Gift Giving Advice - from an Economist

Here's some last minute gift giving advice from Marginal Revolution:

The economist in me says the best gift is cash. The rest of me rebels. Some people argue that the reason we don't give cash is because that is too easy - to show that we know the person well we must signal by shopping for something "special."

Yet this can't be quite right, either. Imagine the following thought experiment. Someone gives you $100 cash. You go out to the store and buy a set of car tires. Purchasing the tires clearly maximizes your utility. Now imagine that instead of $100 the gift giver gave you a set of car tires. Would you be happy that they know you so well that they purchased for you just what you would have purchased for yourself? I don't think so.


I'll try to keep this in mind as I hustle around the Twin Cities on my last-minute shopping errands.

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