Friday, December 21, 2012

The economics of gift-giving

The concept of utility is taught in every introductory economics class: people make decisions to maximize their utility (happiness), and the production possibility frontier (PPF) is a curve that shows trade-offs people can make for how to use their money.  In theory, it’s better to have 10 dollars, which could get you 20 bananas or 10 packs of BubbleYum or three bottles of two-buck-Chuck wine (misleadingly, it’s actually three dollars – $2.99) than it is to have 20 bananas.  The idea being that with 10 dollars, you could buy yourself those 20 bananas, but you have other options and more options is better.  Clearly this is not always the case – countless retailers could share stories of how they expanded assortment and …. Didn’t sell more.  Or sold less.  And of course having 139871894623 options for a 401K causes people to make better decisions … like putting a little bit into every fund.  Instead of, you know, purposefully allocating their investments.

Not to be a huge Grinch, but around this time of year, when stores advertise being open for 72 hours the weekend before Christmas so that you can pick up random junk for your family that they might not want … I mean, so you can give the gift of love, I always think about the waste of resources we as a society are experiencing.  I enjoy giving people presents, and I’ve received some amazing gifts that I treasure to this day.  Yet the idea of a perfect gift doesn’t necessarily strike you for every single person you’re related to or interacted with over the prior year, every holiday season.  So I’m not a fan of gift-giving for the sake of gift-giving.  Because when you trade your 40 dollars for a gift card to a store in the mall that’s mildly pleasing, you trade that $40 for something that is worth less because it gives the gift receiver fewer options.  Theoretically, you would prefer money you could spend ANYWHERE, to that same amount of money you can spend only in a specific place. So should we all just keep our cash?

The biggest reason why you can’t just analyze gift-giving strictly economically, is because we also feel warm and fuzzy giving a gift that’s cherished, and because we feel warm and fuzzy when our friends and family show that they know us (the unique individuals that we are) by getting something so perfect, so us.  Still, can’t we isolate the warm and fuzzy from the consumption, and write lovely cards and spend time with our near & dear, instead of traversing traffic to buy things at the mall?  Just a thought. =)

Everyone, Merry Christmas!  I, for one, am 12 minutes away from arriving at the Newark train station, and probably about an hour from getting to my boyfriend’s parents’ house, very excited to relax and enjoy their company.  Of course, every holiday is better with alcohol (unless you’re an alcoholic), so I can’t wait to crack open the bottle of wine I’m bringing.  For once, it’s not 3 buck Chuck. ;)

Eat, drink, and be merry, everyone!

1 comment:

  1. I hear it's "two-buck-Chuck" because in California it's actually $2 (or $1.99?).

    I agree with you on gift cards -- I generally dislike the idea. It's a poor compromise between giving a thoughtful gift and just giving cash. Cash is great but it's a poor gift because it is impersonal. It doesn't express any knowledge of the receiver or thought from the gift giver. A gift card tries to say "I thought you need or want something from this store (or just that you like this store) but I couldn't or just didn't figure out what that something actually is." It's just a tiny bit more personal than cash, but again, it's a poor compromise. I've given them. For example, my brother and I got my grandpa a Kohl's gift card this year. The rationale is clothes are a useful gift, but are difficult to buy for another person. Still, I feel like I am cheating when I give a gift card.