More on the Economics of Gift Giving

For Christmas, my sister bought me a copy of Predictably Irrational: The Hidden Forces That Shape Our Decisions, by Dan Ariely. In addition to other topics, the author explains how social norms and market norms influence behavior differently, and that this has implications for public policy. Ariely includes a discussion the economics of gift-giving, which is a topic that I have highlighted periodically here on Show-Me Daily. From the book:

If you want to demonstrate affection, or strenghen your relationship, then giving a gift—even at the risk that it won’t be appreciated as much as you hoped—is the only way to go. […]

The point is that while gifts are financially inefficient, they are an important social lubricant. They help us make friends and create long-term relationships that can sustain us through the ups and downs of life. Sometimes, as it turns out, a waste of money can be worth a lot.

My utility for the book exceeds the $15 that my sister spent on it. For this reason, it makes up for at least part of the wealth that I likely destroyed in my gift-giving activities this year.