In Today’s Weekly Standard, Harvard’s Harvey Mansfield writes on "Saving Christmas From The Economists": Economists … have become critical of the frenzy of Christmas gift-making. … Economic analysis says that consumers would be better off making their own purchases, buying things they know they want, rather than trying to get the benefit out of gifts bought ignorantly for them by others. Worse than ignorance is the imposition of the giver’s own taste or views, … The economy as a whole… would be better off without the surge in sales of Christmas gifts at the end of the year. … In this aspect economics is … a way of life–the life of efficiency and frugality. This life is bourgeois, middle-class, and opposed to your wasting your money on whims, as do rich aristocrats. …
Has the gift-giving-as-signaling hypothesis been empirically tested? The test seems rather easy--just compare giving under normal and anonymous conditions. If giving is reduced in the latter case (as I expect it would be), we conclude that signaling is a factor.
When Albert Schweitzer or Mother Teresa gavea glass of cold water to a thirsty patientwhat were they doing?
When a billionaire gives money to establish a hospital be called "The Joe Billionaire Hospital for Children", what was he doing?
Indeed, moral teachers have often been so concerned about the signalling incentives of lavish gifts that they have called for giving gifts secretly.
How many people are like you and Mother Teresa - giving only because you care - and how many give for reasons like the rich people who put their names on hospitals - is a serious question and one I don't know the answer to. I suspect though that there is a significant amount of gift giving that is mostly done for the purpose of signalling.
It is interesting. Our family has decided on no gifts at Christmas and rather to donate to charity. Still people give gifts but less so. We have tried to bring us back from the edge, but the competition to give is too strong.
Another benefit of gift-giving that he missed is that it exposes the recipient to some kind of good whose utility he hadn't yet realized and thus would not have purchased with his own money, or after given cash or a gift card. Individual rationality does not imply omniscience!
I personally have been on both ends of this. My brother got me a navigation system for my car, which has been tremendously useful, but which I would not have gotten on my own, even if I received enough cash to buy it as a gift. I also go my mom a webcam so we could video chat, something she wouldn't have gone out and purchased on her own, and today she's absolutely fascinated with it.
Lesson: make your gift something that exposes the recipient a new experience they may like.
Eric Posner discussed gift giving in his book "Law and Social Norms". Finding the individual's personal taste and making one happy is the art of gift giving. It's not only the value of the gift, but also the value of our time we spent to figure out the taste and likings of the other person. From that point, gift giving is not only a form of art, it's a superior form of human cooperation.
Mansfield claims that giving makes the giver more generous, and that that's a good thing. Do economists ever show any concern for that sort of effect? (Perhaps the answer is: no, because it's been shown not to be real. If so, I'd be interested in a pointer to where it's been shown.)
Economists fully grant that gift exchange is good if it just directly produces enough "warm fuzzy feelings." Anyone reading this would get the impression that Mansfield had said something like "Gift exchange is good because it produces warm fuzzy feelings, and economists don't admit that". Of course his article doesn't say anything of the sort, and turning "gift exchange is good for the soul because it makes the giver more generous" into "gift exchange produces 'warm fuzzy feelings'" (complete with misleading quotation marks) is just the sort of thing that's liable to upset the likes of Mansfield.
I don't think it's obvious whether Mansfield is right or wrong about regular gift exchange enhancing generosity. It seems psychologically pretty plausible to me and it's not too hard to think of mechanisms by which it might work.
The important question - is our material wealth noticeably improved by all those pairs of socks and cheap DVDs? I'd say that if you make a distinction between Big Presents (iPod from partner, new bike from parents) and Small Presents (alarm clock, soap-on-a-rope), the effect is negligible, leaving you with just the signaling and the warm fuzzy glow. For Small Presents, there's not very much of the latter.
Hence, Small Presents are pure signals; a small sacrifice to the gods of commerce to demonstrate your affection at minimal cost. 'I threw away ten pounds on that rubbish, just for you!'
There is also a possible behavioral economics explanation put forward (forget what paper that was), somewhere along the lines of gift giving possibly breaking suboptimal mental accounting routines (especially in case of luxury gifts we certainly price but would never buy ourselves).
Has the gift-giving-as-signaling hypothesis been empirically tested? The test seems rather easy--just compare giving under normal and anonymous conditions. If giving is reduced in the latter case (as I expect it would be), we conclude that signaling is a factor.
Some people have a rather different view of Mother Teresa.
When Albert Schweitzer or Mother Teresa gavea glass of cold water to a thirsty patientwhat were they doing?
When a billionaire gives money to establish a hospital be called "The Joe Billionaire Hospital for Children", what was he doing?
Indeed, moral teachers have often been so concerned about the signalling incentives of lavish gifts that they have called for giving gifts secretly.
How many people are like you and Mother Teresa - giving only because you care - and how many give for reasons like the rich people who put their names on hospitals - is a serious question and one I don't know the answer to. I suspect though that there is a significant amount of gift giving that is mostly done for the purpose of signalling.
John, you can't show that you care if you don't care. Even so, you can care to show that you care, in addition to directly caring.
Robin,Help me understand.
When I write a poem for "Mrs. Shakespeare" forher birthday or our anniversary, am I showingher no love but only signaling?
When Albert Schweitzer or Mother Teresa gavea glass of cold water to a thirsty patientwhat were they doing?
John
I've added a section the the post, with Mansfield's reply and my response.
One reason there might be not enough gift-giving is people undervaluing the warm fuzzy feelings of others.
It is interesting. Our family has decided on no gifts at Christmas and rather to donate to charity. Still people give gifts but less so. We have tried to bring us back from the edge, but the competition to give is too strong.
Another benefit of gift-giving that he missed is that it exposes the recipient to some kind of good whose utility he hadn't yet realized and thus would not have purchased with his own money, or after given cash or a gift card. Individual rationality does not imply omniscience!
I personally have been on both ends of this. My brother got me a navigation system for my car, which has been tremendously useful, but which I would not have gotten on my own, even if I received enough cash to buy it as a gift. I also go my mom a webcam so we could video chat, something she wouldn't have gone out and purchased on her own, and today she's absolutely fascinated with it.
Lesson: make your gift something that exposes the recipient a new experience they may like.
Eric Posner discussed gift giving in his book "Law and Social Norms". Finding the individual's personal taste and making one happy is the art of gift giving. It's not only the value of the gift, but also the value of our time we spent to figure out the taste and likings of the other person. From that point, gift giving is not only a form of art, it's a superior form of human cooperation.
You could think of gifts exchanged as being the 'gluons' of the social force. The 'mathoms' of the hobbits come to mind.
Mansfield claims that giving makes the giver more generous, and that that's a good thing. Do economists ever show any concern for that sort of effect? (Perhaps the answer is: no, because it's been shown not to be real. If so, I'd be interested in a pointer to where it's been shown.)
Economists fully grant that gift exchange is good if it just directly produces enough "warm fuzzy feelings." Anyone reading this would get the impression that Mansfield had said something like "Gift exchange is good because it produces warm fuzzy feelings, and economists don't admit that". Of course his article doesn't say anything of the sort, and turning "gift exchange is good for the soul because it makes the giver more generous" into "gift exchange produces 'warm fuzzy feelings'" (complete with misleading quotation marks) is just the sort of thing that's liable to upset the likes of Mansfield.
I don't think it's obvious whether Mansfield is right or wrong about regular gift exchange enhancing generosity. It seems psychologically pretty plausible to me and it's not too hard to think of mechanisms by which it might work.
The important question - is our material wealth noticeably improved by all those pairs of socks and cheap DVDs? I'd say that if you make a distinction between Big Presents (iPod from partner, new bike from parents) and Small Presents (alarm clock, soap-on-a-rope), the effect is negligible, leaving you with just the signaling and the warm fuzzy glow. For Small Presents, there's not very much of the latter.
Hence, Small Presents are pure signals; a small sacrifice to the gods of commerce to demonstrate your affection at minimal cost. 'I threw away ten pounds on that rubbish, just for you!'
Can't wait to do it all again in 11 months!
There is also a possible behavioral economics explanation put forward (forget what paper that was), somewhere along the lines of gift giving possibly breaking suboptimal mental accounting routines (especially in case of luxury gifts we certainly price but would never buy ourselves).