At Vancity we have been talking a lot about the social economy. There is some extremely interesting conversation going on about what this term means, and I wanted to take a minute to jot down my thoughts on the topic.

As a starting point, it’s good to know what Wikipedia says about the social economy:

Social economy refers to a third sector in economies between the private sector and business or, the public sector and government. It includes organisations such as cooperatives, non-governmental organisations and charities.

While I like this definition from a credit union/triple-bottom line perspective, I don’t feel like it’s as broad as the concept wants to be.

To me the social economy is the same as what others call the reputation or conversation economy. From the time humans started trading what they had for what they needed, we had a social economy. People’s knowledge of the others they were trading with was a crucial factor in those trades and dealings. The industrial age added a level of anonymity into our economy and set us up to pay fixed prices for goods and services from the money we earn from our labour. The information economy didn’t change this at all.

Now the emerging social tools we have at our disposal is merging these economies together in a way that brings a social component into our modern age. We have a global water cooler, allowing us to share information, connect and trade with each other and lend directly to each other in ways that weren’t possible ten years ago. Companies like eBay, Craigslist, CommunityLend and Wesabe allow for social transactions that bring a greater element of trust and reputation into our purchases and financial dealings. This makes it social, and models that leverage our innate desire to be social should be more successful in this new age.

I believe the definition of the social economy is broader than what is written in Wikipedia.

At Vancity we recently created a division called Social Finance. Lots of people have been asking what social finance is. Here’s what Wikipedia has to say about social finance:

Social finance is an approach to managing money that delivers a social dividend and an economic return. Social finance includes community investing, microlending, and sustainable business and social enterprise lending.

I agree with this Wikipedia definition entirely. Social finance is an engine that drives the social economy, but is firmly rooted in creating positive social and environmental change from investing in companies and initiatives that generate a return on the money invested. It is all about the power of including what are often considered externalities in our financial transactions.

As I explore these issues, I’m hoping you’ll lend your voice and tell me what you think.