By Kevin D. Gomez and Alex Kanode
Mother’s Day is around the corner…like, tomorrow. Some of y’all may be panicking as we speak, thinking about what to buy the mothers in your life. Maybe you’ve read a clever economist’s argument that the best gift is cash and you’re thinking to Venmo your mom some dough.
Let us offer you some friendly advice that might save your skin here:
DO NOT, under any circumstances, slip her a twenty and tell her to buy the most economically efficient choice. (*Unless she’s an economist, who you know will enjoy this transaction as a moment of bonding.)
As mentioned, some economists have argued that the most efficient gift is a simple cash transfer (with a smile). Because we often fail to know the other person’s exact preferences, our gift will miss the mark in offering the full utility—the benefit of something—equalling what we paid at the store.
For example, a sweater that costs $50 will likely not be worth the $50 to the person we give it to. It ends up being valued around 5 to 20 percent less than the price of the sweater. So, we end up wasting money on the sweater.
But, (un)fortunately, the real world is not simply concerned with efficiency. It is concerned with adequacy. Is it adequate to give your mom cash for Mother’s Day? If you don’t want our ReasonablAdvice, try and let us know how that played out. We’re guessing it’ll actually end up worse than not giving her anything at all. Why is that?
Signal Your Love and Appreciation
The answer lies in the purpose of gift giving. Yes, one part of giving gifts is in receiving an item that would increase your general welfare. However, the main purpose of gift giving is in the signal it sends. A gift conveys a particular appreciation, emotional connection, and demonstrates social ties between the gift giver and the recipient. The value of this signal is hard to quantify, but it’s safe to say, it can often be pretty close to the price of the gift, if not more.
While the gift of money is efficient in the simplest of economic terms, adding more to the model shows where you made the mistake. When you consider the signal it sends (generally a lack of effort or thought), this leads to a very large negative utility.
A poll of economists highlight that the signal is the most important part of the gift. Around 20 percent of those surveyed agreed that cash is the most efficient gift. A whopping 63 percent disagreed. Not only did many argue from a signalling standpoint, they also added that many gift-givers (excluding Kevin) enjoy picking out the gift as well as the element of surprise associated with the gift-giving transaction. This is also ignored by the efficiency argument for giving cash.
It’s common for mothers to say they don’t want a gift. Despite the supposed preferences (:::rolls eyes:::) of mothers across the country (we’re just assuming based on anecdotal evidence), Mother’s Day spending is estimated to reach $23 billion this year, around an average $185 per person.
For those panicking on what to get that special woman in your life, 30 percent would love to receive the “gift of experience” for Mother’s Day, which gives you some leeway in both the efficiency realm, preferences, and the timing of buying the gift. This means you can save the experience for another time, but just let her know that the “experience” will happen in the near future. Schedule the spa day, sign her up with a personal trainer, or plan a magical family trip somewhere.
Whatever you decide to do, make sure to let your mothers know you love ‘em this year (and every year). At the very least, it increases the general welfare and efficiency in our lives—trust us.
Happy Mother’s Day!