Home > Uncategorized > End bloated salaries in the nonprofit sector

End bloated salaries in the nonprofit sector

from Dean Baker

An average family participating in the federal Temporary Assistance for Needy Families (TANF) program costs taxpayers $400 a month. We pay $126 a month to the typical beneficiary of food stamps—the Supplemental Nutrition Assistance Program (SNAP).

By contrast, Susan Desmond-Hellmann, the CEO of the Bill & Melinda Gates Foundation, costs us $44,200 a month. This figure may catch some readers by surprise, because they probably don’t think of themselves as paying the salaries of people who work at nonprofit organizations. But we do pay her that amount, and it is a problem.

The salary of the Gates Foundation’s CEO costs taxpayers money because we gave Bill Gates a large tax break that subsidizes his contribution to his eponymous foundation or any other philanthropy. If Gates was in the 40 percent tax bracket (a safe bet before the 2017 Tax Cuts and Jobs Act pushed by President Donald Trump), then the government effectively picked up the tab for 40 cents of every dollar that Gates decided to contribute to his foundation.

There is a tendency to treat tax deductions, for charitable contributions or other purposes, as being qualitatively different from direct government spending. This may be a convenient way of thinking for the people who most benefit from these deductions, who tend to be richer on average. But it is nonsense.

From the standpoint of the federal budget, it makes no difference whether the government pays someone $10,000 each year as a housing subsidy or allows them to deduct $10,000 from their income tax payments due to the mortgage-interest deduction. We construct a tax code that fits the government’s needs for revenue. If we allow people to reduce their tax obligations through deductions, it increases the deficit just as if we added to spending by the same amount.

We should have this fact in mind when we consider the purpose of the charitable-contribution tax deduction. In effect, we are saying that certain categories of activities are serving a general public purpose. If individuals choose to support these activities, through religious organizations, educational institutions, or philanthropic organizations such as the Gates Foundation, we will subsidize their contributions by allowing them to pay less in taxes.

This is a reasonable policy for the federal government. It provides subsidies for organizations that address a wide variety of social ends in diverse ways. These subsidies can help promote new and innovative practices that may ultimately be adopted more broadly.

However, the government does put conditions on the sorts of organizations that are eligible for tax-exempt status. For example, they must not be for-profit organizations. The government does not, at least explicitly, allow deductions for money paid to profit-making corporations. Nonprofits also must serve the general public purpose. I cannot have a charity to pay the person who mows my lawn. Nonprofits cannot advance a partisan political agenda.

This is important background for thinking about the money that taxpayers effectively pay to support the salary of the Gates Foundation’s CEO. Most people view the rise in income inequality as one of the major problems in the US economy. Desmond-Hellmann’s $1.33 million annual salary is way above the cutoff for the top 1 percent of US wage earners. In fact, it is far above the cutoff for the top 0.1 percent of wage earners.

While many factors have led to the rise in inequality, part of the story is the excessive pay of CEOs and other top executives. This is more an issue in the corporate sector, where the average pay of CEOs now approaches $20 million a year. Nonetheless, when pay for top executives in the nonprofit sector crosses the million-dollar mark, even at philanthropies such as the Rockefeller Foundation that worry about inequality, this is also part of the problem.

Pay-Cap Savings

As fans of arithmetic know, the more money that goes to the CEO and other top executives, the less money is available to pay people lower on the ladder. This means less pay for both midlevel workers and the lower-level workers who clean the bathrooms and serve the food. And in the case of nonprofits, it also means less money for the beneficiaries of the charity in question.

While there are policies that the government can pursue to lower the pay of CEOs in the corporate sector (my preferred route is giving shareholders more power to rein in pay), government can act directly to lower CEO pay in the nonprofit sector. Specifically, it can impose a limit on pay as a condition of keeping nonprofit status for tax purposes. My preferred cap is the $400,000 annual salary that the president of the United States receives.

Just to be clear, this restriction is not about telling the Gates Foundation or other private charities how much they can pay their CEO or other highly skilled employees. They are free to pay them whatever they want. They just can’t get the taxpayer subsidy through tax-exempt status if they choose to pay their CEO more than the president of the United States makes.

After all, the rationale for tax-exempt status is to promote a public purpose. Helping to generate inequality by paying excessive executive salaries is not a public purpose.

The larger foundations will undoubtedly claim that they cannot get good people if they must cap their CEO pay at only $400,000 a year. It’s worth thinking about this objection for a moment.

A salary of $400,000 would put a worker well into the top 1 percent of the pay distribution. Does a charity really want to tell us that no one who was competent was prepared to make the sacrifice of working for pay that is far more than what 99 percent of other workers make, that is 30 times the median wage, that is more than 90 times the annual earnings of a minimum wage worker? If working for this nonprofit at that pay is too great a sacrifice, then perhaps this is not the sort of organization that taxpayers should be supporting.

Having worked in Washington, D.C., for more than a quarter century, I can think of many highly qualified individuals—people who have advanced degrees from top universities—who routinely put in 60- or 70-hour weeks for less than half of this pay. Some of them receive less than one-quarter of this pay. Would the Gates Foundation really want to tell us that people place so little value on the public service it provides that no qualified person would be prepared to lead it for just $400,000 a year?

To see the implications of a pay cap, let’s take the case of Harvard University, where its former president, Drew G. Faust, earned more than $1.5 million in 2016, her last year in the position. If her pay had been capped at $400,000, it would have freed up $1.1 million.

In addition to the president, many other people in top-level positions at Harvard earn salaries in the high hundreds of thousands of dollars, including the provost, college deans, vice presidents, and other executives. If we assume 30 people in such positions, with an average pay of $600,000, the potential savings would be $6 million.

Added to the savings on the president’s pay, this would free up more than $7 million a year. That would be sufficient to give the 5,000 members of the Harvard Union of Clerical and Technical Workers a pay increase averaging more than $1,400 a year. That would be a very nice holiday bonus.

If this pay-cap policy were adopted, some organizations would inevitably try to circumvent it. One route would be to contract out for services. This may be fine for services such as managing the organization’s endowment, but Harvard might feel a little embarrassed about contracting with its new president, Lawrence S. Bacow, LLC, for “presidential services.” This cap is likely to be more enforceable than many items in the tax code.

It’s also worth quickly heading off one obvious subterfuge. It would be pointless to have a compromise in which the money paid to CEOs in excess of $400,000 could not qualify for a tax deduction. The point is to change policy, not assuage liberals concerned about inequality.

We don’t tell organizations that spend half of their money trying to get Democrats elected that they can only qualify for tax-exempt status on the other half of their money. Such organizations are simply ineligible for the tax subsidy. The same point should apply to organizations that find they cannot get good help for the same pay as the president of the United States earns.

CEOs and other top executives in nonprofits may legitimately argue that they are grossly underpaid compared with their counterparts in the corporate sector. This would be true. Corporate CEO pay has become bloated due to a badly broken corporate governance system that essentially allows CEOs to rip off shareholders. In fact, every worker is underpaid in relation to the bloated pay of corporate CEOs, so top executives in the nonprofit sector are not uniquely disadvantaged in this respect.

A Bad Use of Federal Dollars

As a practical matter, if we are serious about combating inequality, we have to recognize that we are not going to reverse a four-decade-long trend with a single step. If the beneficiaries of the policies that promoted inequality can protect their position by pointing to some other group that got even larger gains, then we will never be able to make any progress.

In this case, we should keep our eye on the ball. The federal government is providing enormous subsidies to the bloated pay of top executives at nonprofits. This is simply not a good use of federal dollars, and it is hardly in keeping with the idea that nonprofits should be serving a public purpose. We can try to develop government policies to reverse market outcomes that generate inequality, but we should first end government policies that promote inequality.

  1. February 23, 2019 at 1:20 am

    Given the worldwide addiction to imposing and accepting tax systems, and the seemingly impossibility of convincing people that a monetary sovereign nation does not need to impose any taxes at all, we should look at the underlying philosophy for applying a tax system.
    There seems to be different principles involved for different people. For example, the income tax system is based on taxing what people earn. The corporate tax system is based on what profits the corporation makes and ignores their earnings. Creative accounting can usually find ways to make a very lucrative business show negligible profits, and with various Government approved incentives, often result in those corporations paying minimal taxes.
    Then there is the system of sales taxes that come under various labels, such as, VAT, GST, excise, and forms of customs duty on imports and exports.
    However, there is another way to impose a tax system that is actually much simpler, virtually avoidance proof, and also far more equitable for everyone. That system involves a very low tax on ALL expenditure and at the same rate for everyone. A tax rate of 1%, and possibly even less, on every financial transaction would be sufficient for most developed countries to eliminate EVERY other form of tax imposition currently in place. The tax rate could be calculated and adjusted to provide the Government with its required revenue and would be collected by the banking fraternity responsible for processing the transactions.
    Every million dollar high-speed trade in the huge gambling casinos called stock and commodity markets would deliver $10,000 to the government while an employee on $1000 a week would return $10 to the same Government if he/she spent that amount each week.
    Considering there are no other taxes on anything, just imagine the impact this would have on the economy.

    • Calgacus
      February 23, 2019 at 7:09 pm

      the seemingly impossibility of convincing people that a monetary sovereign nation does not need to impose any taxes at all,

      It is good that this seems impossible, because in fact, it is impossible. Monetary sovereignty is not magic. There is no way that monetary sovereignty can be meaningfully exercised – that any normal spending level can be maintained – without taxation or fees or charges for something. Belief in magical powers of monetary sovereignty is NOT MMT. It is innumeracy and economic illiteracy.

      This sort of Tobin tax being enough is unlikely to be sufficient to drive demand for money. (a) Easy to avoid, especially in comparison to real property taxes (b) Part of the idea for Tobin taxes or any sin tax is that they discourage the activity, not merely take money. The more we have a Tobin tax, the fewer million dollar high-speed trades there are, the less well this tax drives demand for the currency.

      • February 23, 2019 at 11:53 pm

        The only thing that drives the demand for “money”, Calgacus, is the fact that having a single, legitimate and guaranteed token for use as a nation’s medium of exchange, has proven to be the most convenient and practical system to facilitate all the essential daily trading that is part of every modern society.
        I don’t think there can be any dispute that “money” has become an absolutely essential tool of survival for the vast number of people in today’s world. Basically, “money” is on a par with food and water – if people don’t have those essentials they will not survive.
        Under normal circumstances, people create, and/or accept a Government on the assumption that it is supposed to be there for the benefit of the people and their nation. As a result, one of the major responsibilities of a Government of an independent nation is to provide a legitimate and guaranteed “money” system by declaring what shall be used as the nation’s legal tender. Essentially, that is the basis of MMT – that only the Government has the power and authority to declare what shall be used as legal tender. The creation of a “money” system really has nothing to do with taxation because having a money system is fulfilling a Government’s public responsibility. Every modern nation needs a universal and accepted medium of exchange and the public need no coercion in order to accept such a token.

      • Calgacus
        February 24, 2019 at 9:40 pm

        guggzie2013:Essentially, that is the basis of MMT – that only the Government has the power and authority to declare what shall be used as legal tender.

        No, it’s not the basis of MMT. That theory is called “Legal-tender Chartalism” and it does not work. All of the MMT thinkers say that this theory is wrong and that taxes drive the demand for money. Also, money is not really “a medium of exchange”. Legal tender chartalism is sort of a half-way house to MMT from Metallism. But it isn’t all the way there.

        You can’t set up this system where state money is trusted without having some use for the money – that basically means taxation, or the state selling some kind of stuff (which is what taxation is.) I’ll put more on theory in my response to Dave below. But here is some real world experience that shows the defects of “Legal tender”:

        In the 1860s, Lincoln (upon the advice of his treasury secretary Salmon Chase & others) issued Greenbacks to pay for the war. Chase, incidentally was the strongest opponent ever of the idea that merely declaring something legal tender could make it valuable. Eventually, most sources say that the Greenbacks depreciated somewhat in relation to gold dollars

        But what most later scholars miss is that there were multiple issues of the Greenbacks, issued under different laws and rules. I only read about it in a forgotten 19th century populist work. The first issue Greenbacks could be used to pay almost all taxes. The first issue never depreciated and traded at par with gold. Under the pressure (not to say backstabbing) of the New York bankers, traditional allies of the Slave Power, and their tools in Congress, the later issues were still “legal tender”, but could NOT be used to pay many taxes. They and only they depreciated.

        So the upshot is that the USA ran a controlled experiment of genuine MMT vs Legal Tender Chartalism in the 1860s. And Legal Tender Chartalism was shown incorrect by experiment, as Chase & the New York banksters knew all along.

        Lastly, to call Legal tender chartalism “MMT” is to put words in other people’s mouths that they have explicitly and repeatedly disavowed and argued against. Is this proper?

      • February 24, 2019 at 10:16 pm

        I guess we are talking opinions here, Calgacus. If, as you say, “money” is not a medium of exchange, then what is it? I don’t believe there is one modern day society that could function without an acceptable and guaranteed money system to provide the essential medium of exchange. People need a money system to survive in this day and age and there is no rational need for a tax system to force people to use whatever is designated as the nation’s legal tender.
        That, of course, does not mean a nation’s money system cannot be mismanaged, corrupted or manipulated but, as far as I can see, there is no other convenient and practical solution to a universal medium of exchange other than “money” in whatever form it takes.

      • Calgacus
        February 24, 2019 at 11:32 pm

        No, I don’t think it is a matter of opinion. It is a matter of logic and experience. Were the exchange rates of first issue, second issue Greenbacks and gold matters of opinion? Legal tender chartalism is just plain wrong.

        There are always nuances, but basically merely printing “legal tender” on money just doesn’t work. Unless the “legal tender for all public debts” means that public debts are actually incurred in the real world.
        There’s a name for that: Taxation.

        People need a money system to survive in this day and age

        But why do they need it? What does needing a money system to survive actually mean, actually entail?MMT explains why and what. Other theories don’t.

        It is an important and difficult MMT point is that “There is no medium of exchange.” There never has been. That’s not what money is. (Alfred Mitchell-Innes) Geoffrey Gardiner singles this out correctly as just about the hardest thing to understand in his papers. Again, money is NOT a medium of exchange.

        The point is that money is ultimately a relationship between a creditor and a debtor. There is no “medium”, nothing sitting in between the creditor and debtor. All there is creditary relations and valuations of real world services and movements of goods in terms of these creditary relations. Government taxation and spending are two types of these constantly occurring valuations.

        Saying a tax system is not needed is saying that the financial system need not have any tie-in to the real world. Which contradicts the hypothesis that “People need a money system to survive in this day and age”.

        Finally, again, nobody who knows that the MMTers have disavowed this theory should call it “MMT”.

      • February 25, 2019 at 12:53 am

        Actually, Calgacus, the exchange rates back then for greenback and gold were probably matters of opinion as to how different people valued those assets. It is pretty much the same today when rumour and remarks, often unsubstantiated, can impact on the price of all manner of commodities. As far as I can see, money is definitely the acceptable medium of exchange between buyer and seller – it really has nothing to do with debtors and creditors, although in today’s world of finance, the vast amount of transactions are in fact between debtors and creditors. Most of today’s “money” is simply a spreadsheet figure created as interest-bearing debt so, in that respect, you are correct.
        I have no idea why you say declaring legal tender does not work. It seems the only way a legitimate Government can create an acceptable medium of exchange that everyone can use to buy what they need to survive on a daily basis. The beauty of legal tender is that the Government is in the position to punish anyone who tries to counterfeit the “money” and that provides the confidence that the “money” is guaranteed to the extent that is can be.
        I am surprised you do not recognise that virtually everyone around the world today does need “money” to survive. Can you offer an alternative way to survive that doesn’t involve “money”? I’m sure there would be thousands of people out there very interested to learn the secret.

  2. Nancy E. Sutton
    February 23, 2019 at 5:45 am

    Who could argue against this Tobin tax? And didn’t we have it once, until the ’60’s? Did it actually generate that much revenue then? If not… ? …. is it’s current potential because of the high speed trading that exists now, with current technology? Hmmm…. let’s do it!! We’ve got an array of candidates who should be ready to answer questions…..

  3. February 23, 2019 at 6:55 am

    I do not know if the “Tobin Tax” was implemented in the 60s but most of the later publicity seems to have called it a “Robin Hood” tax and aiming it at the “rich”. If it is applied on a universal basis without any deductions or exceptions, it would be tamper proof. In the case of Australia, and based on the published statistics from the Reserve Bank of Australia, the calculations show that a Debit tax of half a percent would return the Government a little more than their currently budgeted revenue. The application of a Debit tax simply requires a software application to the banking clearance system to arrange the daily transfer of the tax to the appropriate Government account. This would deny the banking fraternity from profiteering by holding the tax overnight and using it in O/N sweeps. It should be a relatively simple matter to do the calculation for the US and determine the tax rate needed to eliminate every other form of tax.
    Naturally, this system is the antithesis for every Government, as it eliminates the huge control over the people that the current system enshrines.
    The major problem with a universal Debit tax is finding a way to control the Debit tax rate that the Government can apply. In Australia, the original calculation used one-third of a percent, but with the increases over the decade, the rate had to be increased to half of a percent. If the rate were to be increased to one percent this would double the Government’s income.
    That hardly seems justified but it probably wouldn’t worry too many people if all other taxes are eliminated.
    The Australian solution is to embed the tax rate in the Constitution in a way that requires a national referendum if any Government wants to increase the rate.

  4. February 23, 2019 at 10:55 pm

    Obviously, Calgacus, you haven’t given much thought to the tax free “credit card” way of financing all the different aspects of the economy that I’ve been describing, in which prices and incomes are based on population and current use of resources and the biggest tax avoided is interest, i.e. bank’s tax on credit. Although “sovereign” government has to authorise credit, MMT has realised that banks are not required to create it out of nothing and profit by renting it out. If governments authorise the credit they need for their own (or indeed our) activities, the interest saved won’t have to be paid out of taxes.

    Given how much we have all had to invest in acquiring money, which in one phase of its use is ‘credit’ but in another a “fuzzy” indicator of ‘debt’ for work not yet done, Guggsie is admitting the difficulty of accepting we’ve been making a mistake, and suggesting we step back from confrontation to “look at the underlying philosophy for applying a tax system”. I don’t know if in the states you have an advert we have here for real estate agents who work for a fixed fee rather than a percentage cut. It imagines the “commiseration” needed when one discovers this AFTER you’ve paid the % commission! What I do know is that quoting markups, interest and other taxes in small percentages is a con trick for sugaring the pill of open-ended fraud. Making the government even a non-profit making banker doesn’t solve that problem as well as Keynesian progressive taxation, which at least confronts the super-rich with their having more than they need, if not the vain and callous excuse that they earned it. If I pay off my credit card debts on time I don’t get charged tax in the form of interest, but this becomes in effect the penalty if I start “living beyond my means”.

    Dean Baker was actually talking about capping incomes which are gross in every sense of that term, especially when the enterprises they are being derived from are supposed to be non-profit making. I don’t think Guggsie’s style of taxation would have the effect of capping incomes, but a fixed pay scale incentivising promotion worked well enough in the British civil service pre-Thatcher. Why seek profits if you have got enough? Are we seeking “growth” as an insurance against competition: the story that a firm will shrink if it doesn’t grow? Robert Locke at https://rwer.wordpress.com/2018/12/25/teaching-of-economics-captured-by-a-small-and-dangerous-sect/ (February 22, 2019 at 4:42 pm) was saying interesting things about this motivation at the international level:

    “Whereas Smith and the classical economists talked about economics in terms of individuals competing in free markets, Clausewitz talked about economics in terms of nation-state rivalries, which in fact has been the principal concern of everybody since the French Revolution, except anglo-US economists”.

  5. Calgacus
    February 24, 2019 at 11:15 pm

    davetaylor1: ‘credit’ but in another a “fuzzy” indicator of ‘debt’ for work not yet done

    No, “credit” is not a fuzzy indicator of debt. Credit and debt are two words that mean, point to exactly the same thing. It is like saying you say potato and I say potato – pronounced the same way – and arguing that you and I are saying something different. Huh.!!! Really, call this off!

    “Credit” and “Debt” are exactly like “being a parent” and “being a child”. Nobody can be a parent without having a child. Nobody can be a child without having a parent. There is just one indivisible parent-child relationship, which the words “parent” and “child” merely express two different views of. That is exactly how credit and debt are used in the English or any other language, the universal and primary meaning.

    In science, points of view are of paramount importance. Get the right point of view and everything is easy. Your ideas of “credit card financing” are NOT a new way of doing things, but a correct way of describing the things we have always been doing. Sometimes your writings on it has has novel insights. But it is not a new system! And per above, this is not at all a criticism. Mitchell-Innes said “Money is credit and nothing but credit”. He might as well have said Money is credit cards (or credit lines) and nothing but credit cards.

    The virtue of MMT, following Mitchell-Innes is that it analyzes state AND bank money and credit with one theory, in a monistic way. In effect, it does compare state finances to household finances – but correctly. And always, compared to its critics who say that MMT doesn’t think deeply enough – if one actually looks at what they have written, then they have considered this “deeper thought” and refuted it or polished it.

    Taxation is one way to “reflux” money; loan repayment is another. But in any case if money is “effluxed” (created), eventually it has to be destroyed, or it will have no value, and this value must always be based on some connection to the real world economy of real goods and services, not financial instruments. So as MMTers have noted, progressive income taxation can augment a demand for money, but it cannot create it. Something like property taxation or sales tax or paying fees to the government for real goods and services has to be there. Otherwise, one can simply do without money.

    The way that taxation is usually thought of is very confused. People think of it taking something real from individuals, when taxation is giving something real to individuals, in return for the financial instrument. Government spending is when the government takes something real from individuals, in return for an IOU, something financial.

    Thinking that governments or anyone else can spend (or lend) without taxation (or reflux) is saying that people can issue IOUs forever, without ever having to do something to back them up. That we can run an economy as an eternal and universal Ponzi scheme with no contact with the real world ever. Lewis Carroll made fun of that idea. (in Sylvie & Bruno). Again, Legal Tender Chartalism is refuted.

    For your system to work, there has to be something refluxing, something playing the role of taxation. This and practically everything else in MMT is a tautology, a triviality. The bad guys want to shrink the (democratic) government, which is basically run on morality above all, to nothing. Because then the biggest baddest guy becomes the government, defined as the biggest guy around. So there always is somebody governing, and the demand for his IOUs become the ones driving the demand for everybody’s money. And there is just no demand for his IOUs, unless he occasionally calls them in, and enforces them, because he’s the biggest, baddest guy around.

    • February 25, 2019 at 8:13 am

      Calcagus, saying “Credit and debt are two words that mean, point to exactly the same thing” shows how little you understand the point at issue. Credit is in one time period, the debt resulting from spending it is in the next. In the future, of which our knowledge is “fuzzy”.

      You might consider the implications of the difference in usage between a wage (for work done in a specific time period) and a salary (for doing whatever needs doing). You certainly ought to consider the implications of something Proudhon said: “Products are brought only with products”, i.e. not with money.

      • Polo
        February 26, 2019 at 6:11 pm

        One “time period” as defined… how?

        I enjoy reading Calgacus short-and-to-the-point explanations of the actual mechanics of modern economies – but more than that, it’s positively hilarious to read some of the responses from old farts with a lifetime of study into some defunct research program, without realizing how idiotic their complaints appear to anyone outside their little retarded corner of academic economics.

        Why anyone employs you people is a mystery. Lifetime tenure, I suppose.

      • February 26, 2019 at 11:05 pm

        ‘Polo’. Isn’t that a round thing with nothing in the middle? This one anyway hasn’t enough there to remember the guy the indents suggest he is abusing has been researching not a defunct but a not yet existing object of research, comparable to trying to invent an internal combustion engine in light of the inefficiency of steam engines. Of course steam engine enthusiasts like Calgacus might not like that idea, but my work was/is more systems engineering than ‘academic economics’: funded by neither ‘tenure’ nor ’employment’ but by a modest pension, a frugal life-style and personal commitment despite over thirty years’ battling incomprehension and abuse like this.

  6. jm
    February 27, 2019 at 2:15 pm

    “A salary of $400,000 would put a worker well into the top 1 percent of the pay distribution. Does a charity really want to tell us that no one who was competent was prepared to make the sacrifice of working for pay that is far more than what 99 percent of other workers make, that is 30 times the median wage, that is more than 90 times the annual earnings of a minimum wage worker? If working for this nonprofit at that pay is too great a sacrifice, then perhaps this is not the sort of organization that taxpayers should be supporting”.

    Did you mean to say that the current wage of Desmond-Hellmann’s 1.33m represents 30 times the annual median wage (roughly $44k), and 90 times the annual minimum wage (roughly $15k)? Rather than the $400k wage that you advocate?

    Not that it changes the validity of your point of course :)

  7. John Pardike
    February 28, 2019 at 2:24 pm

    On-profits are an oxymoron. They are a ruse to allow the very rich to provide comfortable occupations for their progeny, hidden from the tax collector.

  8. Ken Zimmerman
    March 11, 2019 at 8:10 am

    Why do economists continue to believe that they define money? They do not! Those humans who invent and use money define it. Every culture organizes life around a few simple principles, activities, and beliefs. The other institutions and activities of the society hang from that core like branches from a tree trunk. These central acts, institutions, and values form what Ruth Benedict—arguably the most perceptive American anthropologist of the 20th century—called a “cultural configuration.” To study and understand money the focus needs to be the money cultural configuration of whichever culture(s) social scientists choose to study. For example, the money configuration of the USA, and in fact varying from one part of America to another is very different from the money configuration of the Dogon tribe of Mali. But both are money. Baker in this article clearly identifies at least four such configurations within American society (a complex culture) – nonprofit money, charity money, government money, and tax deduction money. The first question for any social scientist studying such monies might be how did American money become so complex?

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