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Monday, January 22, 2018

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The new social economy
Lucy Bernholz

July, 2011

My colleague at Stanford, Rob Reich, coined a phrase, the New Social Economy, that I find very useful. I define this economy as "Organizations and financial structures that deploy private resources for shared social benefits." Shorthand - the sector formally known as nonprofit and philanthropy.

Why do we need a new term? Because the innovations on the edges of nonprofits and philanthropy - from impact investing to social enterprise, B corporations and informal networks of volunteers, digitally created shared goods held in common - these are not marginal extras, they are very much a part of how we create public goods in the 21st century. The reality is that these types of enterprises (nonprofit, mission based for profit, b corporations) and types of funding (impact investing, giving, SRI) all exist in the same "sandbox" - what separates them are old mental models and 20th century regulatory structures. As long as the discussion continues as if these forms operate at odd with each other we prevent ourselves from seeing solutions built on their collective potential.

The new social economy uses all of these tools - financial and structural - to address our challenges from social inequities to climate change. Different problems will require different applications of these tools, some will be more philanthropy and nonprofit, some will be more market based, others may require new kinds of advocacy.

I've been speaking about this new economy over the last year and it is at the core of the work I'll be doing at Stanford. Recent slides I've used in discussions are online here and embedded here - note that these focus on what the social economy looks like from the perspective of donors.

Navigating New Social Economy

What is most important about this new social economy is that it is just beginning. By naming it and seeing its component parts we immediately see that the picture is incomplete. There are institutional forms yet to be invented, digital movements still in their infancy, new forms of governance we can only just imagine. There is much "to be invented" in this economy - from new structures to new financial tools to new regulations and means of oversight.


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