Philosophy and Economics of Gift-giving

Over a year ago, while I was an Indian Revenue Service officer-trainee at the National Academy of Direct Taxes, our batch organised a modified version of the Christmas tradition “Secret Santa” to brush aside the despondency that had set in during the lockdown. Each person was to buy a gift of a stipulated monetary value for a colleague, assigned by a random lot without revealing whom it was from. This made me wonder, does the act of buying something of a stipulated market price and gifting it to someone chosen by random lots qualify as genuine gift-giving? How intrinsic is the element of cost to the idea of gift-giving?

This train of thought led me to American economist Joel Waldfogel’s book Scroogenomics—Why You Shouldn’t Buy Presents for the Holidays? (2009). He puts forth “an economic argument for never giving another gift,” suggesting that gift-giving is an unsuitable way of resource allocation where the gift-giver presumptuously makes choices on the behalf of the gift-receiver, often leaving the receiver dissatisfied with the choice. “Consumption choices are not being made by the final consumer,” and we end up in a situation wherein monetary spending is not commensurate to the level of satisfaction or “utility” derived. It runs against the grain of standard economic theory. Based on thousands of surveys, Waldfogel concluded that “gifts are valued twenty percent less per dollar spent, than items we buy for ourselves.” Waldfogel calls it an “orgy of value destruction” and suggests that instead of presumptuously choosing a gift, it is more prudent to give cash as gifts and allow the receiver to make a free choice for themselves.