So what I'm getting at now is the part of our economy that is not selfish, apparently. Or that might be an overly simplifying way of putting it. But, the economic theory, traditional economic theory describes people as having a utility function, which is arguments include own consumption, and they care only about that. Only people are unremittingly selfish in this view of the world. Economists like to describe that is as practical and sensible but I think the attitude that economists often have is colored by inter departmental rivalry as we have discussed before. And we're not executive department. So we wanted to describe people in a chillingly realistic frame as totally selfish. But in fact people are not totally selfish. They may be often selfish, I don't deny that. But when you get down to maybe as you mature in life you get down to a feeling that, why am I trying to amass all this stuff? What am I going to do with it? What do I need, do I really need all this consumption? I'm sure that that's an important part of our economy, and it's reflected in the nonprofit sector. So as I've pointed out before, right now we're at Yale University which is a nonprofit. That doesn't mean that it's all motivated by benevolence, but it's not profit. Nobody gets to, there's no dividends, there's no stockholders. So people may be pursuing their own advantage, but underlying it, there's a different frame and I wanted to talk about that and we start with nonprofits. How many are there? In 2013, there were 1.41 million nonprofit companies in the United States. This is not the government, it's not paying a dividend to anyone, there's no shares in it, it owns itself. So they're like individuals. They exist for the benefit of their cause. And people have causes and nonprofits have causes. In the United States in 2013, employment in nonprofits was 10.2% of the workforce, some of those are volunteers who are working for nothing. So you wonder why would anyone work for nothing? Often they're older people so you retire and now you don't have to work anymore but then you're sitting at home watching television and you're saying, what am I doing, why should I do this? It doesn't have any deep meaning, at all, I should be working. So they end up working for nothing. As long as they have the income to support themselves and why not? Makes perfectly good sense. The average over 13 countries, mostly advanced countries Was 7.4% of the workforce is non-profit. So what is a nonprofit? It's an organization, it's a business but with one key different, there's a non-distribution constraint. They don't give back the dividend, the profits as dividend. They have to re-invest them. Either give them away or reinvest them in the activities of the organization. This is the percentage of workforce in nonprofits by country in 2013. And it ranges from 12.7% for Israel down to 3.7% for Brazil. Tends to be higher in advanced countries. Maybe that's because they're wealthier, and people are at the edge and needing all of their income. But I think it's also something about the development of civil society, that seems to be part of emerging countries start with a relatively low civil society. I think ultimately giving away is essential to civil society. Well, civil society goes back to ancient Greece. Aristotle coined the term. Although it's called coinonia politicae in Greek. Later, Cicero the Roman senator, translated it into Latin and called it societas civilise, that's civil society. But it's just people looking out with a benevolent impulse at all of our society wanting to help and finding meaning in that. So one example of civil society, I'm just thinking is Charles Darwin. You've heard of him. Well he was a student at Christ College Cambridge and he never went on to be a professor. But he took a course in botany and professor John Stevens Henslow was so impressed with this young man who want to do explore then a new idea that man descended from the apes. I discovered there's an 1848 book named Vestiges by Chambers, which threw out a lot of evidence that man descended from apes and there was a wrong evolutionary history. It was a very controversial book. It wasn't scholarly enough. I mean, it was in a sense. It showed pictures of fossils, but Darwin wanted to study this. And he impressed his professor and the professor got him money for a two-year voyage, just collect information. It wasn't the government that did this. It was just a philanthropist. So this guy Henslow is a bit of a spiritualist and he somehow thought he would discover something about theology from supporting Darwin. He could not have gone to parliament to make a case to support Darwin. It's not the kind of thing that happens. I think great scientific discoveries are often not appreciated by members of parliament, and so they don't happen. So now nonprofits do not distribute profits as dividends. However, they have a history of distributing profits as bonuses to employees. In a recent study 42% of all nonprofits have an informal executive bonus system. That's because non profits have to compete. When you take a job you look at what they are offering you and even if you are a selfless, you are influenced by what they pay you. Moreover you have to be incentivized to do good work. It doesn't matter if you're working for a profit or a nonprofit, you have to be incentivized. So they do the same thing that other businesses do, if you do good work, we give you a bonus at the end of the year. So suppose you decided that your town needs a hospital. Someone you know is sick, and you see the hospital is overcrowded. They need more funding. So you wonder why isn't it happening? There's a shortage of hospital beds, somehow it isn't happening. So you decide you're entrepreneurial. You decide, hey, I can make this happen. So what do you do? Well, you can start a for profit hospital and we know how that is. You bring people together, you go to an investment banker, you talk about placing shares in this for profit enterprise. You can do that. But maybe that isn't the best way to do it. And I'm talking to you as a real live person. Maybe you don't want to do it that way. So the other way you do it, again you have a purpose, you want a better hospital. This is very real, it had something about inequality, if only rich people can afford to go to a hospital but you want to deal with this problem, you care about your community. So what do you do? Well, you might want to go instead of going to an investment banker, you go to the biggest church or temple, or I should add mosque in town. And ask them can I, I want to start a hospital and I'm thinking I could name it after your church or some Saint or someone that is meaningful to you and then make it a religious hospital. This then brings the whole community of adherence to that religion. Into sympathy with your cause, and you can get donations. Instead of going to an investment bank, well, you get free contributions. So the thing is, what is it that motivates people to do non-profit businesses? I think that people's motivations are very complicated. And as we learn more and more about science of psychology and neuroscience we're understanding that there are societal impulses, there are community impulses, there's need for companionship, senses of loyalty. All these are there, but there are other impulses that are not necessarily so good. There's an impulse to hoard, and in an extreme case it's called compulsive hoarding. I understand there's a television show, but I've never seen it, I don't watch much TV about compulsive hoarders. But there are some people who are illustrated in this show who just never throw anything away and fill their whole house up with junk. So Richistan is a book by Robert Frank, not the academic Robert Frank, but another writer about the rich element of our country. Arguing that we're separating into two countries, where we have the rich and super rich. There is growing a sort of entrepreneurial spirit in this country as he documents that is repulsed by political correctness. Political correctness might not allow any kinds of inequality, but there should be a certain amount of inequality for hiring or rewarding talented people to use their talents for good causes. And so there is some, even amongst rising inequality there is some sense of temperance of the hurting instinct and recognition that inequality can within limit serve certain purposes.
