« The One-Minute Rule | Main | How Not to Get Into Grad School »
Giving to my Wild Self
The economist in me says the best gift is cash. The rest of me rebels. Some people argue that the reason we don't give cash is because that is too easy - to show that we know the person well we must signal by shopping for something "special."
Yet this can't be quite right, either. Imagine the following thought experiment. Someone gives you $100 cash. You go out to the store and buy a set of car tires. Purchasing the tires clearly maximizes your utility. Now imagine that instead of $100 the gift giver gave you a set of car tires. Would you be happy that they know you so well that they purchased for you just what you would have purchased for yourself? I don't think so.
The example illustrates that we want the gift giver to buy something for us that we would not have bought for ourselves. Or more precisely one of our selves wants this - the self that is usually restrained, squashed, and limited, the wild self, the passionate self, the romantic self.
Gift giving, therefore, is about reaching out and giving to the wild self in someone else. Why would we want to do this? Because we want the wild self in someone else to be wild about us.
The bottom line? If you want to please the economist in me, send me cash. If you want to please my wild self (I know, not many of you, but you know who you are!) use your imagination.
Posted by Alex Tabarrok on December 21, 2006 at 07:20 AM in Economics | Permalink
Comments
Perhaps we would buy more "wild" things if there were no Christmas. We use Christmas to give each other the things we would feel worst about buying for ourselves. Everybody knows the drill and goes along with it.
Posted by: josh at Dec 21, 2006 8:01:44 AM
I absolutely agree. But (and this has probably been talked through in one of the other threads on this topic) maybe there is another aspect too, which is about discovery.
There are things that I would like if I knew about them (books I would like that I have not heard of) which I will therefore not buy for myself. Even among those things I have heard of, there's a lot I don't have trustworthy information about. So buying a gift can be a co-ordination exercise, matching what you know about someone's taste to your own knowledge of what's out there. A good gift shows that you have insight into the receiver's tastes and also insight into the receiver's ignorance, and that you are using the latter to help satisfy the former.
Posted by: tom s. at Dec 21, 2006 8:45:36 AM
Or maybe we give things instead of money because by giving things we somewhat disguise how much we spent, thereby deflecting cross-gift comparisons. (Relatedly, small children, who are not yet able to think in terms of amount spent, still make comparisons by counting the *number* of gifts each one gets.)
Posted by: jp at Dec 21, 2006 8:54:48 AM
Nothing says romantic Christmas like paying down someone's credit card debt...
Or water bill!
Posted by: david at Dec 21, 2006 9:17:00 AM
The thing is that people are not rational enough to maximize their own happiness. In actuality, people let emotions--like fear and guilt--overrule the decisions that they would prefer to make.
For example, I would love to get a new video iPod, but since I've just graduated from college, I feel like I need to save money for my future instead. This is based in the fear that someday in the future I'm going to need that money for something.
Christmas offers a time for other people to scratch the itches that we can't or won't reach for ourselves. The costs and benefits are different. When we buy for ourselves, it's just a matter of "is this product worth $X?" When we buy for others, we get additional benefits from pleasing someone else with something new and shiny. This benefit is worth a certain amount of money, which varies with how much we think that other person will like the gift in question.
I won't buy a video iPod for myself, but my parents might buy one for me. My brother would never spend $40+shipping on a USB rocket launcher, but I would spend it on him so that I can see his face when he opens it.
Posted by: J. D. Harper at Dec 21, 2006 9:18:14 AM
You can't refute this argument:
"Some people argue that the reason we don't give cash is because that is too easy - to show that we know the person well we must signal by shopping for something "special.""
by using a thought experiment in which someone buys you tires. No one has ever thought, ro ever will think, of tires as "special."
Posted by: R. Williams at Dec 21, 2006 9:20:16 AM
I don't get it. If I needed tires for my car and friend purchased them for me as a Christmas present, I would be very happy.
Posted by: hththth at Dec 21, 2006 9:29:38 AM
You don't need to posit an alter ego ("wild" self) to explain why you might prefer a non-cash gift. The best gift is one that you would have wanted to buy if you had known about it, but you didn't know that such a thing was available (or you didn't realize it was as wonderful as it actually is). The gift-giver is acting entrepreneurially, giving you the gift of information.
Posted by: Lawrence H. White at Dec 21, 2006 9:31:27 AM
Lawrence White nails it. The best gifts reflect a person's tastes, giving them something they didn't know they wanted.
Posted by: eriks at Dec 21, 2006 9:35:31 AM
A big part of it is interest rates. If one gives cash, they should really give it on Thanksgiving so that you can get up and spend it the day after when the sales are the best. But the idea with gifts is that there is a very specific time when they should be given, and there are very high interest rates for late gifts. Because stores are closed on Christmas day, for example, it’s really a drag to just get money on Christmas, and you’ll have to wait at least a day to spend it. There is also lost utility in having to go to the store and actually buy whatever it is you have to get rather than getting the item, because then you have to devote your time resources to going over and purchasing whatever it is you buy, and you would rather outsource that function to the gift giver.
Posted by: David at Dec 21, 2006 9:38:02 AM
Obviously a bunch of economic men commenting. Having just read Robert Frank's NYTimes column on the role of reason versus emotion in relationships, I'd say the best gift is one that shows the giver is committed to the relationship. (How about O'Henry's Gift of the Magi?)
Posted by: Bill Harshaw at Dec 21, 2006 9:42:29 AM
I don't know about you, but if $100 tires were my #1 wish item, I would totally prefer to get the tires than the $100 -- it saves me the trouble of going to the store!
Posted by: Foolish Jordan at Dec 21, 2006 9:49:30 AM
I once asked for a book of stamps.
Posted by: Tyler Cowen at Dec 21, 2006 9:51:31 AM
"The best gift is one that you would have wanted to buy if you had known about it, but you didn't know that such a thing was available (or you didn't realize it was as wonderful as it actually is). The gift-giver is acting entrepreneurially, giving you the gift of information."
Maybe it's just me, but whenever people have attempted to follow this theory in giving me gifts, I end up with things I have no interest in or use for (or which, when tried, turn out to be less helpful than whatever I did before I had them).
Posted by: jp at Dec 21, 2006 10:01:06 AM
What I want to know is where one can get a set of tires for $100.
Posted by: dwight Meredith at Dec 21, 2006 10:14:17 AM
Thoughtfulness counts. Getting a gift that was based on a passing comment you made two months before shows that someone is really listening and caring.
That can increase your utility far more than anything you could have bought yourself, becuase knowing that someone cares about you is something you just cannot buy.
Posted by: Macneil at Dec 21, 2006 10:24:12 AM
If a friend or relative works selling and installing tires and gives
you tires (installed!) for Christmas, that would be great. But do
you think someone would value that gift less than if it had come from
a non-tire-selling/installing giver?
Posted by: Mike at Dec 21, 2006 10:46:47 AM
If you want to please my wild self (you know who you are!) use your imagination.
Jeez... I know who I am, but you and I are complete strangers!
The wild self -- it's the self without the budget constraint we shoulder each and everyday, yes? If we were free from the budget... what frivolities would we entertain? Gifting aims at someone's gratuitous pleasure (free from the calculated living inside budget rationality) -- cash merely shifts the budget constraint; gifting ignores it. If you give cash, the recipient is still inside his budget constraint -- the fact of life so many people so fervently seek escape from.
Posted by: Kirez at Dec 21, 2006 11:07:26 AM
Prof. AT,
Giving a gift other than cash is more pleasing to the giver than to the recipient. The giver gets a kick out of thinking that he/she knows you well enough to make you happier than you would be if you had the choice to buy something yourself.
As for the two versions of you; schizophrenia can be treated. I’m particularly concerned about your ‘wild side’ being left to roam free.
Posted by: Chairman Mao at Dec 21, 2006 11:33:43 AM
Alex,
Please tell me where you are purchasing tires, $100 for an entire set. I want to shop at that store.
Posted by: Sameer Parekh at Dec 21, 2006 11:36:56 AM
To be honest, I think people like receiving gifts because the giver is more likely to bypass the "giving limit." My grandparents, for example, are more likely to spend over $50 (the prescribed family limit) on a gift than they are to hand over more than $50 in cash.
Posted by: nick at Dec 21, 2006 11:45:39 AM
I'm with Bill and the O'Henry comment. It's not so much the cost/number of gifts (excepting children) as the gift-receivers perception of the thought that you put into purchasing the gift. Yeah, it can a great gift, but if your wife knows that your secretary picked it out it really won't fly.
Posted by: Alex Ambroz at Dec 21, 2006 11:46:06 AM
"If you want to please my wild self (you know who you are!) use your imagination."
Is Professor Tabarrok sending a kinky message to his wife?
Posted by: anonymous at Dec 21, 2006 12:58:15 PM
Gift cards are the interior solution. Ever since I was a child, I've hated "Gift of the Magi," which struck me as a terribly cruel story.
Posted by: Virginia Postrel at Dec 21, 2006 1:04:44 PM
I've found that the best gifts aren't those that you wanted, but gifts that you never knew you would want. Anyone can buy things they always wanted with cash, only your true friends can surprise with a gift you could have never imagined.
Posted by: Joon at Dec 21, 2006 1:40:57 PM
