The holidays are here, and in the last weeks, all over the world – the parts of it that celebrate Christmas, anyway – you could see people hurrying through the material streets of their towns or the virtual streets of the internet, desperate to find suitable gifts for their friends and loved ones. The simplest option would, of course, simply be to present them with cash, and that’s precisely why some people consider this practice to be thoughtless. And yet, not only do statistics frequently show money to be the most common seasonal present, some people also defend this as a superior practice to other ways of present giving, as seen in this CollegeHumor video:
This is a parody, for sure, but here you can read about two actual professors of economics raising the same point in full seriousness. One of them, Steven Landsburg, says he is “not sure” why people don’t switch to cash gifts. He is aware of the common explanation that people appreciate the time spent in order to pick and buy a gift for them, “but we could accomplish the same thing by giving the cash value of our shopping time, showing that we took the time to earn the money.” The other one, Joel Waldfogel, wrote a paper in 1993 estimating the “deadweight loss”, a measure for loss of economic welfare that society suffers due to the fact that people choose to spend their money on a gift for someone while that person herself might have preferred to buy something else for the same amount.
Now, I don’t think cash gifts are necessarily a bad thing. I have received some myself and was very happy to spend them on hookers and fine wine. Still, I’m not sure if the question why many people prefer to give or receive old-fashioned non-cash presents is equally mystifying to anyone who hasn’t got an economics degree. But just in case, let’s go back to a brillant fictional physicist’s take on the related matter of birthday gifts:
The entire institution of gift-giving makes no sense. Let’s say that I go out and I spend 50 dollars on you. It’s a laborious activity, because I have to imagine what you need, whereas you know what you need. I could simplify things, just give you the 50 dollars directly, you could give me 50 dollars on my birthday, and so on, until one of us dies, leaving the other one old and 50 dollars richer.
In other words, if we accept the premises behind the “superiority of cash presents” party line, the next logical step is to abolish the practice of gift giving altogether. OK, maybe you could then still give presents in some cases, but only if the relationship is one-sided, i.e. only one party receives gifts from the other. That may not even happen that infrequently (e.g., but not only, in childhood), but the standard relationship one imagines between gift giver and receiver is clearly one of reciprocity, i.e. when one gets the other something for Christmas, or birthday, that person will return the favour. And if both would choose to give each other cash only, the practice seems senseless, whether both of them give the exact same amount or one significantly more than the other and the relationship skews in the latter’s favour.Read More »