Mainstream economists have argued that because people know their own preferences, gift giving is irrational. Behavioral economists have countered by claiming that gift exchanges can strengthen social bonds as well as make both members of the exchange feel better than they would have, had they purchased items on their own. Nobel prize winner Richard Thaler added to this argument stating that because people mentally divide their budget up into categories, such as 10% for clothing, a nice shirt that exceeds that mental budget is of immense utility.
Behavioral economists give quite convincing arguments. But would there be reasons for exchanging gifts even if everyone was perfectly rational?
There would be if information was incomplete. Specialization makes gift giving rational. Because it is impossible to know about every market in expert detail, people often make choices that are suboptimal. When a sommelier gives a bottle of wine, the receiver is not only given a gift; he is given precious time that he would have had to spend researching wine before making a purchase. When a friend who knits as a hobby gives knitted gloves, the receiver is given time that he would have had to spend learning how to knit.
Another instance when gift giving is rational is when the cost of purchasing goods individually is too high. If two friends separately decide to go overseas to different destinations, each can benefit the other buy purchasing the local goods of their travel. For example, one friend could buy dried mangoes from Thailand, while another buys Kestane Şekeri from Turkey. Exchanging these goods when they get back would be much less costly than having each person purchasing both Kestane Şekeri and mangoes.
Finally, giving gifts also gives knowledge. The bottle of wine from the wine expert is information that one gets about a certain, perhaps unknown, brand of wine. Similarly, Kestane Şekeri is cultural knowledge about Turkey that may never have been gained.
Behavioral economists give quite convincing arguments. But would there be reasons for exchanging gifts even if everyone was perfectly rational?
There would be if information was incomplete. Specialization makes gift giving rational. Because it is impossible to know about every market in expert detail, people often make choices that are suboptimal. When a sommelier gives a bottle of wine, the receiver is not only given a gift; he is given precious time that he would have had to spend researching wine before making a purchase. When a friend who knits as a hobby gives knitted gloves, the receiver is given time that he would have had to spend learning how to knit.
Another instance when gift giving is rational is when the cost of purchasing goods individually is too high. If two friends separately decide to go overseas to different destinations, each can benefit the other buy purchasing the local goods of their travel. For example, one friend could buy dried mangoes from Thailand, while another buys Kestane Şekeri from Turkey. Exchanging these goods when they get back would be much less costly than having each person purchasing both Kestane Şekeri and mangoes.
Finally, giving gifts also gives knowledge. The bottle of wine from the wine expert is information that one gets about a certain, perhaps unknown, brand of wine. Similarly, Kestane Şekeri is cultural knowledge about Turkey that may never have been gained.
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