A waste of money may be worth a lot
If you're invited to someone's place for dinner, you might show up with some flowers or a bottle of wine. You don't even ask yourself if the polite gesture's worth the expense. But commentator and economist Dan Ariely says maybe you should.
Commentator Dan Ariely, beehavioral economist (Dan Ariely)
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TEXT OF COMMENTARY
KAI RYSSDAL: Maybe you've got a dinner party to go to this weekend. Or somebody's invited you over to watch the NBA finals Sunday night. If your mother raised you right, you don't dare show up empty-handed. Some flowers, maybe a bottle of wine. You don't ask yourself if the polite gesture's worth the expense -- even though commentator and economist Dan Ariely says maybe you ought to.
Dan Ariely: From a standard economic perspective, gifts are a waste of money. Imagine that you invite me over for dinner one day and I decide to spend $50 on a bottle of wine. There are a bunch of problems: To start, I am not sure what wine you would like the most. And besides, maybe you'd prefer something else, like a book, a DVD, or a blender. This means that the bottle of wine that cost me $50 might be worth, at most, $25 to you.
If gift-giving were rational, I would come to dinner and tell you, "Tom, thanks for inviting me. I was going to spend $50 on a bottle of wine, but realizing that this might provide you with only $25 of benefit, here is the cash instead and you can decide how best to spend it."
Or even better, maybe I would split the cost and offer Tom $37.50, making both of us better off.
But, despite the realization that gifts are economically inefficient, I don't suspect that many people would follow this advice. Why? Because even though a cash gift is more economically efficient, it will in no way endear you to your host.
For example, if the day after the dinner party you find yourself in a bind and need some help moving a sofa, the odds are that the host that you gave a gift to will step in to help. But what about the host that you gave the efficient cash gift to? Wouldn't his logical response be, "How much are you offering me for my time?"
The point is that while gifts are financially inefficient, they are an important social lubricant. They help us make friends and create long-term relationships that can sustain us through the ups and downs of life. They are, in fact, efficient because they help us create the social fabric we so depend on.
It turns out that sometimes a waste of money is worth a lot.
RYSSDAL: Dan Ariely is a professor of behavioral economics at M.I.T. His new book is called "Predictably Irrational."
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From Cambridge, MA, 06/13/2008
Today's commentary was a bit like passing off a Sarah Lee cheesecake as home baked when contributing to a potluck dinner.
As much as we are enlightened by the experimental research of behaviorial economics, I am disappointed by the repackaging of the basic lessons of many other social science disciplines as the insights of "economics".
The foundational academic study of the non-economic meaning of gifts was written more than 50 years ago by the anthropologist Marcel Mauss. Every first year anthro student is familiar with his famous essay -- "The Gift: Forms and Functions of Exchange in Archaic Societies". The topic has generated thousands of dissertations and untold journal articles. Many of them with much more interesting insights (and better examples) than today's commentary provided.
It wasn't too long ago that economics, as an academic field, derided qualitative research that generated classics like "The Gift". As a result, today much less of this work is done at first-rate research universities.
In the spirit of the topic -- it would be nice, when using the gifts of anthropology, sociology, political science and psychology -- that your commentators acknowledge that they didn't bake those cheesecakes themselves.
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