Jason Kuzniki at Positive Liberty consders Zach Wendlings’s considerations on deadweight and economic consequences of gift giving, Christmas being an egregious example of the same. The idea is simple:
How can exchanging gifts destroy value? A typical illustration goes like this: Your Great Aunt spends $20 to purchase a Widget for you as a Christmas gift. You, on the other hand, would only be willing to pay $15 for that same Widget. Therefore, that extra $5 is lost value.
Many gifts are in that category. However, what I try to do, especially with my family is sometimes very different. However, in my mind a good gift is something different. A “perfect gift” goes something like this:
Your Great Aunt (or me) buys a gift for $20 for you as a Christmas gift. You on the other hand would never have even considered buying said gift, i.e., would be willing to spend nothing on it. You find however, this opens up an entire new avenue of enjoyment and opening up a whole new avenue of life experiences for you, perhaps a new hobby or pursuit is now possible. You would previously have considered the worth of that gift at $0, but now, having opening up a new pursuit … find it a key unlocking a new door in your life. By analogy, the value of a particular widget (a car key) is small, but if it opens and makes available a thing of much greater worth (a car) possible, the value of the key is greater than it’s raw economic worth.
The point being, that sometimes we can, with gifts, to open up people to new opportunity. As a trivial example, my eldest daughter has found most of her reading enjoyment in fantasy novels. I don’t give her fantasy for Christmas, but instead try to open up new avenues, e.g., historical fiction.
Specifically, even when buying gifts that don’t open large new avenues of life experience for people, which is hard. I do try to get things that fit the following criteria:
- The person might like it.
- The person would never consider buying it for themself.
That is, I try to maximize lost value in the above analogy. This approach is admittedly something of a lottery or hit and miss exercise. But the “hits” make it worth it.
I agree the secret in gift-giving is to give something the giftee would never purchase.
Wow, you guys must be terrific gift-givers. FWIW, I was just thinking about the economics of Christmas gifts this week in precisely the same terms as Jason @ Positive Liberty. Interesting angle you came up with on it, Mark, and one worth mulling.