in opposition to the house and tends to
exploit and colonize the house. In a nutshell, Gudeman’s theory of the economy is quite well
summarized in the following paragraph stated at the beginning of his book:
Economy has two sides. One is the high-relationship economy that is
rooted in the house. Neglected by economic theory, it is prominent in
small-scale economies, and hidden and mystified yet salient in capitalism.
The other side consists of competitive trading. Anthropologists know one
side of the economy and economists know the other, but the two are
intertwined. Neither side is complete without the other that influences
it. Their balance varies across cultures and time. The tension lies within
economies and within us. We calculate our relations to others, and we
empathize with them. We measure some things and consider others to
be incomparable. The tension is social and personal. (Gudeman 2016, 2)
Gudeman distinguishes three hierarchical spheres of the market characterized by an
increasing degree of abstraction starting from the foundational commercial sphere known
as the “real economy” or “main street”—the world of corporations—the financial sphere
of “Wall Street (or The City)” is built upon it as a second market sphere: “The financial
circuit intersects the commercial one through the liquidity it provides, and because some
commercial entities derive a portion of their income from financial operations” (Gudeman
2016, 19). He calls the third market sphere “meta-financial and it is farther detached from the
house, the community, or even the commercial sphere because it “uses abstract instruments
14 There is even some discussion of New Keynesian and Post-Keynesian economics, but no engagement with
Feminist Economics. This is a pity because Gudeman would have found support in Feminist Economists’ work on
care and provisioning for his framework.
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An Institutional Economics of Gift
of finance that depend on the calculation of risk, which is objectified as a commodity to be
bought and sold, as in a derivative” (Gudeman 2016, 19).
On the one hand, the relationship between the five spheres is quite fluid and can
vary: “The five spheres are emphasized differently across economies, and their prominence
changes over time” (Gudeman, 2019, 21). While on the other hand, Gudeman states a drift
or tendency towards colonization or exploitation of the lower material spheres by the higher
financial spheres in modern capitalism: “From a different perspective, the other spheres
increasingly dominate the house economies in the service of self-interest and profit, which is
expressed as the need for efficiency and growth” (Gudeman, 2016, 21).
This framework of social and economic spheres bears some resemblance with
Habermas’s (1981 and [1992]1999) social philosophy combining an array of systems (state
and market) with a tendency of colonizing the “life world” which is somewhat similar to
Gudeman’s house and community. Interestingly, Gudeman seems to neglect the specific role
of the state and third sector in his analysis. The state and the third sector are not regarded as
separate spheres by him but subsumed under the sphere of communities.
The key mechanism in the process of exploitation and colonization is a broad notion
of rent:
Market rents include interest, dividends, ground rent, capital gains,
royalties, profits, and arbitrage returns enabled through use of financial
tools. . . . Tribute and tithes are rents.15 The free use of environmental
resources is a kind of rent.16 In these ways rents, which are a part of
distribution, fall outside a pure market analysis and a mode of production
approach. They depend on asset control, social relationships, and closely
held knowledge from the mathematical to the sacred. (Gudeman 2016, 5)
However, resistance against this assimilation of the house by the market is not futile
because: “Rents can be limited by strengthening the social sphere that enables and sets
limits to markets. Setting caps on markets, however, is a struggle between self-interest and
mutuality in economy” (Gudeman 2016, 21). It is noteworthy and akin to our own IEG
perspective that Gudeman regards rents as the other, dark side the gift:
What the economist terms ‘rent,’ however, the anthropologist might
term ‘free gift,’ which is doubly interesting because neither economists
nor anthropologists believe in free gifts. A free gift either falls outside
the model of calculated exchange or represents a denial of mutuality.
(Gudeman 2016, 175)
In contrast to both of these social science traditions, Gudeman stresses the importance
of free gifts as socially supportive and fostering communal action. However, instead of using
the label gift, he juxtaposes the behavioral pattern of self-interest with mutuality:
Mutuality means connecting to other, while self-interest means turning
inward to personal ends and calculating one’s relations. Mutuality or
sociability is expressed by sharing and is linked to empathy or the ability
15 Note that this broad concept of rent bears some resemblance to Kenneth E. Boulding’s grants economics
(1981).16 Note that this broad concept of rent bears some resemblance to K. William Kapp’s concept of social costs
(see Kapp 1950 and Berger 2008 and 2017).
968 Paolo Silvestri and Stefan Kesting
to see oneself in the place of others. The distinction between self-interest
and mutuality is typified by the difference between calculated behavior in
markets and making material life through social relationships. (Gudeman
2016, 11/12)17
Gudeman shows the working of sharing and mutuality in the house economy with the
help of material gathered in numerous ethnographic case studies mainly conducted by him
in Latin America, but also in reviewing ethnographic work by other anthropologists in other
parts of the world. However, not all mutuality is productive. There are also negative aspects
of close social relationships: “The most significant role of mutuality in markets today may be
the most difficult to document: cronyism in financial trade. Cronyism is a form of reciprocity
between managers of capital” (Gudeman 2016, 67).
The method Gudeman employs and calls an “Anthropology’s Lens” is to gather
empirical material about the material local practices and voices of other cultures to inform
his institutional theory building to analyze modern capitalist societies while contrasting
case observations with the “descriptive, normative, or prescriptive” models developed by
economists (Gudeman 2016, 10/11).
We have described Gudeman’s theory of the economy here at some length and
considerable detail because it presents a prime example of abductive theorizing based on an
institutional framework and on anthropological field work akin to our IEG approach and
because it is distinctly different from, while engaging with mainstream economic theories
and concepts like: transaction cost economics, rent seeking and other forms of abstract
utilitarian modelling.
Ethnography
To this day, the core empirical method for anthropology is ethnography or fieldwork—
the dense description of human interaction drawn from a participant observer who tries to
keep as open a mind as possible when reporting and interpreting what he or she sees, hears,
and picks up in other ways (Engelke 2017, 14). Moreover, in their Economic Anthropology
Hann and Hart also emphasize: “we are skeptical of evolutionary models grounded in
notions of efficiency and abstract individual rationality, and argue instead for a more
rounded approach to economic organization that does justice to the material, historical and
ethnographic record” (2011, 8). Empirical evidence is recorded in the following way: “On
the basis of this participant observation the anthropologist amasses data, often in the form
of diaries and fieldnotes...” (Hann 2000, 41). In the terminology of philosophy of science
this is an inductive method in the extreme. Superb examples of ethnographic investigations
of economic institutions are Caitlin Zaloom’s study of financial trading in London and
Chicago (2006) and David Graeber’s book on debt (2011).
Moreover, to identify important differences as well as similarities in comparisons of
socio-economic systems thick description of historical cases is another important method
for theory development in institutional economics (Hodgson 2001). However, such an
institutional historical analysis needs to mix a deductive and inductive approach, termed
abduction in pragmatism because: “The most powerful and informative statements and
theories in the social sciences are those that emanate from particular theorizing that
17 This concept of mutuality and also the idea that the market is somewhat more or less embedded in
social structures is quite related to Mark Granovetter’s network theory and concepts of weak and strong ties (see
Granovetter 2005 and 2017).
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An Institutional Economics of Gift
is targeted at a specific domain of analysis and also guided by general frameworks and
principles” (Hodgson 2001, 40).
Explaining Institutional Change
Certainly one of the key objectives of institutional economics is to better understand
institutional change within the current economic system—capitalism (Hodgson 2015; North
1990 and 2005; and Ostrom 1990). Such an improved understanding may also be helpful in
developing a more progressive, less crisis prone18 economic system for the future (Hodgson
2019). The reason why contemporary institutional economics should make more use of
economic anthropological research and ideas about the gift in particular is its potential to
explain institutional change. Ostrom (1990) has championed the use of anthropological
field work to inform institutional economic theory, but there are also industry and problem
specific ethnographic studies which illustrate such fruitful interdisciplinary collaboration
(Zaloom 2006; Graeber 2011). Gudeman’s work (2016) critically reviewed above (see the
section on Theory Construction) is a prime example of combining ethnographic field work
and institutional theorizing to explain institutional change in modern capitalism.
However, there is a bifurcation of the discipline into Original Institutional Economics
(OIE) and New Institutional Economics (NIE) (Rutherford 1996; Groenewegen et al. 2010).
A very similar methodological and paradigmatic split into Rational Choice Institutionalism
and Historical Institutionalism is apparent in political science and other related fields in
social science (Blyth 2002; Campbell 2004;19 Cole 2013; Hall and Taylor 1997).
Method in OIE
As is clear from Hodgson’s (1998) concise introduction to the institutionalist
approach OIE would not have any objection to use ethnographic research in the mix of
other methods.20 He states six methodological principles: (1) Emphasis on cultural factors,
(2) Openness to interdisciplinary work taking insights form other social sciences, (3) No
recourse to or primacy of homo oeconomics, but openness to other ontologies, (4) Statistical
and mathematical methods may be useful, but are not the essence of economics, (5) The
starting point of economic analysis is not mathematical modelling, but rather based on
stylized facts, and (6) “[E]xtensive use is made of historical and comparative empirical
material concerning socio-economic institutions” (Hodgson 1998, 173). Hodgson (2001)
also emphasizes the usefulness of ideal types in mapping out the theoretical space within
which hybrid or intermediate cases can be located in-between or besides the spheres of state
and market.
Moreover, James Ronald Stanfield’s sympathetic engagement with Polanyi’s work leads
to an explicit endorsement of ethnography: “The point is that the methodology of economic
anthropology should contain or be part of economic analysis” (1986, 30). Somewhat earlier
than Hodgson and Stanfield, Charles Wilber and Robert Harrison wrote: “The holistic
nature of institutionalism has ruled out other than incidental use of formal methods. Instead
institutionalists have engaged in a systematic form of storytelling...a pattern model” (1978,
18 Think, for instance, of the financial and climate systems.
19 Hall and Taylor (1997) as well as Campbell (2004) actually distinguish three paradigms of institutional
analysis. See Table 1.1 presenting a concise overview in Campbell’s book (2004, 11).
20 A good example of the use of anthropological research is demonstrated by Samuel Bowles, Richard
Edwards, and Frank Roosevelt (2005) in their pluralist textbook while discussing culture (2005, 39–42) and in
presenting the case of “income distribution among the Lamalera” (547) their “income” is a whale that’s shared in
a particular way. For an overview of qualitative and mixed methods used in economics, see Martha Starr (2014).
970 Paolo Silvestri and Stefan Kesting
71) and explicitly refers to “the participant observer method” (Wilber and Harrison 1978, 74
and 75) as a preferred way of gathering data and theory building.
Method in NIE
In an article for the Journal of Institutional Economics entitled “How (Not) to Measure
Institutions” (2013) Stefan Voigt starts from a clear preference for objective (quantitative)
measures over subjective (qualitative) ones (Voigt 2013, 2). He also begins from a primacy
in the characteristics of institutions of constraining behavior of individuals—sanctioning
mechanism (Voigt 2013, 5) while later stressing the role of institutions in enabling behavior:
“Institutions bring order to an otherwise chaotic world. They allow actors to form reasonable
expectations about the future, which, in turn enables actors to develop a longer time horizon,
make long-term investments, engage in the division of labor and so forth” (Voigt 2013, 10).
This statement already implicitly assumes some form of methodological individualism and
individual rationality as the motive for behavior. However, half of the rules (conventions and
ethical norms) presented by Voigt in a table are characterized by “self-enforcement.” So, this
implies these rules are just followed by individuals because they are somehow internalized
(Voigt 2013, 6) while he does not provide an explanation of how this internalization works or
where these rules come from. Later he admits that finding out how the factual enforcement of
all rules works is “messy” (Voigt 2013, 8) and needs to “take behavior explicitly into account”
(Voigt 2013, 11). In our view this requires the application of qualitative research methods.
This is apparent when one looks at the empirical case studies (for instance: Ellickson 1986;
Bernstein 1992; Djankov et al. 2003) which are used by Voigt to underpin his arguments
and which are based on ethnographic field work, surveys, in-depth interviews, and other
qualitative methods. For instance, Bernstein’s (1992) is a dense case description of how
trust relationships are built in the diamond industry and how disputes are settled outside
the court. The study seems to be based on interviews with diamond traders. While Voigt
states that “factually observed behavior needs to be measured” (Voigt 2013, 17), and that
surveys without ethnographic field research conducted in parallel are unreliable (Voigt 2013,
18) or not “objective” (Voigt 2013, 19), he does not explicitly mention the major role that
qualitative or mixed-methods need to play in his research program, but talks about “dummy
variables,” “predictability” (Voigt 2013, 20), and “appropriate models” (Voigt 2013, 22) at
the end of the text. However, there is no indication of how the holistic qualitative material
gathered in the cited empirical studies could be formalized.
Akerlof and Shiller—Story Telling
Other advocates for mixed methods and methodological pluralism are George Akerlof
and Robert Shiller who point out in Animal Spirits that all kinds of empirical evidence counts:
“Throughout this book we have been stressing that our description of the economy fits the
qualitative as well as the quantitative facts, better than a macroeconomics that leaves out
irrational behavior and non-economic motives. Occasionally we have used statistics, but for
the most part we have relied on history and on stories” (2009, 168). The empirical chapters of
the book clearly support a pluralism of methods. Especially the methods of discourse analysis
(in chapters 11 and 12 of their book) and the history of economic thought (in chapter
4) are praised by the authors for the additional and different questions they can address.
The aforementioned qualitative methods all contribute to Akerlof and Shiller’s storytelling.
Such methodological pluralism is touted again in Shiller’s Narrative Economics (2019) which
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lists: in-depth narrative interviews, focus groups, and textual analysis as preferred methods
and at the same time sees rigor expressed only in formalization and quantification with no
explanation of how these methods could be bridged or integrated.
Critical Summary
Voigt’s and Shiller’s contributions to the methodological debates demonstrate a
kind of openness to methodological pluralism, but also a reluctance to give up outdated
ideas about rigor and superiority of formal and quantitative approaches over qualitative
ones. However, from the discussion above institutional economists (both NIE and OIE)
show openness to more qualitative and mixed methods for both: theory development and
gathering of empirical data.
(Tentative) Conclusions
In this article, we have tried to show the possibility of developing the research perspective that
we have tentatively called Institutional Economics of Gift (IEG) (Kesting, Negru, and Silvestri
2020). In this view, we deemed it important to explore two key issues—the subject-matter of this
perspective, exemplified in certain case studies, and the study method. The three case studies
analyzed—the welfare state, the third sector and the percentage philanthropy institutions—
were chosen for at least two reasons. On the one hand, because they are emblematic forms of
different degrees of institutionalization of gift circulation, especially as regards enforcement
mechanisms, the rights and duties involved in giving, receiving, and reciprocating, and in
the case of the third sector, as regard the rules governing its organizations. On the other
hand, because they are “hard cases” they exemplify some of the possible tensions that exist
when linking gift-giving and institutions. In an attempt to show some of the problems arising
from this tension, we have focused, in particular, on the relationship between obligation
and freedom and on the state/market dichotomy. In this regard, we have tried to show why
IE should reflect more on the problem of legal-political obligation in general, but also on
the problem of the obligatory nature of the gift and its always problematic connection with
human freedom. Similarly, the three case studies show the inadequacy of the state/market
dichotomy in grasping the complexity of the problematic link between gift and institutions
and the different shades of grey that exist in institutionalized gift-giving cases.
As a method for theory construction, the gift epitomizes the institutional essence of
these three policy areas. For social anthropologists and institutional economists, the gift
is the ideal type which embodies the potential for social cohesion, civility, and mutual
care. It is essentially different from market exchange and coercion by the state—a third21
institutional platform which allows for the epistemological perception of modes of behavior
and social spheres where norms, values, and rules underpinning altruism and reciprocity
engage with or even trump utilitarian self-interest. The institutional theory of the gift as a
third dimension is the lens to see giving as a specific pattern of behavior and to perceive its
benefits for society. To “measure” the institutions behind gift-giving empirically, it is not
enough to account for the money collected by charities and NGOs promoting good causes,
the money spent on presents and the coins handed over to beggars in the street or to sum
up all the hours of voluntary work and unpaid care labor in households. Such statistical
data are useful to account for the quantitative importance of gift-giving, however, since the
21 The importance of this third dimension is very much emphasized in the work of Anspach (2002) and
Heritier (2020).
972 Paolo Silvestri and Stefan Kesting
values, norms, and rules supporting gift giving will be context and case specific and are not
quantifiable, ethnographic studies, surveys, and other forms of qualitative studies will be
needed to account for the institutional web in support of these patterns of behavior and to
explain why and how they work.
We have tried to take steps towards a research horizon that offers a renaissance for
productive collaboration between Institutional Economists and Social Anthropologists
which remains to be further explored in future.
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... Again, much work remains to be done to understand how PTDIs challenge our dichotomic way of thinking, being a sort of new "third way" between state vs. market, welfare state vs. third sector (and civil society), institutionalized solidarity vs. spontaneous solidarity, obligation and freedom (Silvestri 2019;Kesting, Negru and Silvestri 2020;Silvestri and Kesting 2021). ...
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“Percentage Tax Designation Institutions”, also known as “Percentage Philanthropy Laws”, are fiscal institutions through which taxpayers can freely designate a certain percentage of their income tax to organizations whose main activity is of public interest: churches, third-sector organizations, political parties, etc. A comprehensive explanation of such systems is still lacking. In The Community of Advantage, Robert Sugden provides an original theoretical account of the Italian “8 × 1000” institution as one of those forms of regulation that “would be justified as ways of expanding opportunity for mutually beneficial transactions” and, more particularly, as a liberal and “contractarian approach to the provision of public goods”. This article is an attempt to expand and deepen the understanding not only of the 8 × 1000 but also of the 5 × 1000 and 2 × 1000 institutions, by reflecting on and possibly refining Sugden’s contractarian account, at least with regard to the part that relies on and develops the voluntary exchange tradition (Wicksell, Lindahl and Buchanan). To remain faithful to two normative premises of Sugden’s approach—the opportunity criterion and the correlated freedom of choice—we must introduce some theoretical adjustments to take into due account the way in which taxpayers’ freedoms—not only freedom of choice but also autonomy—are affected by default rules and the related redistribution procedures. In addition, these institutions also go beyond the voluntary exchange tradition—insofar as they go beyond its basic assumptions: the benefit principle of taxation, taxpayers’ self-interest and the very logic of exchange—and, at the same time, they can be read as a new form of voluntary tax justice.
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Mainstream economics offers a perspective on the gift which is constructed around exchange, axioms of self-interest, instrumental rationality and utility-maximisation – concepts that predominate within conventional forms of economic analysis. Recognising the gift as an example of social practice underpinned by social institutions, this book moves beyond this utilitarian approach to explore perspectives on the gift from social and institutional economics. Through contributions from an international and interdisciplinary cast of authors, the chapters explore key questions such as: what is the relationship between social institutions, on the one hand, and gift, exchange, reciprocity on the other? What are the social mechanisms that underpin gift and gift-giving actions? And finally, what is the relationship between individuals, societies, gift-giving and cooperation? The answers to these questions and others serve to highlight the importance of the analysis of gift in economics and other social sciences. The book also demonstrates the potential of the analysis of the gift to contribute to solving current problems for humanity at various levels of social aggregation. This key text makes a significant contribution to the literature on the gift which will be of interest to readers of heterodox economics, social anthropology, philosophy of economics, sociology and political philosophy.
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‘Percentage Philanthropy’ or ‘Percentage Tax Designation’ institutions, known in Italy as ‘Otto per mille’ and ‘Cinque per mille’ – existing in several countries of southern and central-eastern Europe – allow taxpayers to allocate a little percentage of their taxes to organizations pursuing public utility purposes. The choice of designation of a beneficiary organization is usually expressed in a specific section of the tax return. In this volume we present the results of an empirical quantitative and qualitative research on the Italian ‘5x1000’. The research was developed thanks to a new database on individual Italian taxpayers and through the administration of questionnaires to taxpayers and third sector organizations residing in the province of Cuneo. Taxpayers and third sector organizations are the main protagonists of the circulation of the ‘gift of 5x1000’. The great success of this particular fiscal subsidiarity institution is evidenced by the yearly growth of three parameters: the number of taxpayers who make the choice, the number of third sector organizations, and the total amount of resources redistributed by the state. Yet, it is still a poorly studied and understood institution. Who are the taxpayers who choose to give the 0.5% of their income tax, and what are the motivations behind their choices? Who are the organizations benefiting from 5x1000, and what services do they provide thanks to the resources deriving from it? Who, in turn, benefits from these services? The research resulted in several findings. On the taxpayers side, the propensity to express the choice and allocate the 0.5% of income tax is very high for the vast majority of Italian taxpayers, with no significant differences between Northern and Southern taxpayers; however, almost all taxpayers who do not have the duty to submit tax return do not make the choice. The analysis of taxpayers’ socio-demographic characteristics shows how the propensity to give the 0.5% of income tax seems influenced not so much by age and sex, but by the level of education, working conditions and position, religious faith, voluntary work and interest in politics. The survey confirms the main hypotheses of the research: the reasons for giving the 0.5% of income tax are attributable, in order of importance, to altruism (“gift-without-sacrifice”) and autonomy in choosing how to allocate one’s taxes (“taxpayer’s sovereignty”). The research shows how the 5x1000 institution marks the difference between voluntarily ‘con-tributing’ to the common good and simply ‘paying a tribute’. On the side of the Third sector organizations, the already known phenomenon of concentration and dispersion-pulverization of the 5x1000 resources, both at the regional level and between ‘large’ and ‘small’ beneficiaries, is also confirmed at the provincial level, affecting, in various ways, the impact that such resources have on Third sector organizations, the services they provide, as well as those who benefit from them: families, minors, the disabled, young and old. The overall number of citizens who use such services appears to be significant in any case. Starting from the analysis of some gray areas and critical issues and from the estimate of the so-called ‘Unexpressed potential’ of 5x1000, we conclude with some policy recommendations. Overall, the research sheds new light on the use of taxes as a form of gift, its circulation and the ‘generative’ capacity of civil society through the great circle of the 5x1000. Keywords: Percentage Philanthropy; Percentage Tax Designation; Cinque per mille; Fiscal Subsdiarity; Gift; Taxpayer’s sovereignty; Third sector.