Economists Agree, It’s the Thought That Counts!

Cash. In so many ways, it’s the perfect gift. It always fits, the color is definitely right, and it quickly and easily nestles into the crisp white envelopes you keep in your desk’s bottom drawer. What’s more, almost everyone can enjoy using it. But is it really the right gift to give?

Apparently not, according to the IGM Economic Experts Panel. Fifty-four percent of respondents to this week’s poll disagreed or strongly disagreed with the notion that gift-giving is inefficient because recipients could satisfy their preferences much better with cash.

“Balderdash,” said Carl Shapiro of Berkeley. “This narrow notion of ‘efficiency’—and what life is about—gives economists a bad name.” A bad name that the Atlantic had some fun with this week in the sendup, “If Economists Wrote Christmas Cards.” (The New York Times and Quartz also had something to say about the economist-scrooge stereotype.) “Bah, humbug,” said Christopher Udry of Yale. “Such a claim takes an oversimplified model too seriously. Gifts can serve many purposes.”

Most of those who disagreed did so on the basis of gift-giving being about personal relationships. “Instead of proposing to your wife with a diamond ring, you offer her a gift card of equal value,” hypothesized Austan Goolsbee of Chicago Booth. “Efficient—if you don’t count your hospital bills,” he said.

“It’s the thought (identifying the right present) that matters!” said Markus Brunnermeier of Princeton, who strongly disagreed. “In addition, money lacks the surprise element,” he said.

Twenty-two percent of respondents expressed uncertainty. “For many (most?) gifts, ‘efficiency’ is not the point,” said Nancy Stokey of the University of Chicago. Most of the undecided referred to the emotional side of gift giving. “Try a cash gift next Valentine’s Day,” quipped Richard Thaler of Chicago Booth. It seems unlikely that we’ll hear any first hand accounts of that little price theory test.

Even those who agreed that cash is more efficient pointed out that gifts should depend on the recipient. “Motivation for the present has to be non-monetary—but try giving your spouse cash!” said Anil Kashyap of Chicago Booth.

The poll didn’t ask how much givers should spend, but many of the economists put forward suggestions for homemade gifts and small, thoughtful presents. Darrell Duffie of Stanford suggested hand-knit socks. And research from Chris Hsee indicates that you’re probably spending too much on gifts, anyway.

Overall, the message is clear. In a personal relationship, especially one that you want to build or keep strong, cash is just the wrong choice. If you’re interested in getting rid of the recipient, a crisp $20 bill ought to do it.