Why cash is beautiful

If you had $20 to spend, what would you get? Would it be the bottle of wine a guest brought to the dinner party you invited her to? No? It cost her $20, but you wanted it less than the jar of Nutella and very nice glass of whisky you bought with the last $20 you spent. Economists recognize that that gift was inefficient. She took $20 and turned it into something worth less than $20 by making it a gift for you. And you’ll do the same when she invites you over for dinner.

You agree with me, but you feel like something is fishy. I’m tricking you somehow maybe, but certainly you won’t bring an AJ with you the next time a friend invites you to a party. And you’d be disturbed if they did the same to you. A gift is just more thoughtful.

This was a common theme from my students listened to an Econtalk podcast. But I disagree with that assessment. Not as an economist (from which position I also disagree), but as a sociable person, from an aesthetic position. Cash is beautiful. When you give me a twenty dollar bill you are giving me the sweat of your brow to buy anything my heart desires. And what I receive may very well spare me the sweat of my own brow to meet my own needs. A bottle of wine is thoughtful, but cash gives me access to time and time is the most precious commodity.

Most people, when receiving a gift, would be happier with something that is less valuable to them than they would getting access to anything they want or need via a cash gift. And frankly, I’d rather try to convince them that I wronged them by not giving them cash over a bottle of wine over a bottle of wine. So the next time I go to a party I’ll bring a gift and not cash. At least if that party’s hosted by “civilians”. Economists I’ll just give cash… I’m not sure if that implies I like them more or less.

5 thoughts on “Why cash is beautiful

  1. I like your disquisition on gifts but something is missing: Those who love me and know me well use the occasion of a gift to give me something I would never buy for myself, even if they gave me the cash to do it. A bottle of much better than average wine is a case in point: I would rarely treat myself but I enjoy it without reservation when it’s a gift. Among the abstemious, a gift is sometimes the only occasion for gross self-indulgence; it may be the only occasion. I wonder if I am the only one to act this way (and, perhaps, a little sick).

    Also, I wonder what your experience has been with the other sex when you hand one of its members cash. In fact, I am too cowardly even to think about it.

    • Ha! I’m also too cowardly to give cash to a woman as a gift.

      And I’m also think indulgences make good gifts, though part of that is that I value other people’s consumption in not-straightforward ways (e.g. I want my little sister to enjoy good gin because I see it as expanding her autonomy when she gains access to such better options). However, the economist in me cannot real accept that I would be made better off by receiving something I wouldn’t buy on my own. Here’s a ridiculous example: giving a chinchilla fur coat to a starving homeless person. Is it nice? Sure. Is it the “right” gift. Probably not.

      We could ad hoc in different factors in our utility functions (similar to my preference that justifies giving indulgences but not receiving) so that I have a preference for you being happy with gifts you give to me. But I think a more accurate story would be that if giving cash was the norm you would be more likely to buy that above average bottle for yourself once in a while. Instead, our consumption plans (“mostly drink Old Granddad, but occasionally drink Laphroig”) are adjusted so that one part of our consumption is supplied through semi-reciprocal gift giving.

    • Rick: I never said anything leading to giving a poor person a fur coat. For one thing, if he/she were rational, she would not like it. I only said something was missing from your reasoning. It’s probably the economist in you that missed it.

      Positing reciprocity does not save the day. Buying me a bottle of good wine is always a good idea and she continues to do it whether I reciprocate or not. Perhaps it’s because I never handed her cash for a present. Perhaps, that’s my reciprocation.

      I am glad you have enough sense to be rational and appropriately cowardly in the face of the inevitable.

  2. The point of my fur coat example is that it takes our shared intuition (that indulgences make good gifts) and stretches it too far. We could come up with similar examples: Oprah could give everyone in her audience Toyotas (“nice”) or Ferraris (“how the hell am I supposed to use this?!”); I could give you a nice bottle of wine, or a bottle of Chateau Lafite that would miss the mark. This makes me think there’s a tradeoff between it being an indulgence and it being something you might conceivably *choose* to buy with your own money.

    I agree that reciprocity would be too strong. Gift giving in general is not reciprocal. But we do make plans according to our expectations of the gifts we will buy (who buys socks before Christmas at their mom’s?).

Please keep it civil

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