Question

Is it economically efficient to give cash as a gift to a “special someone” for special occasions, such as a birthday or special holiday? Are there any downside or “risks’ involved in giving cash? Please explain.

Answer 1

This theory was first introduced by an economist named Joel Walfogel. He stated that the traditional way of gifting was inefficient as there was a gap between value you would get with the gift compared to the value of the product you would have purchased with the same amount of cash. The utility or satisfaction you would attain from the gift you receive will be comparatively lesser than the satisfaction you get from getting the product yourself with the gift money.

This is the reason why gifting cash is considered to be more economically efficient than the traditional gifting. The only downside of gifting cash is acceptance. Gifting cash is really uncommon in our society. So it can also be perceived rude by the person who is receiving it.