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December 17, 2008


Much Christmas gift-giving is to children, and we are paternalistic and maternalistic towards children. Gift-giving to adults may be a generalization from the practice with children.

If we want to consume luxuries but worry about lack of self-control, it can be helpful to have holidays to coordinate our purchases, so that we get to enjoy the gifts but feel less temptation to splurge at other times.

In North American Jewish communities holiday and celebration gifts of money seem to be more common than among Christian families. This may be a result of a traditional mercantile minority culture and the lack of a religious stigmatization of money.

I tried to answer this question in this TCSDaily.com article:


I was thinking about this just recently when I took part in a Christmas charity to help needy children. Basically you're supposed to buy these children gifts based on some very vague wish lists (mine requested a "video game", no name, no system, no genre, just a "video game"). You know next to nothing about the child aside from their age and gender. Cash and gift cards are discouraged because of fears that the parents will confiscate them. In a situation like that, how should one go about maximizing the utility of the gift to the child?

If my friend and I each give each other $10, both of us wondered why we bothered. If my friend gives me $10 but I only give my friend $5, I feel like I haven't actually given him anything and he feels like he should have gotten more. If I buy my friend a book and he buys me a plush toy, both of us feel like we've gotten something worthwhile.

Giving gifts instead of cash means you don't feel silly at the end.


"why do we often make and distribute Christmas wish lists?

So we don't get 20 copies of the same gift. Those who know us can quickly think of what we have said we needed, or the kinds of things we like.

Everyone we know will sweetly offer us the same thing, the most obvious thing, which is awkward for all involved. The idea of the list is to broaden information so that people aren't embarrassed by giving you the same Barbie doll (or in my case, French press!), but instead choose different things from the list to give you.

This allows them to signal the uniqueness of the relationship between you, which is important to both parties.

Personally, I always try to extend what I know about someone, to get them something I know they will like, that is right up their alley, but which they have not yet discovered for themselves. It won't be on their list but would fit in any taxonomy of it. I highly recommend this strategy.

Assume if is possible for
1) 2 rational agents to have different information sets
2) an information set that partially specifies another individuals information set and utility function

In this case an agent can have unique information, knowledge that it is unique, and knowledge of how another agent will value this information. Presumably it is possible for the agent to use this information to increase the utility of another agent by more than a transfer of money.

That is the aim of gifting.

A big restriction on the size of an individuals information set is the time required to gather new information. One could think of gifting as a way to transfer something more valuable than money (time). If so then individuals with little money but a lot of spare time should receive a different type of gift to those with a lot of money but little time.

Further, in the case where one information set is the superset of another then gift giving is pointless in one direction. This could be one reason why adults ought to not receive many gifts from children.

I think a decent amount (though certainly not all) gift giving is of the following sort.

There are certain things that we'd like to get, but which are such that the act of paying for them with our own money has disutility beyond the money loss. These are things that we'd prefer to get by having other people give them as gifts.

For instance, someone might want a massage, but might not want to think of themselves as the sort of person who spends money on a massage--for $60 an hour, it can seem extravagant, and many people would prefer to think of themselves as frugal and financially responsible (and perhaps, would prefer that other people think of them that way too). So while at some level it would be worth $60 to this person to have an hour's massage, he wouldn't be willing to pay $60 of their own money to get one. Other examples could include items that seem childish, or useless, (so that buying them would signal immaturity, or impracticality), but which people want nonetheless.

I'm not saying this obviously rationalizes the process of gift-giving; it's not clear why asking somebody else to get you something childish/impratical/whatever should send a different signal from spending your own money on it. Nevertheless, I suspect something like this is going on, and that it explains some of people's gift preferences.

From my brother I gather that Christmas is a way for everyone to get stuff they want without realizing that they're consumerist pigs. Instead, they're thinking of themselves as generous benefactors.

People like socializing. If I tell my friend about an awesome new toy I bought myself, he's likely to be distracted or uninterested. If he bought it for me, he is more invested in it. He's also more likely to be interested in playing with it.

There is also a third possibility. Maybe Christmas is just a vestigial holiday from an era when people would be thankful for almost any present.

1) As others have said, much Christmas gift-giving is to children. Children are generally unable to give cash and are often not in a position to take advantage of cash gifts. (Cash gifts I received tended to end up in a black hole called "The Bank", while many non-cash gifts were things I actually wanted and used.)

2) If I give someone a wish list, and they get me something, that means that I didn't have to go out and buy it myself - or have to stop and consider if it was a wise use of my own money.

3) Compare Boxing Day, the British tradition of giving gifts to one's social inferiors on the day after Christmas.

Or maybe your ideas are right, but you're missing the levels that make them make sense in combination.

Gift-giving is a signal that we know each other really well, and thus makes us feel good. This is unconscious and evolutionary based on the tribal nature of our ancestors

We consciously, intellectually, know that when we get gifts that we want we'll feel good, so we tell people what we want.

What would we expect to see if that were the case? Well, probably we'd need a good evolutionary psychology argument for why gift-giving making us feel good would be genetically valuable.

The value of a present to the recipient consists of the signaling value (shows who cares for us) as well as the utility of consuming the gift. If our friends tend to give us gifts of low utility, we may be willing to trade off the signaling value of the gift for higher utility by giving our friends a "hint" about what to buy us.

Well, perhaps it once *was* about giving a gift to someone you cared about, and it became a part of the culture. Now it's empty of its original meaning, but the tradition continues despite how irrational it is.

To maximize the value of the gift you receive, it's better to provide people with a list than it is to get cash from them and buy the item yourself, because in the latter case you incur transportation costs, time costs etc. So it makes perfectly good sense -- no mystery here.

I suspect there are some additional factors at work.

1) Cash implies a business relationship. Giving a gift signifies a friendship.

2) If you're doing exchanges cash is completely irrational. Either both people give eachother the same amount, and nothing has changed, or one gives more than the other and you have a socially awkward imbalance.

3) Items are harder to put an objective value on so there's less risk of an imbalanced exchanged.

4) There is a potential net gain in value as the gift giver, in addition to the time and cash value of the gift, is also giving the recipient a knowledge gift (in introducing them to a new product).

5) It's a bit of a prisoners dilemma. In a gift exchange both agents have the opportunity to give a poor gift in return and to win the value exchange, by reciprocating with a similar value gift they signify they are a trustworthy agent (a friend).

Recently, I've taken to requesting cash as a Christmas present.

Gift lists specify a rough category of "things I like", which is an unnatural category. A prospective gift-giver may be able to find something that I didn't know was in the category but which I turn out to like.

It could be a command-and-control phenomenon: you write a wish-list and then judge your partner on how dutifully he/she fulfills the task. It's a way of measuring the level of conscientiousness.

Why is it OK to register for gifts when you are getting married (a different name for a wish list), but not Christmas?

@Chris L: Because many people are simultaneously getting the betrothed gifts from a narrower array (i.e. household appliances, etc.), and it is important to avoid gift collisions. This is much less of an issue for a birthday, when people have a broader array of options to choose from.

Other points:
1) I often get good gifts that I did not know that I wanted. (That is, I don't always know what I want better than others).

2) Sometimes people generate ideas about what to get me from a wish list, even though they do not get me something from the wish list. (That is, the list can be useful as something other than direct instructions on what to give me).

3) Items I put on my wishlist are often things I wouldn't spend money on, because I have more practical things to spend money on, but would appreciate having. (That is, the things I would buy with cash given to me are not the same things I would want to receive as gifts, and so gifts allow me to get "fun" things even though, if I had the money, I would bypass the "fun" things and go for something more practical).-- I think this is the point Daniel makes above

Do you guys have a name for the bias where you assume that all (or even most) humans are rational agents?

Since irrational people and their customs are a fact of life, and that's not going to change anytime soon, I have to resign myself to receiving gifts and thus being obligated to give gifts as well. So if it's going to happen, I might as well make the most of it and take advantage of the waxing social acceptance of gift lists.

Sometimes I have an explicit or implicit deal going with the hyper-rational people in my life where we agree to give each other nothing. However, this is not always stable. Mrs. Commonsense is rational, but her family is another matter. So she caved in and gave me something so they wouldn't think she was weird, and that meant I now have to give her something to reciprocate and so the family doesn't think I'm weird and cheap, and since everything has to be a surprise we both get "just one more thing" in case we're severely out-gifted by the other, and the vicious cycle begins.

Most gifts and lists are for the children. Adults exchange wrapped gifts too because it's a) traditional, b) colorful/aesthetic/creative, c) fun, d) mildly exhilarating, and e) thoughtful.

Adults just exchanging money is a) not traditional, b) not very colorful, c) not fun, d) builds no suspense, and e) is less thoughtful.

Christmas is mainly about 'a' and 'c'. Wrapped adult gift exchange and Santa and colorful light on the house are not necessary, they are just a cultural morph that caught on and persist because people like it within a certain cultural context. Kind of like rap music, or Seinfeld, or whatever.

a gift signals the the expenditure of *time* and the more time spent the better.

thinking of and choosing a gift takes more time than consutling the wish-list, and so therefore is more valuable.

purchase of any gift takes more time than giving cash.

this helpa explains why even gift-tokens (near-cash substitutes at best, and clearly inferior to cash) are still nevertheless preferred to cash. a gift token takes some time to purchase.

Wedding gifts tend to be more utilitarian, in the way of getting a couple started in their new life, and thus there is a high probability of repeat gifts, since there is a relatively small number of things that are given at a wedding; there is also a higher number of people who will be giving gifts, which increase the likelihood that there are people who don't know the taste of the bride and groom.

Of all the reasons given for gift-giving, measuring relationships seems the most likely.

The apparent pointlessness of exchanging equal amounts of money can be described in terms of mental accounting: both giving and receiving gifts can yield utility, but this requires us to think about each separately: I got X good thing (+ utility boost), and made someone else happy by giving them Y thing that they like (+ utility boost). Exchanging money forces us to combine these into a single mental account, canceling out everything except the difference between the two, and thus wasting much of the possible benefit. (Depending on the slopes of individuals' utility functions in giving and receiving, it can actually lead to overall negative utility.)

Many of the answers here are surprisingly excellent but Warrigal's answer seems pretty conclusive.

"a gift signals the the expenditure of *time*"
I think botogol hit it on the head here. This also explains elaborate wrapping.

Wish lists also let the giver signal they are willing to spend more than the value of a gift.
Say I'd like a luxury item: a foot massager that costs $100, but I'd never pay more than 25 for it and neither would you. You can signal you love/like/want-to-impress me 75 bucks, and an hour fetching and wrapping, worth.

Hum. I think I'm going to have to quine Warrigal's answer [quining: denying something that is obviously true] :-)

I do every now and then see people giving money as a gift, and when the receiver isn't in a really dire financial emergency, it normally seems to come with the request to use it for something special, rather than to add it to the ordinary household account. It does seem to me that a tradition of gifting money "to be used for something special" would not fail simply because of Warrigal's point alone, even if the amounts given were unequal. Since gifts given would be required to come out of your household, not out of gifts you receive, it does not seem that there would be an extreme pressure for someone with little money to necessarily give matching gifts to someone with a lot of money, either.

What I think is going on is that gifts signal willingness to adjust one's actions to what the receiver wants/needs. (I do have to admit that part of the reason is that it is my pet theory that signalling willingness to adjust underlies a lot of human behavior.) It may sound strange that I think this is in no conflict at all with gifts not necessarily be useful or wanted, but I think what is going on is that what is honestly signalled is not what the signaller will do in the future, but what they are willing for the receiver to think they will do. The point is that most of the time, humans play (iterated prisoner's dilemmas which are) coordination games, i.e. games where there are multiple equilibria and each player needs to have an idea of what the others will do in order to get a reasonable payoff. In cases where none of the equilibria are Pareto-optimal, the players (it seems) need to have a common model of what share of the pie each player is willing to let the others have (although I'm not sure how this point is affected by the economists' idea of using side-payments to make equilibria Pareto-optimal). Since not playing an equilibrium strategy in the coordination game is bad for all players, signalling that you want another player to think you're willing to let them have share X is an honest signal that you really are willing to let them have share X.

Well, that's more of an intuition that it might be possible to flesh out than an actual theory, and it may turn out to be buggy, but at least if it can be consistently formalized, it seems that it would be able to account for all of Robin's points, above.

If Warrigal is right, then we would expect a higher frequency of cash gifts in one-way situations where there is no expectation of exchange, i.e. at weddings and from grandparents to small children. Sounds right to me.

I think Daniel is right, too. Gift exchange can represent a holiday from disciplined norms about consumption without breaking the norms down. A similar thing happens with grandparents watching kids. I set limits on how much TV I let my kids watch, or how much dessert they have. And there is always a conflict between the kids' current happiness and the long term benefit of internalizing disciplined norms. So I don't break the rules. But if the kids stay with their grandparents and they break the rules, no damage is done to the norms. Christmas is when we collectively act like each others' grandparents.

I agree with John Maxwell:
That gift-giving tradition is simply an excuse to shop more and spend more.

A curious property of Warrigal's answer is that it happens to be one of the most amenable to simple word problem logic. This might impact how conclusive people feel it is to the question.

Maybe people give both time and money when they buy gifts, and maybe those two aren't thought of as interchangeable. Super rich people have a scarcity of time relative to money. They don't impress other people nearly as much by simply spending money.

Maybe it's just that the sheer affective impact of a dress isn't the same as the affective impact of a $50 bill, even if you can exchange one for the other.

(You reply, "But why is the affective impact different? Wasn't that the original question?" And I reply, "Brute force of perceptual association, which isn't transitive through the buying experience.")

People are giving little packets of affect, not utility.

I, like many people, am prone to irrational amounts of buyer's remorse on luxury purchases. This is not a problem when I receive gifts, because I haven't spent the money. It is somewhat of a problem when I buy a gift, because I worry that I could have bought an even better gift with the same money and made the recipient even happier, but it's not as acute as when I buy for myself.

So, in the best case exchanging goods allows people to temporarily correct for their irrational frugality. Of course, in the worst case it allows them to temporarily cast away their rational frugality.

Poll: Are gift cards an acceptable compromise between choosing a gift and giving money?

I give a weasely answer to my own poll. Only if the choice of gift card indicates knowledge of the recipient. The more specific, the better. Gift card for Sears < gift card for a bookstore < gift card for a store catering to your hobby.

I added to the post saying weddings are a clearer example of the puzzle. There the list is very specific, kids aren't relevant.

The trouble with the extravagance theory is why we are excused more for putting extravagant items on a list vs. buying them ourselves.

The trouble with the signaling time theory is that most of us have many ways to substitute time for money and vice versa.

The trouble with the vivid show theory is why we don't just give some cheap vivid balloons or noise makers.

Unit, your command test theory seems odd, but at least it roughly fits.

Matt: I think in that case you should just buy a video game which is either very popular (so as to increase the change the recipient will find it 'popular', if you follow), or which has been well-appraised critically (in which case, you're saying mere popularity or sales may be misleading and enjoyability tracks better with critical acclaim).

Unit: I don't think command-and-control explains much at all. Suppose I give a loved one a wishlist, and they end up giving me a gift not on the wishlist, but which I wind up finding much more pleasing than I predicted any of the wishlist items were. Am I really going to deduct points for not obeying my orders? No, I'm going to give them major props for either knowing my preferences better than I apparently do, or knowing more about an area than I (much the same thing, if you think of it as them giving me 'what I really wanted').

There is a much simpler explanation. Giving a gift creates an association between the object given and the person who gave it. This makes friends and acquaintances harder to forget about, since using or seeing that object years later may bring back memories of the person who gave it. There is direct evidence for this in the fact that people sometimes refer to objects by source: "the sweater that [name] gave me". That increases the expected number of times that the gift-receiver will think about the gift-giver, and thereby increases the probability that they will remain friends. Money doesn't work for this purpose, because once it's been spent, there is no longer an object around to trigger those memories.

I am not sure that the bridal/baby registry serves the same function as the holiday/birthday gift list. I wonder if the resemblance is merely superficial.

As anyone who has been marshalled for the wedding/baby shower gift can tell you, these are much more impersonal and the lists are quite regular and uniform each time. Usually only the silverware pattern and crib sheet colors differ.

The community as a whole is making a statement with the wedding/baby situation in a way it does not with the other two, and the community element is of prime importance.

At work we regularly pony up for wedding/baby, but never for holiday/birthday. We the community are stating our involvement in happy independent starter families as a social good - so it is appropriate for your job & colleagues to invest in this, even when they scarcely know you.

So I am wondering if wedding/baby is truly comparable? The signal seems different. But I am not a social scientist.

Whenever giving cash for christmas comes up, I always think of this scene from Donnie Brasco:


Warrigal's answer explains why nothing > giving cash, but it doesn't explain why giving gifts > nothing.

Okay, so my pet theory does not work for predicting wedding gifts vs. money -- it's not clear (to me) that buying the gifts oneself shows more adjustment to needs than giving money. It could, through extra time spent and perhaps being responsible for specific gifts on the list, but that argument doesn't seem enough to confidently say that's what's going on.

I've answered this question before, Robin_Hanson: Part of the benefit of a gift is to give something the recipient *didn't realize* they would benefit from in the first place. For that reason, it's impossible to write a wishlist for it. When people are too lazy to find out this "perfect gift", they just ask the recipient what they want.

Lots of variables at work. I'm old enough to remember an aunt giving me hand knitted mittens or socks, which I had to lie and say I liked in my mandatory thank you notes, while other aunts/uncles might give a couple crisp $1 bills (yes, that old). Meanwhile my mother might give her siblings home-canned chicken. (Yes, money was tight.) So one assumption likely is: we're in the money economy and the exchanges and wish lists are for bought presents, commercial products. And both giver and receiver are essentially equal.

In part, it's an information problem--how well do giver and giftee know each other, their desires and needs, how much do they value efficiency in exchanges, how secure or insecure in the relationship are they, how much contact do they have during the year. etc. It's also a risk problem, giving and receiving presents can be risky. My posting a wish list is itself a gift to potential givers with limited time, limited imagination, etc., saying I understand their anxieties and concerns and I won't ask them to know me better than I know myself. (Or maybe, it's also distancing--I don't want the risk of receiving a present that's incongruous with my self image.

The giver and the receiver's motives aren't the same:
The giver is the one who wants to signal closeness to other person (this is all they can hope for).
The receiver has other signaling to consider:
1. the item given has signaling potential in other relationships.
2. friends pretending to be closer than they are to you isn't as much of a concern to most people as far as I can tell, more important is whether other people are understanding the signals they're trying to send.

-> Better to get the items you want and signal with it in the relationships that matter most to you already than to test the strength of all your friendships/acquaintances. e.g. Would prefer to have book that will look good on their shelf than to have accurate information that Emily doesn't know their taste in books.
So they thwart the giver's attempts to signal by giving them instructions, which the giver then has an excuse to follow (this isn't necessarily bad for the giver - they may have only wanted to signal because it would have been embarrassing not to when they could, but to be prevented is easier).

You know, people have actually thought the this before, and deeply, but unfortunately the bias of the field of economics -- that completely unsupported supposition that people are rational, individualistic maximizers of simplistic utility measures -- makes this work invisible. If you want to understand how people actually behave, you need to go to a field that studies actual humans. For instance, see Marcel Mauss's seminal anthropological study, The Gift: The Form and Reason for Exchange in Archaic Societies or Lewis Hyde's reintpretation and popularization of the same ideas.

One possibility is that prudence/practicality constrains the ways in which people consider it appropriate to spend money on oneself. If you are of modest means, you are judged harshly for purchasing an iPod instead of saving money or paying your credit card bills, etc.

This applies to spending money received as a gift, because money is fungible.

However, someone of modest means isn't judged harshly simply for possessing an iPod, they are judged harshly for spending money on an iPod. The institution of gift-giving (including the social pressure not to give money, and the acceptability of drawing up wish-lists) provide a way for someone of modest means to acquire the iPod (or whatever) without being subject to harsh judgment for purchasing it. You can't put "paying down my credit card debt" on your wish-list, and even if you did, people would feel social pressure not to give you money or pay your credit card debt for you.

I think that this can go a long way towards explaining the phenomenon of christmas lists or birthday lists, but does not do as much for wedding/baby registries. I guess Eliezer's suggestion about the affective features of a gift (over money) sounded pretty good, so maybe that can be part of the explanation too.

I was going to say: I wonder if the role of specific gifts is "forcing fun" - but I see Lewis Powell has preempted me. Perhaps it might be even better stated as "denying a humdrum use". Nobody wants their present to be spent paying the gas bill.

One interesting phenomenon in my experience that supports this: when someone has a big personal goal in mind they often do ask for money - and get it.

Note that even when people give out a wish-list, it tends to be an actual list, and not just a single item that they want from each person. (I recall a South Park episode where Cartman requests a specific gift from each friend, in order to avoid the duplicate gift phenomenon, but of course this just reinforces Cartman's image as very crass.) I agree with jimrandomh's point that a gift retains an association with the giver in many cases, but I'd also want to stress that this is a two-way phenomenon. The recipient is more likely to think about the giver when using or seeing or thinking about the gift, but the giver is also more likely to think about her connection to the recipient on seeing the recipient using the gift. This feeling of connection is strengthened when the giver specifically chooses the gift. Presumably, the effect is strongest if the giver chose the gift from the universe of all possible gifts, but I suspect that it's still pretty strong even if there were only two permissible choices. If I were to choose between a stylish sweater and an iPod for a friend, then I would at least be reminded of my role in my friend's life each time I see her with either the sweater or iPod, and she would be reminded of my role in her life each time she uses one or the other. However, if she had just told me to buy the sweater, or told me to buy the iPod, this would deny me any agency in her life (at least with respect to this one salient choice), and (provided our relationship is a good one) thinking about my agency in her life is a benefit for both of us.

One of my relatives does consistently give cash (and only cash) to me and at least one other family member on Christmas, though we don't do the same in reverse. In my experience this works out well for all people involved.

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