Comments on economics, mystery fiction, drama, and art.

Wednesday, December 20, 2006

Gift-Giving: An Economic Analysis?

It's Christmas-time once again, and once again, economists weigh in on the rationailty of, and the utility derived from gift-giving. The usual conclusion is that, leaving aside any benefits derived from knowing that someone cares enough about you to give you a gift, you will probably derive more satisfaction (utility) if people simply give you cash.

Now that exception might be major. And as Daniel Kahneman demonstrated over and over again, people aren't necessarily rational decision-makers even when they are choosing for themselves--they change their minds frequently and rapidly, they choose both sides of the same offer when it's framed differently, they express regret, and so on.

But almost no economists go the next step. If I get more utility from my choices, and if you get more utility from your choices, why even give each other money? Why not just keep it and spend it on ourselves? Cutting out the middleman, so to speak?

This is a case, I think, in which economics tries to do too much. I think gift-giving continues because it is a powerful symbol, and that both the giver and the recipient see it as such. Giving is a sign of affection (and sometimes power--"See how much I can give you. See how much I can withhold"); accepting what someone gives you is also a sign of affection. Knowing that someone cares enough to spend time thinking about what you might want does have an effect, as well.

Maybe it pays to restrict your giving to people you care deeply about. Maybe it makes sense to alter your gift-giving (and receiving) habits.

But pay no attention to those economists who urge you not to give. They haven't really thought carefully enough about it.


Post a Comment

<< Home