Wednesday 16 October 2019

Gift-giving: Do our economists think its a boom or a bust?

Central Bank Governor Philip Lane. Photo: Steve Humphreys
Central Bank Governor Philip Lane. Photo: Steve Humphreys

Dr Philip Lane, Central Bank of Ireland

In our defence, economists are extremely broad-minded - we recognise that every individual is different and that, for example, the types of gifts that people give and receive naturally vary quite a lot due to our individual tastes.

A training in economics provides absolutely no guidance in picking presents: the only recipe for success is to have a sufficiently close relationship that you have some hope of understanding what kind of gift might be happily received. One important lesson from economics is that there is not much connection between the value of a gift and its price: expensive goods are typically the result of high production costs or artificial scarcity limits, with many of the most-valued gifts sold at much lower prices due to relative abundance or lower production costs. In closing, let me wish all readers a happy Christmas!

Professor Alan Barrett, ESRI

I remember reading Waldfogel's paper when it was published. It made some sense to me, I have to confess. Here's why and it's not related to being an economist. Part of Waldfogel's argument is about gifts you don't want. I can still remember as a small child the feeling of excitement as I unwrapped gifts only to suffer the horrible disappointment of realising it was a jumper or some other piece of clothing. Kids want toys, not jumpers, although tracksuits work. I can still feel the disappointment that I experienced on those occasions and how it was made worse by having to pretend that you really liked the jumper. I also related to Waldfogel's argument because I seem to be a poor chooser of gifts for others. The rate at which gifts I've purchased are returned is scary. Maybe that is related to being an economist!"

Seamus Coffey, University College Cork

Cost-Benefit Analysis is a central part of the toolkit of economists and the textbook view of efficiency is that we want to see transactions where goods move from those who value them lower to those who value them higher. This is how welfare is generated and ensures resources are put to the most productive uses. With gift-giving, the person giving the gift is between the seller and the consumer. Comparing the value the receiver places on the item with the price of the seller misses that intermediate step. It is almost by default that in many instances those receiving gifts will value the item less than the price of it - if they valued it more they would likely already have bought it for themselves. But we don't give gifts just to generate a surplus of consumer utility over producer costs as is the analysis for most transactions. We give gifts because we enjoy it - or in some cases we do it to avoid the negative consequences which not doing it will bring. Plug "keeping the peace" into your cost-benefit analysis and you'll find reason enough to justify it.

Dr Loretta O'Sullivan, Bank of Ireland

Like many families, mine has gone down the Kris Kindle route. This has been something of a godsend for us, mainly because everyone does up a wish list. Wearing my economist's hat, this gets a thumbs up. By making us reveal our preferences, it helps reduce the inefficiency of present-giving. Putting my festive hat on though, there is something warm and fuzzy about the gift tradition - efficient or otherwise - which is maybe one for the anthropologists to explain.

Dr Tom Healy, Nevin Economic Research Institute

An economist once entered a department store in Dublin. (It was a he in this case). Asking a kind sales assistant for advice on purchasing something that was neither 'outrageously expensive' or 'tacky', he was directed to a huge array of options. He ended up with a beautifully wrapped present courtesy of the shop staff. The story illustrates three truths: 1. Economists are limited in their knowledge and use of data; 2. Giving and receiving unlocks human emotions and needs that go beyond money; 3. Human behaviour such as that of the sales assistant is based on qualities of helpfulness and kindness that are not directly measurable and go beyond sales commission. On the way out, the economist stopped and gave a small token of money to someone begging. It was not the money that mattered. It was that someone was recognised, had their hand shaken and asked for their name. They were human again and not someone merely looking for money or accommodation.

Irish Independent

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