Archive

Archive for December, 2012

In defense of gift giving, the gift of information.

December 11, 2012 Leave a comment

Every year Joel Waldfogel, and his book scroogenomics or some variant gets rehashed.  I mostly agree, deadweight loss, etc is a problem.  What I find mostly glossed over is the gift information.  Thoughtful gifts, that hit the mark, are not at best break-evens; they are surpluses.

For example buying a person a CD, and exposing them to an artist they do not know about, but will love is very valuable; far more valuable than cost of the CD.  The gift is not only the CD but the service of having someone find you a new artist you will like.  How much would you pay for this service; that is your consumer surplus.  Such surpluses must be weighed against deadweight losses.

This surplus is missing from the discussion.  It is assumed that when giving gifts we only can lose, that good gifts simply break even.  People who know each other well and exchange thoughtful gifts profit from each others comparative advantage arising from situational knowledge.

If a pal and I exchange equally priced gifts and spend the same time picking them out.  We benefit from from each others comparative advantages.  I might pick for my friend a popular economics book while they pick for me the popular book on basketball.  If we know each other, the subject, and to be safe, pick one of the best books in the genre; we will probably have produced a surplus.

In closing, though poorly picked gifts may create deadweight losses, thoughtful ones potentially create huge surpluses.

Advertisements
Categories: Economics