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”To say, here I am. To do something. To give. This is what it means to be a human spirit.” Levinas, Ethics and Infinity.

There are probably as many occasions for gift giving as there are relationships.

In addition, each relationship is characterized by its own particular demands on how the gift is given. Should the gift be unwrapped at the spot? Is even a quick look into the envelope inappropriate? It is therefore not evident what these differ-ent kinds of gifts have in common: a Christmas gift is eviddiffer-ently unlike a business present, and neither do an end-of-the-year bonus and a charity donation resemble each other a lot. There are, in my view, nevertheless some essential characteristics

of gifts. Two of these in particular form the backbone of the discussion through-out the chapter: reciprocity and adequacy. These elements play an important role in most of the gift exchanges.

Reciprocity

At first sight it seems quite natural that a gift is voluntary in nature. Still, an-thropologists stress that although voluntary on guise, factually gifts have strong reciprocal properties (Mauss [1925], Codere [1950]). One has not even only a duty to give, but also to receive and to return. The extravagance of gift-giving in primitive societies is underlined by the fact that a failure of accomplishing one’s obligations to reciprocate often eventuates in warfare and the loss of dignity.³ It is therefore often thought that reciprocal behavior is necessarily connected with gift exchange. Mauss called reciprocity one of the ”human bedrocks on which so-ciety is built” [quoted by Arnsperger [2000, 72]. Or according to Binmore [1998, 24]: ”Love and Duty are not the cement of modern societies ... the mechanism is reciprocity” (his emphases).

According to Camerer [1988] however, it is ”especially misleading to assume that modern gift-giving must be reciprocal”. It is indeed reasonable not to assume that it is a necessary aspect. Consider for example the case of blood giving. The giving of blood is not directed to specific individuals but to an anonymous agent, as carefully remarked by Arrow [1972]. Gifts or donations of this kind can by assumption not elicit reciprocal gifts, albeit this not immediately signifies that non-reciprocity is also unlikely to occur in personal relationships. But consider the higher effort of workers above minimum firm standards. This is not always reciprocated by the firm in the form of higher wages or bonuses (see Akerlof [1982]). If we take this behavior as a gift of the worker to the firm, then reciprocity is not connected with fairly personal relationships either. The correct conclusion would be that gifts are not necessarily reciprocal in nature. If we are to explain the existence of gift-giving, we also have to explain why certain kinds of gifts are given with a reciprocal intention and why others are not.

Adequacy

3This occured for example among the Kwakiutl. It should be noted however that their use of warfare mostly refers to warfare directed to an individual and not so much between nations. For a detailed description of the Kwakiutl, see Codere [1950] and chapter 3.

Consider the following two quotes. According to Camerer [1988, 198]: ”A delib-erate cash gift is a polite way of saying, we care about you less”. And Douglas and Isherwood put it even more to our imagination by writing: ”...in our society the line between cash and gift is ... carefully drawn. It is all right to send flowers to your aunt in the hospital, but never right to send the cash they are worth”

(Douglas and Isherwood [1978, 58]).

One wonders why it is so bad to make a gift in cash. Standard microeconomics arguments tell us that it can never be worse to get money rather than a specific good. The reason is simple: with a cash-transfer it is in principle always possible to buy the same good as the intended in-kind transfer. Moreover, if existent, a more preferred good may be purchased instead. Whenever an in-kind transfer forces the recipient to consume more of that particular good than he would have done with a cash transfer, the recipient prefers a cash gift (see e.g. Mankiw [1998]).

Because gifts in kind weakly lowers the recipient’s utility relative to a cash-gift, I call them inadequate.

Besides the literary example from the introduction to this chapter, there is ample empirical evidence of inadequate gift-giving. Calculations by Walfdfogel [1993] show that for Christmas gifts, recipients valued the gift by 10-30% less than what the givers had spent on them. An extreme example of inadequacy is found among a tribe in Canada (the Kwakiutl) where some of the gifts are worthless to the receiver (see also the introduction to chapter 3).

For sake of completeness, I should add that there are some notable exceptions to the rule that gifts in kind are inadequate. First, it may be the case that the gift is more expensive for the recipient than for the giver. For example, a souvenir brought from abroad cannot be purchased from an amount of cash that equals its retail price, as the recipient would have to incur transportation costs. Another example is when the recipient has incomplete or imperfect knowledge about his own preferences, such as when he is not aware that this particular good existed so that he could never have bought this good with a cash-gift even though he derives great pleasure from it (see also Camerer [1988]). Finally, a gift can help recipients to stick to self-control. Thaler [1999] considers the example of a couple who cannot afford to spend more on wine than $10 on average. To retain self control, they may decide never to spend more than $20 on a bottle, even though they prefer to have a $30 bottle occasionally. A bottle of $30 as a gift may be greatly appreciated since they are able to enjoy a fine wine without giving up

self-control. Although interesting in its own right, in the rest of this chapter I assume that gifts in kind are inadequate.

The challenge, then, is to find theories of gift-giving that are capable of unifying these dimensions of gift-giving. This is the purpose of the next section.