Sunday, January 27, 2019

In Defense of Gift Giving

[I seem to be on a defensive kick recently . . .]

As an economist by night, I was thinking about the economics of gift giving this past holiday season. 

This is of course not a new topic for economists to fret over.

Here is how I frame the solution: 
  1. Time is THE valuable (scarce) resource. $20 represents my time. A unique item I search for and travel to acquire in 2 hours that I purchase for $5 represents a lot more. Can we strike a good equilibrium in all cases? Are we too rich to make these bargains any more?
  2. Gift giving forces us to think about and act on the behalf of others. Is this being fully and appropriately communicated?
  3. It should be redistributive: you and I exchanging $20 bills is stupid, but . . .  that is a bit of a strawman. Keep in mind it is not just monetary redistribution that is at work. We can redistribute time, effort, ideas (creative people probably have a burden to bear), et al.
  4. It gives us permission: When he was alive, one of my grandfathers was a widower for most of my life. I remember him vividly at many Christmases handing out checks to each child and grandchild with a bit of a sheepishness saying, "This is the only way I know to do this. Get yourself something nice." The check was probably for more than he should have been giving I now realize. But more importantly I realize that there was a gift I was giving him in exchange. Delighted to receive cash as a child, I didn't realize my gift was giving him permission to do it in this manner rather than on his own attempt to shop for ten or so different people--I gave him back his time along with avoiding all the potential downfalls for disappointing results.
  5. Gift giving demonstrates (signals) care and love AND it is positional (and yes that can be a negative in an economic-efficiency sense or other--see below).
As always, we have to strike a cost-benefit balance, and we should start with the assumption that in gift giving people are indeed making choices in at least their own best interest. The burden of proof should be on those claiming market failure.

The biggest concern I think we should consider is just what we are signalling and to whom. Just because you can shower your children with material luxury, should you use this as the very vivid and potentially public moment to do so? I am certainly guilty of potentially over indulging in selfish activities (gift giving and otherwise) in the holiday seasons--all of them.

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