Monday, December 5, 2016

Is gift giving efficient?


  1. On this it is very interesting to see the work of the philosopher Marcel Mauss, his classic work The Gift

  2. Two sides to every gift.

    Economists Cowen and Tabarrock express a unique perspective by examining the utility value of gift-giving. According to these economists, efficiencies are gained by sharing the variable of preference with the receiver. Involving the receiver with the final decision of the gift can increase and almost guarantee the satisfaction of some receivers of gifts. However, the surface-level of efficiencies cannot outweigh the other side of gift-giving. As the article ‘An economist’s Christmas: Is gift-giving wasteful?’ by Joseph Sunde points out, there is more to gift-giving than mere utility.

    The other side of gift-giving also includes self-expression. How much the person means and how well does the giver know the receiver may sometimes be far more important than the actual exchanged value of the gift. A gift of little or no retail value might be far more appreciated if the receiver is a grandparent receiving a hand-made Christmas ornament from a grandchild. Many husbands may find the holiday season exceptionally cold if they opt to give their wife something as ‘thoughtless’ as a gift card. Gift-giving is any opportunity for the giver to express many levels of value that goes far beyond retail.

    In all fairness, obligation plays a major role during this time of year. Many gifts are purchased for colleagues, public service providers (i.e. teachers, mailpersons, etc.) and a gift card may be the perfect form of expression. Before any gift is exchanged, value must be characterized on a gift-to-gift basis.

  3. This video provides great perspective in maximizing the value of gift giving. Two economists discuss how wasteful gift giving can be without really realizing it. When people give gifts that aren’t wanted, the recipient values the gift as less than the cost. This happens more frequently than we know. I can think of a number of instances where I bought gifts thoughtlessly last minute, not knowing whether or not they’d even like it. On a positive note, gift giving can certainly lower the recipient’s search cost.

    The economists go on to explain two important problems with gift giving. There’s the incentive problem and the knowledge problem. When we buy gifts for ourselves, we have good incentives to choose carefully and knowledge about what we truly want. But when people give gifts to others, there is less incentive to choose carefully and little knowledge about what the person really wants. In fact, Americans are wasting $18-$20 billion a year on gifts that go unwanted.

    We’ve all been there. We’ve frantically purchased gifts, especially last minute ones. But do we really step back and reflect on how many possible scenarios where we’ve wasted money on thoughtless gifts? This video certainly makes you think.

    Their conclusion in solving the problem is to try and eliminate the stigma of giving straight cash. I have never thought that giving cash was a bad idea. I actually enjoy receiving cash and don’t believe it’s a lack of thought. A gift from a significant other is a little different, especially as a young woman. You certainly want a thoughtful gift, but the hope is that they actually know you and what you really want. But receiving cash from others should not be frowned upon.


  4. The art of gift giving is indeed quite a skill. It takes great effort to collaborate the 2 essential keys: incentive and knowledge. It is very difficult to tackle the knowledge of exactly what the recipient wants or needs without spoiling the surprise factor to the gift-giving process. The only instances which may work around this are when you may have gained the knowledge of what one may want or need previously in the year… or to contact someone close to this person (relative, parent, friend, etc.) to get accurate knowledge on what exactly a value adding gift would be. And my favorite of all when in doubt send cash and a nicely written greeting card. Although cash is a way to add value some people find that it is quite an impersonal gift.

    I am sure many of us have received gifts that we were not in need of or honestly did not want. Although intended to be such a positive added value experience there are many cases in which the value creation falls short. Intentions of the gift giver are generally well, but the lack of incentive and knowledge create the discrepancy. The $18-20 billion wasted annually on Christmas presents is uncanny.
    The topic of charity giving needing to be more efficient is fascinating (, allowing the cash to go directly to the recipient for the money to truly be utilized is both very strategic and very efficient.

    1. I found the video extremely informative. It really puts into perspective the value of putting careful consideration into gift giving. The economists in the video explain the problems people have with gift giving.
      According to "The problem with gift giving has nothing to do with the intentions, those are all good. But when we allocate resources through gift giving, we do it in a kind of perverse way. I'll only spend $100 if I see something that's worth at least $100 to me. Normally, $100 worth of spending produces $100 worth of satisfaction. With gift giving, I can go out and spend $100 on you, let's say, and I don't know what you want, my expenditure of $100 can produce $0 worth of satisfaction. So it's just potentially a very, very bad way to allocate resources," says Joel Waldfogel, an economist at the University of Minnesota and author of the book "Scroogeonomics: Why You Shouldn't Buy Presents for the Holidays," says we need to re-think the gift-giving process. Waldfogel also says while gift cards can seem less thoughtful than buying an actual item, they are a good option when the gift giver doesn't have enough knowledge to buy something they know will truly satisfy the recipient -- like in a Secret Santa exchange.

  5. This video is super fitting for the time of year! Gift giving is a stressful, and time consuming task. When you put time and effort into something like finding a perfect gift for someone so many factors go into the decision. Do you know this individual well? Are they friend or family member? Or is it a cousins girlfriends child you have never met? It is easier to give a gift to someone you have a connection with, or someone you know well. As discussed in the video, most gift receivers value the gift less than the purchaser does. But why? Was it something they weren’t interested in, or was it something they already had? Again, GOOD gift giving, is a gift in itself. As another individual commented, gift giving is better received when there is an emotional attachment to the individual. It is less about what it is, and how much it was, and the fact that is was something from the heart. Incentive and knowledge as discussed in the video are the 2 key factors of good gift giving, having good incentive, or knowing exactly what you are getting someone and why you chose that. The knowledge supports the receivers knowledge or interest of the item thy will be receiving. A book from their favorite author, or tickets to see their favorite band. These gifts are more efficient gifts, as they are something the receiver will appreciate and value the same as the purchaser believed you would.

  6. Gift giving and gift receiving are two actions that I’ve always struggled with. It’s been long my opinion that I should give gifts that are needed as opposed to just wanted. Unfortunately, this often results in the receiver being disappointed at my choice of a gift. To counter disappointment, I’ve tried to give gifts that are both needed and wanted. The down side to this strategy is that what I think someone may need isn’t necessarily what they truly need. This is the same when I try to figure out what the receiver wants. For these reasons, I agree with the economist that cash is one of the best gifts. It’s not personal but it allows the receiver the power to make their own decisions. The only struggle with cash is determining the right amount to give. With cash I try to put myself in the person’s place but then I struggle with what type of gift I’d want to receive.
    Receiving gifts for me is a challenge because while I’m far from rich, I can afford most of my needs and basic wants. Also, having struggled with debt for many years I have a hard time accepting gifts especially if I know that the person who’s giving me the gift can’t truly afford it. So unfortunately for me the best gift is no gift. Why? Because I value things that can’t be priced. I value not having debt. I value not having to think about how bills will be paid at the end of the month. If someone wants to give me a gift they should refrain from doing so and let me know that I have a true friend who understands how valuable their non-gift is to me. That would be the ultimate efficient gift.

  7. For someone in the nonprofit field, I can say that the topic of gift giving has great appeal. I agree that gift giving can be very inefficient, it has taken me years to talk my mother out of gifting me sweaters I would never wear (no offense to yours!). They held no value to me except until I turned it around and gifted it to a shelter or to the salvation army. I assigned a different value to the sweaters than she did.

    I agree that some gift giving can create obstacles and become a hindrance, especially when it comes to nonprofits. One of the examples given was regarding how a charity’s own requests can create inefficiencies (like accepting used shoe donations in order to spend a ridiculous amount of funds to have them shipped to another country). These inefficiencies squander resources that can be better used in other ways, and turn a “gift” into a waste that is economic and behavioral.

    Over the years I have found that some grant givers perpetuate the cycle of inefficiency. They may have all the right motivations and incentives to give (that are also financially motivated as a benefit for their corporation), but create roadblocks and expectations that generate additional hardships on the nonprofit. A few examples: after spending weeks in compiling the necessary documentation, funds are granted to hire a consultant but nothing is allocated for the implementation of their plan; or funds are granted to support programs that directly benefit the nonprofit stakeholders, but not for the staff time to deliver said program, or for the operating support that makes any of it possible. I once had to talk my board of directors out of creating a brand new program only to make us eligible to apply for specific funds. It would have required over a month of staff time in budgeting, designing curriculum, filing paperwork, and putting everything else aside for a slim chance of receiving restricted funds – to the detriment of all other programs. The opportunity cost was too high to consider for a staff of two. In this case, we were successful in moving away from that impending inefficiency, which would have had a negative and lasting impact on the organization.

    What a great opportunity however, to learn more about the person/organization you are gifting. Help them do what they are great at, or find out what they really need. We could all use a little more care and attention these days.