Saturday, December 23, 2006

Economics of Gift-Giving

From the Armchair Economist: Economics and Everyday Experience, by Steven E. Landsburg:

"I am not sure why people give each other store-bought gifts instead of cash, which is never the wrong size or color. Some say that we give gifts because it shows that we took the time to shop. 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.

My friend David Friedman (son of Milton Friedman) suggests that we give gifts for exactly the opposite reason – because we want to announce that we did not take much time to shop. If I really care for you, I probably know enough about you to have an easy time finding the right gift. If I care less about you, finding the right gift becomes a major chore. Because you know that my shopping time is limited, the fact that I was able to find something appropriate reveals that I care. I like this theory."

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