Economist gift

How can you give an economist a cheap gift without causing offense? Here’s how:

How to give a cheap gift to an economist without causing any offense

It’s not that hard. You see, most economists believe in economic efficiency — and in the context of gift-giving, that would mean conveying the most happiness to the recipient per dollar spent.

However, giving a gift may cause what economists call a “deadweight loss,” as when the recipient values a gift at less than the cost to the giver. Think about what happens if a giver spends $40 on a gift that the recipient would (secretly) value at only $30. Then there has been a deadweight loss of $10.

Most people are way too polite to let on that they didn’t like a gift, and the idea of people valuing gifts in money terms is bizarre to most people, except economists. Economists had long talked about this among themselves, but the issue came out into the open with the publication of “The Deadweight Loss of Christmas,” by Joel Waldfogel in The American Economic Review, Vol. 83, No. 5. (Dec., 1993), pp. 1328-1336.

There are many rejoinders to Waldfogel’s article, but the most powerful is an argument something like this: We don’t give gifts to convey utility in consumption. Rather we give gifts to show friendship or love to someone. When we spend a lot of time getting to know someone and picking out a gift, we convey that love. We also conduct search on behalf of the recipient, perhaps finding something that the recipient didn’t even know existed.

Therefore, you won’t insult an economist familiar with the “deadweight loss” argument if you give that person a cheap gift — provided you show your friendship or love in its selection. In a tender moment, you could even tell your favorite economist you were thinking of buying an extravagant gift, but you learned about the Waldfogel argument and found a more efficient way to express your friendship or love.

The bottom line? Whether you buy a cheap gift or an extravagant one

  • make it a gift that shows your friendship or love
  • mention the Waldfogel argument

and your favorite economist will not be offended.

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