Thursday, February 17, 2011

What purpose is served by an exchange of gifts?

I had thought about writing something about gift giving before Christmas, but it might have looked as though I was complaining about how difficult it can be to buy gifts for people who seem to have just about everything they need already. (Perhaps I might even now be wandering into dangerous territory.)


In the past, economists have had some difficulty in understanding why people exchange gifts. The reason is that since the satisfaction that a person obtains from consumption spending is determined by her or his personal preferences it is difficult for anyone else to know what she or he would like. (I hope this is getting me out of trouble rather than digging a deeper hole.) Thus, some people end up with gifts they don’t want. (Fortunately, this rarely happens to me!) The remedy some economists have proposed is predictably crass: give money not goods. Neerav Bhatt has provided an entertaining discussion of this view here, including a clip from an episode of Seinfeld showing Elaine’s reaction to Jerry’s gift of cash for her birthday.

Greg Mankiw provides a good economic explanation of gift-giving in terms of signalling theory. If a person is able to provide a thoughtful gift - despite the difficulty of discovering what the receiver would really like - this sends a signal of the feelings that the giver has toward the receiver.

I suppose that is how gift giving helps to strengthen bonds. It can be wonderful when that happens. (In my experience it is most likely to happen when the potential receiver of the gift is willing to send some signals by dropping a hint or two about what she might like.)

The exchanges of gifts among members of social and business organizations at Christmas functions etc. is presumably also intended to promote bonding. One approach, which is probably fairly common, is for everyone attending such functions to buy and wrap an inexpensive gift, with all gifts being distributed randomly at the function. A member of a club that I belong to recently proposed a different approach: the names of all members would be put in a hat and each person would draw out a name and buy a gift anonymously for that person. This might have resulted in more people being given things that they might appreciate and might have helped to bond individual members of the club to all other members. It seems likely that if you know that the person who has given you a gift that you appreciate is a member of the club, but you don’t know who it is, you might have good feelings towards all other members. (As it happened, the club decided to continue with the practice established a couple of years earlier of donating gifts for children to a local charity rather than exchanging gifts between members. It would be interesting to know if the proposed method of gift exchange has been used elsewhere and what the effects have been.)

The Rational Optimist: How Prosperity EvolvesWhile bonding helps explain exchanges of gifts between close friends and members of some organizations, does it is also explain exchanges of gifts between people who don’t know each other well? Exchanges of gifts between people in different organizations in the modern business world can be viewed as gestures of goodwill (albeit often tax deductible). Some anthropologists and archaeologists have encouraged the view that such exchanges of gifts to establish goodwill were much more common in tribal societies. According to this view, people in pre-industrial economies exchanged gifts to cement relationships, but people in modern economies trade with each other to make profits. Matt Ridley suggests that is ‘patronising bunk’ (‘The Rational Optimist’, p. 133-4).

As Ridley suggests, there is no reason to suppose that traders in all cultures have not always been acutely aware of the desirability of getting a good bargain for the valuable items that they are exchanging. There is some evidence that money can change the way that people perceive exchanges, but this seems to me to be based on misconceptions about money. An exchange of goods with strict reciprocity (barter) might appear more like an exchange of gifts than a commercial transaction, but people are fooling themselves if they think it is different in important respects (other than possible tax avoidance) from an identical exchange facilitated with the use of money.

19 comments:

Lorraine said...

You practitioners of the capitalist variation on libertarianism (known in America (and unfortunately a growing number of other places) as 'libertarianism') just love using your rationalism to squash any optimism that the human animal has any potential to transcend its alleged money-grubbing, territorial and 'self interested' ways. Maybe I'm just paranoid, but your purpose here seems to be to shut down the 'gift economy' paradigm.

Assuming it is 'patronizing bunk' that people in pre-industrial economies exchanged gifts to cement relationships, but people in modern economies trade with each other to make profits, who is being patronized? If I were to allege such a thing, I would certainly intend it as a compliment to the pre-industrial economies, but I suppose that sentiment would be dismissed by the virtue of selfishness crowd as yet another 'noble savage' metaphor.

Winton Bates said...

Hi Lorraine
The post was about exchange of gifts rather unilateral gift giving.

I don't have any interest in shutting down the 'gift economy'. As I understand it this is about unilateral gift giving without seeking anything in return. We see a fair amount of it in this country (as in many other parts of the world) in times of natural disaster. The world would be a better place if there was more of this kind of giving.

There are interesting questions lurking here about the kinds of societies most likely to encourage people to give generously to others. I think George Orwell had some insights into human nature that might be useful in thinking about this.

Lorraine said...

Ah, glad to know the gift economy isn't in anyone's sights. Now to which works by Orwell might you be referring? I'm a big fan of Orwell.

Winton Bates said...

I was thinking of 'Animal Farm' and poor old Boxer, the horse, who was always telling himself to work harder for the benefit of the other animals. Orwell was painting the picture of a society that exploits altruists.

Incidentally, coming back to first point about libertarians wanting to close down the gift economy, it may be worth noting that one of the objections we have to a heavy role of the state in providing welfare assistance is that this tends to displace voluntary giving. It would be nice if an expansion in the voluntary sector could one day displace government.

Thought Bubble Ten said...

Winton, what a great post this it as it raises so many questions, ones that I've pondered over from time to time :)

For instance, WHY? Why do we give gifts? You've suggested some reasons, some of which have been true for me, I'm sure. And WHAT is a gift?

It's because I've reflected on my motivations for giving a gift or wanting to give someone a gift that I've decided not to observe the traditional gift-giving occasions society has prescribed for us. (Go on, ask me at what point is 'society' different from 'us' :)), at least not unless my motivation transcends the obligatory 'let's make each other feel good'.

That said, I do love the idea of giving a gift. I'm not entirely sure why but one thing I do know is that it gives me joy to give a gift when I choose to give one. And that, for me, is the only reason I need.

I think that ultimately, altruism is self-serving and that's not a bad thing. If we want to help others because it gives us joy to do so, I think it's a wonderful thing.

Unfortunately, a lot of 'giving' that happens under the guise of altruism feeds a mutual dependency - the giver needs to give in order to feel good about his/herself and the recipient/beneficiary feels indebted and/or becomes (more) dependent on the giver.

I don't feel I'm a better person *because* I've given someone a gift. On the contrary, I feel I've truly given a *gift* when I've given it while feeling good (great even) about myself and have no expectations whatsoever about how the recipient responds. I do hope they will experience joy though :)

To be honest, the very notion of a *gift* is something that I've intuitively felt uncomfortable with.

You see, for me, we are all part of the one, unified whole and so, whatever is given is *given* from that unified whole and *received* by that unified whole, which to me is a rather strange thing.

Giving someone something they need is not a gift, no more than oxygen is a *gift* that the blood gives the cells of the body.

So, if a gift is to make any sense (to me), it must be something that is given for the sheer joy of it. Giving someone something she needs is not giving a gift. It is taking care of myself, for she and I are part of the whole.

Apologies if all this reads like a bit of a ramble :)

pranusha said...

In companies corporate gifts place major role to maintain good relation between employee and employer. And one more thing is branding, these two are main purpose of gifting.

Lorraine said...

Winton tells us that one type of gift economy we'd be better off (or at least more independent) without is the state-funded safety net. Thought Bubble Ten tells us that giving, in order not to foster dependency, must not consist of gifts that people actually need. Put more crudely (frankly?): 'Do not feed the animals.' Thought Bubble Ten, to their credit, uses the word 'transcend.' As Orwell has taught us: "Proles and animals are free." Pranusha points out that giving is often part of branding; a fact perhaps most unsubtly stated in America's 'public schools,' a perfect example of the so-called voluntary sector finding its way into roles that used to be associated with the the public sector. An organization called CCFC has emerged as the go-to resource on children as captive audience for aggressive marketing, especially in the school setting. One of their favorite stalking horses has been the 'publisher' known as Scholastic. I worry that the new-school (i.e. capitalism-friendly) libertarians have slid some considerable distance along the slippery slope that leads from Rand's dictum that "need is not a claim" to a dictate to the effect that 'need' is a dirty word. Surely if it is dangerous to be in denial of the fact that human nature is inherently selfish, it must be at least as dangerous to be in denial of the fact that every human being starts life in an utterly dependent state. Of course, the snarkier econocentrists will find a way to frame parental love as selfishness, too. Perhaps my hopes of finding some aspect of the human condition that somehow transcends economics are just that; hopes.

Winton Bates said...

TBT: You raise a very interesting question about whether altruism is self-serving, which is the other side of the coin of whether selfishness can be altruistic. I have been thinking a bit about Ayn Rand's view of selfishness and wrote about it here . I think a lot depends on what is going on in the mind of the individual. An acts of kindness that is viewed as a joy by a person with high self-esteem could be viewed as a self-sacrifice by a person with low self-esteem.
The distiction between altrusitic giving and exchange is not always clear. The issue seems to be about the strictness of reciprocity that is expected. A person living by the golden rule, 'to do unto others ...', might have a lot of faith that the receiver of the gift would reciprocate in similar circumstances, or they might just think of themselves as the kind of person who gets pleasure from doing that kind of thing.
I am interested in your idea that we are all part of one unified whole. It could be Stoic philosophy, or it could have its origins further the east - which might be where the Stoics got their ideas came from in the first place.

pranusha: I agree with you.

Lorraine: It seems to me your hope of finding some aspect of the human condition that transcends economics is a bit like hoping that there is some aspect of the human condition that is beyond human understanding. It might well be that there are some aspects of the human condition that we will never understand (e.g consciousness). But I don't think that should stop us from trying to understand.
Perhaps I misinterpret your intention. Is possible to find an aspect of human motivation than transcends self-interest? I agree that it is nice to think that humans can become sufficiently noble as to transcend self-interest.

Thought Bubble Ten said...

Hi Winton, I find it always useful to examine my motivations for doing anything. If my motivation comes from a place of freedom, love and joy, then it really doesn't matter how others perceive it.

I mean, our perceptions are just that and they are idiosyncratic, subject to a variety of influences. I find that acting according to my own *good* motivations far more reliable than acting according to how other people perceive my actions.

This is not saying that I am indifferent to people's feelings. On the contrary, it is because I am sensitive to them that I design my actions to maximize the chances of their being received favorably. However, I would not proceed with any action if my motivation does not come from a place of freedom, love and joy. And, once such action is taken, I try not to get preoccupied with how it is received other than to use it as feedback for how I might better design future actions.

As for altruism being selfish...well, that's a word with a negative connotation. However, if by *self* we mean the unified whole, then I'm quite happy to be selfish, for after all, a good deed, performed with good intent/motivation(as used in Buddhism) benefits all, whether we are all consciously aware of it or not :)

@ Lorraine. I'm certainly not advocating not 'feeding the animals' or anyone who has a need. Quite the opposite. It is important and necessary that we take care of one another because we are all part of the one whole.

However, giving someone what they need is not what I would call a *gift*. Giving someone what they need is something that I believe we need to do - like the blood giving oxygen to the cells.

Winton Bates said...

Thanks TBT. You must have a high jen ratio!

Lorraine said...

Then it would seem that receipt of gifts is higher in the hierarchy of needs than receipt of alms, and like all the higher things in the hierarchy, is attained by sombunall (some but not all). So, is membership in the gift-exchanging class of people limited to the solvent?

Winton Bates said...

Ugh! Sorry Lorrainne. You have lost me. Actually, something you wrote earlier has got me thinking about how people tend to talk past one another when they are thinking in terms of different layers of ethics. I will write something about it.

Thought Bubble Ten said...

I'm a bit lost too :)

Winton, what is a 'high jen ratio'?

Anonymous said...

Gift giving is as old as mankind himself. It is an extension of our respect, admiration, or affection for one another. One of the earliest examples of gifts known to mankind was that of gold, frankincence and myrrh given to a little bloke who would later go on to become a carpenter, before reaching much greater heights.

Winton Bates said...

TBT: The numerator of the jen ratio is actions that bring the good in others to completion and the denominator is actions that bring the bad in others to completion. I wrote something about it here.

Anon: That is both funny and profound and related to what I want to write about different levels of ethics.

Lorraine said...

I certainly hope I said nothing offensive. Admittedly, the laissez-faire worldview tends to bring out my abrasive side. If (as I hope is the case) I lost you in the other sense, it may be the hierarchy of needs, which is a reference to Abraham Maslow.

TB10: So, if a gift is to make any sense (to me), it must be something that is given for the sheer joy of it. Giving someone something she needs is not giving a gift. It is taking care of myself, for she and I are part of the whole.

Re-reading the above it becomes obvious that I missed something the first time around. How embarrassing. For some reason, I zoomed in on "taking care of" and "self" and went on YOYO patrol. Many apologies.

I guess my own take on gift-giving doesn't rule out necessities. I'm of the Food Not Bombs school of philanthropy. Like a lot of left-hand-path types, I hate the word charity. In my country the charitable sector is quite Evangelical-dominated, and there is a certain fetishism in the major charitable agencies with "hit rock bottom" type experiences and their (IMHO diabolical) way of molding or re-imprinting human personalities in certain ways.

Jim Belshaw said...

Winton, in an Australian and Pacific context, the term ceremonial exchange cycle was used to describe gift giving that could extend across considerable space and time. One issue when I did my honours thesis was whether or not this could be described as trade.

Polanyi and others, especially marxist economists, argued that things like trade could only exist in a money using society. I took an opposite view.

Gift giving seems to vary greatly between cultures. Central to it, I think, is that the gift involves a bundle of attributes (gift itself plus intangibles plus the process of giving and receiving) that are culturally derived and hence vary.

The economist's arguments you quote would seem very strange indeed in some cultures because they are arguments derived from a different culture.

Winton Bates said...

Jim, you might be interested in Matt Ridley's comments on the 'kula' system of the south Pacific. For the benefit of other readers, kula is a system involving exchange of armshells for necklaces - with the armshells travelling in a clockwise direction and the necklaces travelling in an anti-clockwise direction, with an item possibly returning to the original owner after a couple of years. Ridley claims that kula was only one of many different kinds of exchange practiced on these islands and that other exchanges involved useful items rather than 'pretty gifts'. (You may be familiar already with the reference Ridley gives: Davis J, 'The kula system of the south Pacific', "Exchange", 1992.)

Ridley's comment is colourful:
'the fact that Westerners give each other cards and socks at Christmas speaks to the importance in their lives of the social meaning of exchange, but does not mean that they do not also seek profits in markets. An anthropologist from the South Pacific might study Western Christmas and conclude that an utterly pointless and profitless but frantic midwinter commercial activity, inspired by religion, dominates the lives of Westerners' ('The Rational Optimist', p. 134).

Leaving aside Ridley's peculiar northern hemisphere perspective that Christmas happens in midwinter, do you think his comparison of kula with exchanging Christmas cards is reasonable?

Jim Belshaw said...

At the risk of upsetting some of my anthropologist and historical colleagues, Winton, it's not unreasonable because it draws out the cultural elements.

One of the things that I was (am) interested in is the extent to which certain activities reflect things such as underlying resource differences. Here I know the Australian Aborigines best.

The exchange of ceremonial gifts can be regarded as trade in that there is an exchange of value, and that is what trade is. With a Christmas card, the material value is small, the intangible or cultural value high. So it's really a social act, although it might still meet a formal definition of trade. I note. by the way, that barter is still trade; money may (as you note) affect things, but I don't think that it affects principles.

Now when you look at the Aborigines, you actually find patterns of distribution that do reflect resource distribution. You find patterns such as the distribution of pituri that very clearly reflect trade in the way conventional economists would define it. And you find the influence of fashion.

An interesting example of the last is the WA group that adopted an inferior tool making system from another group. It seems clear that they placed a greater value on it because it was imported even though it wasn't as good. But then, that's hardly new!