The Economics of Gift Giving
As has been addressed in recent articles in Money and Time magazines, the gift of cash is actually the most economically efficient gift to give. Buying someone a gift that they do not want or do not value at the price which was paid for it constitutes economic waste and is inefficient. So, does this mean giving cash is good for the economy? No, if that were the case everything would be much too simple.
Instead, it turns out that economic inefficiency is what is best for the economy for the time being. If everyone buys gifts, spending increases, while if cash were to be given, spending may increase, but the money may be used for different purposes as well. Increased spending will help businesses by raising revenues, which in turn helps investors and employees of the companies causing an upward shift in the economic cycle.
It seems counter-intuitive to want to be economically inefficient and it may be. The gift being given is truly for the person receiving it and therefore, shouldn't they receive the most out of it. Cash is the way to provide the most benefit to the individual with a fixed amount of resources. But, if giving a gift can help the economy as a whole, is it ok to detract from the receivers gain? This dilemma is the reason so much advice can be found and why it is impossible for everyone to agree on one side of the issue.
A compromise would be the ever popular gift card. In this way the businesses are generating revenues and those people who receive the cards will be able to find the item within the store which gives them the most "bang for their buck". Overall, the gift card is actually likely to increase spending even more as it is virtually impossible to make a purchase for the exact amount of a gift card.
In the end, everyone has heard the old saying "it's the thought that counts" and in considering the economic outcomes of different gift possibilities there will certainly be a lot of thoughts to count this holiday season.
Works Cited
"'Scroogenomics' Author on Why Christmas Gifts Are Bad - TIME." Breaking News, Analysis, Politics, Blogs, News Photos, Video, Tech Reviews - TIME.com. Web. 10 Dec. 2009. .
Published by Kyle
I am a real estate investor in Indiana. I have several units which I rent out. I am also a student at Indiana University, studying accounting, real estate, and sociology. View profile
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