LYNN NEARY, host:
Time now for the TALK OF THE NATION opinion page. If the crowds at the mall this weekend were any indication, there are a lot of shoppers still searching for that perfect holiday gift. Of course, economist would argue you would save yourself a lot of wear and tear by just giving people what they really want money. After all, they say, you know what you want more than anyone. Giving cash is efficient and in the end saves money. It's almost guaranteed to work, at least in theory.
In yesterday's Washington Post, Kevin Hassett, himself an economist, argued that there is more to gift giving than efficiency and dollar amounts. Psychology, he says, may be more important than economics when it comes to unwrapping those presents under the tree. So what kind of gift do you prefer? The neatly wrapped, took the time to shop gift in a box, or do you just want cash? Tell us why or why not?
Kevin Hassett is director of economic policy studies at the American Enterprise Institute, and he joins us now from his office there. Welcome to the show.
Mr. KEVIN HASSETT (American Enterprise Institute): It's great to be here, Lynn.
NEARY: Well, let's start where you started your commentary with a critique of the gifts of the magi and you didn't think very highly of, at least, two of the wise men when it came to their presents.
Mr. HASSETT: Yeah. That's right. Caspar gave myrrh to the baby. I mean, what was he thinking? Myrrh was a resin from a tiny shrub that was used for embalming. It'd be like giving a mortuary kit to a little kid today. It just really didn't make much sense at all. And Balthasar gave perfume. That perfume is that last ditch gift for everybody who hasn't thought of anything until the day before.
NEARY: Well, I tell you I learned what myrrh was from your commentary. I had no idea that it had something to do with embalming. But, you know, perfume is not a bad present, I have to say. But -
Mr. HASSETT: For a baby, I mean?
NEARY: Well, for a baby. Okay. Maybe, perhaps, he was bringing it to her mother but what about the third gift, gold. That's the one that -
Mr. HASSETT: Yeah. Melchior gave gold, which is what economists say you should give because that's like giving money. And the idea is that if I had to think of a gift for you and I don't really know you that well, and I'd probably buy you something that you wouldn't like, but if I gave you the money then you could buy exactly what you like the most.
And so, historically, economists have thought well, gift giving is kind of a puzzle, really. Why does it persist given that the right thing to do is to give money? But there's a new line of psychology research that suggests that the gift giving that we see might make a great deal of sense, in fact, and that's what my column is about.
NEARY: Well, let's talk about the economists first. I want to draw that out a little bit because I'm not quite sure I can, you know, why did they say money is the most, is the best thing to do in terms of economics.
Mr. HASSETT: Well, yeah. Again, so the idea would be that if you have a dollar to spend then you know exactly what you want given that you have that dollar. And since I can't climb inside your head then I would probably give you something that wasn't exactly what you would pick.
But even if I completely nailed it, then the only thing I would do is reproduce what you would have bought if you bought exactly what you wanted. And so the baseline economist's answer is just give them the money because if you really hit it out of the park then you'll get them what they would have bought anyway. Otherwise, you'll give them something that they like less.
NEARY: But this has some larger economic repercussions?
Mr. HASSETT: Oh, yeah. In fact, this is what, you know, in geek language, we call it give them a lump sum transfer rather than an in kind transfer. It's one reason why economists say that you should make a welfare program be all about giving people money rather than giving them specific items like, you know, food stamps wouldn't be preferred by economists as much as like the Earned Income Tax Credit, which gives people money back, if it's a corporate's school of economics.
NEARY: Now, I was about to say this is very Scrooge like, but then I remembered he wouldn't have given money at all, either. He wouldn't have given anything. But it does, sort of, take the joy out of Christmas to just give money and maybe that's what you're talking about in terms of or the joy of gift giving in general. Maybe that's what you're talking about in terms of this psychological approach.
Mr. HASSETT: Right. That's right. So the interesting thing is that when you give someone a gift, then they at times get kind of irrationally sentimental about it. And there've been a number of psychological experiments - I talked about just one in the column - that have shown that. But the basic idea is that that act of receiving is a kind of moment where you almost imprint on the gift and couldn't decide that it's the apple of your eye that you really, really love it.
There's one experiment at a college, Simon Fraser University, where they gave kids coffee mugs from the school bookstore and then asked them how much money would it take for me to give you so that you could give me the mug so you get rid of the mug.
And generally, people would only give up the mugs if they got a lot of money, a lot more than it cost in the store. But if you gave people money and ask them whether they wanted to buy a mug, then they wouldn't buy a mug because they nobody really wanted the mugs.
But the fact that they had received the mug, made the kids really fond of the mugs, kind of inexplicably. And that's really the opportunity of gift giving. The opportunity of gift giving is that if you give something to someone and they might value it because all of the sudden the fact that it's a gift is something special for them.
NEARY: We are talking with Kevin Hassett about his op ed in Sunday's Washington Post about the economics and psychology of gift giving. And if you would like to join the discussion, you can give us a call at 1-800-989-8255.
And we're going to take a call now from Nathan, and he is in Memphis, Indiana. And hello, Nathan, welcome to TALK OF THE NATION.
NATHAN (Caller): Hello.
NEARY: Go ahead.
NATHAN: Yeah. I would prefer cash. I mean, I'm a college student, so I don't really need anything. I've gotten everything I've want for a few years and right now, I've spent all the (unintelligible) and I'm all out of cash.
NEARY: So you just want cash?
NEARY: Lots of it?
NATHAN: As much as I can get.
Mr. HASSETT: I hope all your friends and relatives are listening, Nathan.
NATHAN: I hope they are, too. Probably not, because I'm pretty much feeling they're not listening to talk radio, unfortunately, but -
NEARY: Well, Nathan, don't you want to like open something, though. I mean, don't you like to open it and that I mean, do you just want them to hand it to you or do you want to wrap it up? Do you want it to be gift like in some way?
NATHAN: The way my friends were like they always give you something even though I don't need anything. So like, there's going to be something under the tree to unwrap either ways. But the bulk of it I just, like, just to help get me through until I get everything, until the Christmas season's over with and I can get everything paid off.
NEARY: All right. Well, thanks for your call, Nathan. And if anyone recognizes his voice, which was breaking up a bit there on his phone, but if you recognize him, give him the money. That's what he wants.
And I just want to tell our audience that you are listening to TALK OF THE NATION from NPR News.
Kevin Hassett, what about gift cards? Are they is that better than money or is that a good way to give money?
Mr. HASSETT: You know, after I read the piece on Sunday - because, you know, they always change your piece at the last minute and you wonder if you're going to introduce an error, and so I always rush out to get the paper and read it when I have a piece in the paper - I thought of a point that I should have made in the piece this weekend, which is really, if you run through the logic of my piece it means that gift cards are precisely the worst possible gift. Because the gift card isn't really, exactly money although, I guess, maybe a Visa gift card might be.
But if you give a person a gift card to, say, Best Buy or a specific restaurant, then they are kind of constrained to go to that place. But they also, probably, don't get any kind of sentimental attachment to the gift card. And so if you give a gift like a coffee mug, then maybe they'll be sentimentally attached to it. You have the hope of creating that sentimental bond that we've seen in the experiments.
But if you give them a gift card, then you don't really get that and, you know, you don't really get all the benefits of having money, either. So the gift card gift is something that I don't think would appeal to psychologists or economists.
You know, Nathan's question just one last aside - reminded me of another experiment that was written up in the piece where at the University of Central Florida, they asked kids to auction off their Christmas presents. And there are college kids who, presumably, like Nathan, really needed the money and the interesting thing was that people put reserve prices on their Christmas presents that were well above the cost of the presents.
And so I wonder if we had Nathan back, if he was going to take something that he got that wasn't money, if we ask him to sell it, to really sell it, so you had to give it up if you'd give a price that was at or above the cost of it.
NEARY: Well, we have an e-mail here from Michelle, and this may speak to why gift cards have become more popular. And she writes, "When I am given cash it somehow embarrasses me. I am uncomfortable for many reasons but when I am given a gift that someone thinks that I will like or tries to please the person they think I am, I have fun. I analyze it, try to figure out what led them to buy it for me. Hooray for the gift. It says so much more about the giver than cash."
Interesting, first of all, that idea that cash is embarrassing and I think that's, probably, why people have turned, perhaps, to gift cards, because it seems a little bit less crass, but also this idea that it says more about the giver, the gift, when you actually give a gift.
Mr. HASSETT: Right. And that's why one of the things that I found when I was reviewing the literature on these gifts, is that something that the psychologists talk about is gift giving anxiety. Right. So if I'm going to give you, Lynn, the gift that tells you everything you need to know about Kevin Hassett then, you know, what if I mess it up, right? What if I give you something that suggests that I am really clueless? You know, that's a lot of pressure on me.
And Americans feel that, I think, that might be one reason why gift cards are going up in popular. About five percent of gifts this holiday season are likely to be gift cards. They could be because a lot of people are trying to dodge that responsibility.
NEARY: Well, you know, one of problems with gift giving, I'm realizing now, is that something I buy something and then I think, did I give this to that person last year? Or the year before? That I thought it was such a perfect present for them that I've already given it to them.
Mr. HASSETT: Yeah. That's a very common mistake. And the other thing is that, I think, as our cultural becomes wealthier it's likely the case that there are lots of people you know that you can't really think of something to give them because they already have everything that they want. And so it makes the gift giving challenge really quite a serious one.
NEARY: Now, what are you giving your wife for Christmas this year, Kevin?
Mr. HASSETT: Oh, gosh. She's going to listen to the show, probably, so I don't know if I'm -
NEARY: But is it going to be a present or is it going to be cash?
Mr. HASSETT: Well, I'm definitely going to give her a present, and if you are listening, stop listening right now, spouse, Christy. And, I'm going to there are actually two main presents for her but again they I'll say one of them involves thinking a lot about what she likes. She loves the weather and so I'm getting her something so she can measure weather better.
NEARY: All right. Good. Well, have a good holiday.
Mr. HASSETT: Thanks a lot, Lynn.
NEARY: Kevin Hassett is director of economic policy studies at the American Enterprise Institute and he joined us from an office there. You can read his op ed on our NPR.org.
This is TALK OF THE NATION from NPR News. I'm Lynn Neary in Washington.