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A paradox at the heart of gift-giving

Ooo! Lovely! Honest…

A FORMER editor of this newspaper once said that “a gift is a sale at a price of zero”. In strict monetary terms this is true. But most people do expect to be paid for gifts, albeit in the non-monetary currency known as “gratitude”. This has many denominations: words of appreciation, hugs and kisses and, particularly, smiles. The wider point our ex-editor was making, though, is pertinent. A gift will cause a misallocation of resources if the recipient would have preferred something else that would have been no more expensive for the donor to acquire.

In this context, a study just published in Psychological Science, by Adelle Yang at the National University of Singapore and Oleg Urminsky at the University of Chicago, looks illuminating. Dr Yang and Dr Urminsky have studied the currency of gratitude and think it may be creating poor incentives. Their hypothesis is that the reason gift-givers sometimes appear to make bad…Continue reading
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