Tis the season for exchanging gifts. One popular strain of economics thinking that has gotten a lot of play in recent years is that choosing a surprise gift for someone else is an economically suboptimal tradition. It's hard to know the optimal gift for maximizing the happiness of another person, leading to lots of regifting or returns, and choosing a gift for someone usually strokes the ego of the giver more than it optimizes for the happiness of the recipient. So many have suggested that the best gift is to just give a person cash and let them choose what they want.
It turns out most economists disagree with this line of thinking. Most of them agree, gift-giving is not about income redistribution, it's a way of signaling the value of your interpersonal relationship, and spending the time to select a gift for someone is a better way of achieving that than just handing over an envelope of cash. And what of the value to the gift giver? That utility should not be discarded so lightly, nor should one underestimate the value of surprise or novelty.
I enjoyed this comment from Austan Goolsbee from the University of Chicago:
Instead of proposing to your wife w/diamond ring [sic], you offer a gift card of equal value. Efficient--if you don't count your hospital bills
This is reassuring. I'm sure my brother will love the nose hair clipper I picked out for him.