Wed Mar 14, 2007

Gift Exchange

Kieran

James Joyner is perplexed by John Quiggin’s beard. Or, more precisely, by this:

All manner of worthwhile charities hold events wherein people are “sponsored” based on how many miles they bike, laps they walk, hours they go without sleep, ropes they jump, or what have you. Why the need for the gimmick? Are there some significant number of people who don’t give a damn about curing leukemia but are nonetheless willing to donate to the cause for whatever pleasure seeing people shave their beard yields? Or who aren’t sure whether breast cancer is more worth curing than some other disease and make that determination based on what physical challenges the antis are willing to undergo to prove their point?

It’s a good question. But I think the answer will not be found in differences in degrees of pleasure or utility between “Cure for cancer” and “Cure for cancer plus John Quiggin having no beard.” Neither is it quite a question of uncertainty about one’s preference for giving money to a charity being clarified by the knowledge that someone is also doing a sponsored walk.

Instead, what we’re seeing here is the norm of reciprocity in action. You give me something, and that means I can give you something back. A cure for breast cancer or leukemia is very worthwhile but from the point of view of the immediate exchange it is a long way off. I know that my money will not buy a cure, at least not in any direct or immediate way. Moreover, when it comes to giving away my money, there are innumerable worthwhile charitable causes that might plausibly make a claim on some of it. What things like sponsored shaves or Walks for the Cure or a Free Car Wash (with a donation) do is establish a local gift relationship with someone in particular, for something in particular. Sure, the particular thing being given (a shave, a car wash) is trivial in comparison to the overall cause (a cure for cancer). Nevertheless, it is the small relationship of reciprocity that makes the exchange meaningful for the giver and thus makes it much more likely to actually take place.

The norm of reciprocity can also be seen at work when charities send you pre-printed personal mailing labels to use on your envelopes. Again, the idea is to give you something in order to get you to give something back. Now, these efforts are not always successful or even plausible. To be successful, gifts need to carry some real cost to the giver, and ideally they should be unique to them as well. (This is why John shaving his beard of 30 years off is a good example.)

The cost of a gift is not irrelevant, but neither is it determining. In a strictly economic framework, these kinds of activities are analogous to the deadweight loss of Christmas gifts (why not just give money, after all?), or are simply advertising gimmicks whose only function is to attract attention. The resolution to the puzzle is also similar: without the framework of mutual reciprocity, the exchange likely wouldn’t happen in the first place—even if in principle a more efficient (no shaving, no car-wash) solution would be available to narrowly rational agents with the right preferences. That is why almost all forms of charitable giving in fact involve some kind of reciprocal exchange, whether it’s something as trivial as getting a badge, or as heavily mediated as the performances by celebrities on a telethon.