The Economics of Gifting- Part I of II

The first thought that popped into my mind as I started writing this was if it was too early to start thinking about Christmas. By general standards, I’d reckon yes. Not by mine, I’m afraid. You see, the circumstances surrounding this year and my puritanical, ‘good Christian’-didactic, educational upbringing have contributed to the need to start singing carols much earlier than usual. I confess to have already busted out a tune or two, but in my defence, I was preoccupied with the ideas outlined in this article (it being both Diwali season and Christmas only round the corner) and a little music to suit the mood never hurt anyone.

With these festivals comes the inexorable exchanging of gifts among friends and family if you’re lucky, and among other acquaintances, if not. Now why would I say that? Aren’t festivals an essential part of our social fabric that follow the maxim of ‘the more, the merrier’? Certainly, but the proclamation’s on behalf of all the economists who are wont to preach the futility of gift-giving, but more on that in the next part. Instead, the question that I initially sought to answer was:

Why do you get gifted the most unsavory presents in Secret Santa?

Ah, where does one start? Secret Santa, for those of you not familiar with it, is a game played in groups of people around Christmastime where each player’s name is written on a chit, all the chits are then folded, shuffled and drawn from in such that each player gets a name that (for obvious reasons) isn’t their own to whom this person becomes a ‘Secret Santa’ (hereafter referred to as the gifter) and must secretly give a present to the ‘giftee’; that is the main objective. Everyone thus both gives and receives a gift— and this is the vital part— anonymously.

Of course, there are a few problems with this. Secret Santa is often played among large groups, such as colleagues at work or students in a class. The entire point of the game, as was previously pointed out, is to ensure that nobody does not receive a gift at the end. Hazarding a guess, this strategy is a manifestation of the sort of charitable festive cheer associated with the holiday season. While you would certainly prefer only buying gifts for your circle of intimate friends and close colleagues, chances are, if everyone followed suit, there would be the odd person— the poor, isolated little victim of this selfish regime— who got left out because (s)he didn’t belong to an in-group.

            To overcome this inevitable failure of sorts, Secret Santa is played, but even that doesn’t give us the happy ending we wanted, because Secret Santa has its own set of incentives to dole out and spoiler alert—  they’re not the nice ones. For starters, the anonymity instilled therein as a virtue turns out to be something quite the opposite. Everyday probability and the game being played in large groups is enough to content ourselves with the fact that you’re almost always more likely to be someone’s Secret Santa who isn’t in your friends circle, so that you’re not quite that well aware of their likes and dislikes, as such you’re imperfectly informed. You don’t know what’ll make the perfect Christmas gift, so you may well choose to engage in a bit of research and try to unravel their inner mysteries, so to speak. Ah, but here’s the trade-off: Sniffing around on Facebook and the like (most probable choice by today’s standards, let’s face it,) or surreptitiously working questions like “So [insert giftee’s name], I’ve been on the lookout for new genres to try out recently, would you have any recommendations for me by any chance?” into conversation— all this arduous ground work requires time, energy and the slightest amount of interest coupled with altruism on your part (transaction costs, if you will) to accomplish. These, as any member of our species would acknowledge, are not exactly instinctual characteristics. That requirement is rather better fulfilled by the trait of selfishness, and here the seed of doubt is implanted, “What if my gifter doesn’t reciprocate with the same level of thoughtfulness?”. This uncertain ‘What if?’ is what leads to shirking responsibility on the gifter’s part of the unspoken deal i.e. giving a somewhat nice gift. Nor is this decision impulsive, for it has been made abiding by the purest of logic: if your own Secret Santa was mindful of your fancies, you’ll have made a net gain, and if (s)he wasn’t, at least you weren’t naïve enough to squander resources catering to those of your giftee. This is known in Game Theory as a dominant strategy and dominate any speck of graciousness on the gifter’s part, it does. Since everyone behaves this way, every player also ends up with a subpar gift than they would have liked. The interests of the individual are at odds with those of the entire group. Sound familiar? It should, at any rate, given that it’s yet another appearance of (what’s known in the business as) the Prisoner’s Dilemma ─ used to explain a layout of strategies in a game amounting to the emergence of outcomes brought about by rational decision-making despite their being unfavourable to all players.

            But wait, there’s more. Say, you knew your way around Game Theory and therefore, how we’re all doomed to fall prey to the Prisoner’s Dilemma, but somewhere deep down inside you, you know you’re better than all that. You’re going to be the exception to the rule, the only noble one who stands by the well-intended objective- fostering the tenet of generosity, like the OGs, the Three Wise Men at the birth of Jesus. Very well then, go ahead and buy a wonderful gift. How very blessed indeed, how utterly fortunate is thy giftee, O selfless one!— Hold on a second there, that was a play on words, wasn’t it? Selfless. Self-less. As in a self  (person) without identity, because if you’d care to jog your memory, gifts have to be given anonymously which is to say that no hearty demonstrations of gratefulness shall come your way in return for taking the pains to choose an appealing gift. Oh, isn’t that a pity! And hardly fair, too! After all your efforts, to be snubbed like that. You poor thing — But you never wanted to be a poor thing, did ya? That was never part of the bargain. If the game’s inherent anonymity ensures that you get none of the credit for a good gift, it also absolves you of giving a bad one— Voilà, ladies and gentlemen! If you would please join me in giving a warm, welcoming round of applause to none other than Moral hazard, astutely making its way onto the stage and into our lives ­— The incidence of moral hazard is even more evident once the size and nature of relationships existing in the group are accounted for. In my own experience, having played Secret Santa in both small, close-knit groups (This was back in school, because we wanted to have gifts for Christmas, but weren’t exactly rolling around in money to buy one for each of our friends.) and larger, less well-acquainted ones. The secrecy pact is foregone quite effortlessly in the former; nobody really ends up keeping it Secret Santa and thus, the relevant information about ‘Who’s got who(m)?’ slithers its way out into the open; especially if the group is not very large, limited to single digits, let’s say, even a few revelations enable the putting of two and two together as regards the others. Here, the reader can themselves reach the conclusion why it wouldn’t be wise to be caught shirking in this case, not if you want to play next year too. The latter kind of group, on the other hand, finds it in its interest to preserve the pact. Since we can safely assume, as a result of our previous deliberation, that players have engaged in self-serving behaviour, any disclosure would shift the risk (of being labelled a grinch) associated with unthoughtful gifting from the anonymous nature of the game to themselves, not unlike the proverbial ‘Apne pairon par kulhaadi maarna’ and if there’s one thing we don’t want for Christmas, it’s that. 

Anoosheh Zahra Mirkhushal

SY B.Sc. Economics

This is the first of a two-part article. Read the second part here.

One thought on “The Economics of Gifting- Part I of II

  1. Mohan Vaidya says:

    Nice and relevant article

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