As Black Friday approaches, millions of shoppers prepare for long lines, angry shoppers, and supposedly good deals on hot retail items. Some shoppers will be buying for themselves, but most put themselves through this retail war zone in hopes of snagging the perfect gift for friends and loved ones for the upcoming holidays. Many of us stare at these shoppers in awe, wondering if it is truly worth the craziness. But have you ever looked at gift giving in the same way?
Gift giving has always been a problem for economists. Why you might ask, would the beautiful act of giving a gift be problematic for anyone besides Ebenezer Scrooge himself? Well plain and simple, it’s not efficient.
I think it is fair to assume we all know our own tastes best. That being so, the most efficient thing to give someone would be money, then that individual could pick out whatever gift they believed would bring them the most happiness (utility). But, it’s not that simple. Alex Tabarrok, an esteemed blogger and economist, likes to put it in the scope of a relationship. Say you want new tires, and getting them would bring you what you believe would be the most utility. Therefore, your significant other goes out and surprises you with a new set of tires for your 10th anniversary present. How romantic, right?
As you can see, it’s not as simple as basic economics says it should be. This is why economist Gregory Mankiw explains gift giving as a mode of “signaling.” Giving a gift is a way of signaling our love, friendship or comradery, things which money can’t buy, as talked about in one of my favorite recent reads, What Money Can’t Buy by Michael Sandel. The way I view it; Gift giving is a way to show our love and affection towards the recipient. Maybe the best way to sum up the rationale behind gift giving isn’t through fancy graphs and utility curves, but through the old saying, “It’s the thought that counts.”
You won’t find me personally waiting in line for a new high definition television come this Friday, but for those that do decide to tough it out in hope of getting the perfect symbol to give, I commend you. But also, consider wearing a helmet, shoulders pads, and a mouth guard. It can be brutal out there!