The economics of cash gifts for Christmas

Choosing a present for Christmastime exchange gift activities in school was always difficult.

One time, I had no clue on what the person I picked wanted and I also had no time to spend selecting the right gift. A few hours before the Christmas party, my mother resolved my problem with two unfolded bills in mint condition placed inside a small box. It looked like a present one would be elated to see under the Christmas tree, but I don’t know if the receiver was happy about it.

At my first company Christmas party, the management was kind enough to collate our wish lists. The person I picked that time wanted a memory card and I’m pretty sure that it was easy to find. But I didn’t bother going out to personally pick a gift for him. Again, I ended up giving cash for the exchange gift. To be fair, he was happy about what he received.

Growing up, I’d always feel bad about receiving money from my parents for Christmas. Although they would always give a sizeable amount, I always yearned for gifts they chose themselves. But getting money is better than getting nothing at all, right?

The question remains, though: Is it okay to give money as a gift?

From an economist’s perspective, gifting money reduces the occurrence of deadweight loss or the lost retail value when an unwanted gift is given. For example, you purchased a fragrant candle worth P3,000 for a person who’s not into that kind of relaxation. And because of the disconnect, it might not be as valuable to you in terms of its monetary value. Economist Joel Waldfogel, the proponent of the idea, suggests that the deadweight loss from gift giving is one-tenth to one-third of the item’s value.

Meanwhile, gifting money is equivalent to giving your loved ones the power to select items they actually want. There is still a caveat to cash gifts, though. In 2010, The Guardian found that those who receive money spend it on everyday expenses, put it in their savings account, or use it to pay off debt instead of getting something that would pass as a gift. Still, the receiver benefits from that cash gift.

Gift-giving isn’t just about its economic implications, though. Gift-giving is not about our perception of a gift’s monetary value, but it’s about our expression of affection towards someone.

An economist’s view of gift-giving may be affected by their perception of market transactions, where an object is traded for another item with the same value. However, it shouldn’t be always viewed like that.

For essayist Lewis Hyde, giving gifts “unsettles the balance” between two parties. When you give and receive a gift, you don’t compare the value of what you get with that of what you give. Hyde said that the imbalance reinforces “trust, commitment, and obligation” between the two parties. In short, it’s an act of building and nurturing relationships.

Today, gift-giving is a practice we continue to observe. In hindsight, some may be motivated by the fact that they’d get something in return. But at its core, giving is a selfless act to build relationships. In the end, there are no strict rules in gift-giving. It’s acceptable to give either cash or a well-selected material gift to your loved ones this Christmas. It’s also a matter of personal preference but as they say, it’s always the thought that counts.

Photos courtesy of Pixabay