The Economics of Gift Giving

choi

Josh Zumbrun, If You’ve Bought No Presents Yet, These Wise Men Applaud You; Economists say gifts are inefficient, but even wonks can’t fight the yuletide. Wall Street Journal, Dec 24, 2015 (front page).
http://www.wsj.com/articles/econ ... presents-1450923671

Note:
(a) " 'Anyone who has had microeconomics knows,' says Mr [economist Sean] Snaith, who directs the University of Central Florida’s Institute for Economic Competitiveness, 'that an income transfer, as opposed to a gift in-kind, gets you to a higher level of utility.' "
(i) University of Central Florida (public; in Orlando, Florida; Founded in 1963)  Wikipedia
(ii) in–kind (adj): "consisting of something (as goods or commodities [or service]) other than money <in–kind relief for the poor>"
www.merriam-webster.com/dictionary/in–kind

(b) "Chad Moutray, chief economist for the National Association of Manufacturers, once bought his wife shares of the Dow Diamonds exchange-traded fund for Valentine’s Day.  There is little romance about the fund, which mimics the Dow Jones Industrial Average. But it was an efficient gift, he says—highly liquid; low expense ratio * * * But he experienced what economists call an unanticipated externality: 'My female work colleagues were less impressed. They thought that I should have given the real thing.' "
(i) exchange-traded fund (ETF): "ETFs had their genesis in 1989 * * * Most ETFs are index funds that attempt to replicate the performance of a specific index. Indexes may be based on stocks [eg, Dow Jones Industrial Average, S & P 500], bonds, commodities, or currencies. An index fund seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index."  Wikipedia

The advantage of ETFs is low management fee (which an investor pays wealth managers), and the return is exactly the same as the index (DJIA, S & P 500 etc) -- no better and no worse.
(ii) externality (n): "a secondary or unintended consequence <pollution and other externalities of manufacturing>"
http://www.merriam-webster.com/dictionary/externality

(c) "A 1993 paper, 'The Deadweight Loss of Christmas,' gave the notion its first real academic ballast. The author, Joel Waldfogel, then at Yale University, calculated yuletide waste"
(i) Joel Waldfogel, The Deadweight Loss of Christmas. American Economic Review, 83: 1328-1336 (1993)
(ii) Joel Waldfogel, Professor and Frederick R Kappel Chair. Carlson School of Management, University of Minnesota, undated
https://carlsonschool.umn.edu/faculty/joel-waldfogel
("was previously the Ehrenkranz Family Professor of Business and Public Policy at the University of Pennsylvania's Wharton School, where he and had served as department chair and associate vice dean. Prior to Wharton, Waldfogel was an associate professor of economics at Yale University")

(d) deadweight loss
(i) deadweight loss
https://en.wikipedia.org/wiki/Deadweight_loss
("is a loss of economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable")

What equilibrium?  That is, equilibrium of what and what?  (You need two opposing forces to create/ reach an equilibrium.)  See next.
(ii) deadweight loss
http://www.investopedia.com/terms/d/deadweightloss.asp
("The costs to society created by market inefficiency. Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources. Price ceilings (such as price controls and rent controls), price floors (such as minimum wage and living wage laws) and taxation are all said to create deadweight losses. Deadweight loss occurs when supply and demand are not in equilibrium")
(iii) Eric Nielsen, Deadweight Loss. In Regional Focus. Federal Reserve Bank at Richmond, Fall 2005, at page 9 (under the heading Jargon Alert)
https://www.richmondfed.org/~/me ... df/jargon_alert.pdf
(explaining deadweight loss)

Quote:

"Deadweight losses are losses for everybody. Removing a deadweight loss must yield a benefit to some while leaving no one else worse off than before. (Such an improvement is called a 'Pareto
improvement' after the Italian economist Vilfredo Pareto.)

"It is worth noting that Waldfogel’s study explicitly ignores any sentimental value people may place on received gifts. Some psychology studies have found that people place a very high premium on the worth of things they have received as gifts. If this is indeed the case, then gift giving could at times be a form of 'value creation.

(e)
(i) definition:

dead weight (n): "also deadweight
1 the weight of an inert person or thing [read examples]
  1.1  a heavy or oppressive burden"
http://www.oxforddictionaries.co ... english/dead-weight

One example under definition 1 is: "And, as it happens, the rescuer shedding what he knew would be the dead weight of his clothing was my great-great-grandfather, John Kitchel."
(ii) Please read the following speech (until the "dead weight", that is) to comprehend of both definitions in Oxford dictionaries.

Richard S Carnell, Dead Weight and a Distant Shore. US Department of Treasury, Apr 12, 1996.
https://www.treasury.gov/press-c ... s/Pages/rr1003.aspx

Please take notice that due to a snafu, the quotation marks ("  ") were replaced with (A  @).