Some years ago, some economists came up with an idea that became briefly fashionable. The idea is that gift-giving is inefficient. That’s because it’s unlikely that the gift given to the recipient would have been as high up on his utility scale as some other item that could have been purchased for the same amount of money. Therefore, resources are being wasted, and you’re thus far better off giving money than objects.
Maybe, and it’s true that as kids get older, they tend to get money rather than gifts from their parents. But still, it’s kind of tacky to slip a friend two “$20s” and say Merry Christmas. Indeed, if that happened to you, you might think it was pretty weird or lazy. On the other hand, if he gave you a fancy cutting board or a nice bottle of brandy, you would be happy even if you weren’t in need of either.
So in the end, the economists’ theory here is pretty vapid. Also, it fails for another reason. The equation here combines the subjective utilities of two people into a single unit, which isn’t really possible because we’re dealing with stuff that’s ultimately immeasurable. The giver might, in fact, gain vast joy from giving even when the receiver didn’t just love the gift. It’s also possible that the receiver loved getting a gift even if he didn’t like the gift itself that much.
In other words, “it’s the thought that counts.” That means more than it seems to mean. Real value extends from the human mind, not the physicality of the thing or the some cobbled together social welfare function.
In any case, here you have economists working to deploy their fancy theories in a way that attempts to make a longstanding tradition seem idiotic. After all, most of the civilized world has had money to give for the better part of 500 years, and yet during all that time we still developed and practiced a gift-giving tradition. There’s a point to the tradition that can’t be outwitted by all the Ph.D.s in a room.
What’s the core economic truth about exchanging gifts? It’s a truism: Both parties do it because they benefit from it. That may not sound very insightful, but actually, it took 2,000 years for some of the world’s smartest people to figure it out. It’s called mutually beneficial exchange because both parties are made better off by exchanging than if they hadn’t.
This is true whether each party is giving a gift to the other or if just one person is buying a gift from a merchant. In this case, the money given up is a proxy for physical property, except that the money is more fungible. Thought of in this way, Christmas is year-round because, with everything you buy or sell, you’re engaged in an act of gift exchange from which both parties benefit.
In addition, more than the personal benefit that comes from exchanging goods among the parties directly involved, there are great societal exchanges that result, including knowledge exchanges in the arts, philosophy, language, architecture, and science, as well as tolerance and understanding of cultural differences.
Part of the reason it took philosophy so long to figure out the meaning of exchange has to do with a mistake made by Aristotle. As fantastic as he was on the subject of private property—here disagreeing with Plato—it wasn’t really possible for him to imagine a world in which wealth was generated by the whole community by virtue of exchange and entrepreneurship. He believed that exchange meant trading of equal value, but that’s quite wrong. If that were true, there would be no reason for the exchange at all. In fact, in an exchange, both parties imagine themselves to be made better off.
There’s a humane element to the idea of the exchange-based economy. We discover through exchange the value that other human beings can be for us as individuals. We grant each other dignity and discover our own in the process. We find others valuable to us, which is why we so often say “thank you” when we buy something. Both parties thank each other because both parties have gained in value. This is why exchange is such an important life force for the unfolding of human rights. Indeed, it’s impossible to believe that the idea of human rights would ever have been discovered apart from the experience of voluntary exchange with others.
An exchange economy is called commercial from the Latin root commercium. It simply means to trade to mutual benefit. The beautiful Medieval poem called “O Admirabile Commercium” celebrates trade of a special sort. It goes as follows:
“O admirabile commercium! Creator generis humani, animatum corpus sumens, de Virgine nasci dignatus est: et procedens homo sine semine, largitus est nobis suam Deitatem.”
Which translates to:
“O admirable exchange: the creator of humankind, taking on a living body was worthy to be born of a virgin, and, coming forth as a human without seed, has given us his deity in abundance.”
So we see what’s happening here. God himself traded eternity for time by taking on the form of a human person in Jesus, thus blessing the world as worthy of such. This is an important insight because it takes holiness out of the exclusive realm of the spiritual and makes it physical. Thus does this admirable exchange also sanctify the material world, including its economic dimension. Again, we get this word commerce from this very conception.
The reality and implications of the incarnation (God becoming man) grew throughout Christian history, and it intensified as society developed in wealth through the late Middle Ages and into the Renaissance period. The high spires that pointed endlessly upward toward the heavens during the Gothic period gradually gave way to the celebration of the human form with the Renaissance and Baroque eras, sometimes going to absurd lengths so that the fleshy figures in bright colors replaced the rigid art of the 13th through 15th centuries.
In art, architecture, music, science, and economics, we gradually bring time and eternity into contact with each other with the idea of progress. This was all about the celebration of the human form made possible by the admirabile commercium.
The grotesque attacks on commercial life over the past three years in most parts of the world mean more than merely the deprecation of small businesses. It was literally an attack on the Western conception of society and, arguably, a repudiation of our understanding of the relationship between God and man.
That’s how much is at stake with the status of a commercial society. This is the terrain in which humans have learned to encounter each other and find value in each other and the social forms we make together.
Remember this during these holidays. Gift-giving is about more than just finding something that someone likes and giving it away. It’s about the experience of freedom itself: the exercise of human volition to grant value and dignity to others and they to you. We must do this for each other, for we’ve surely learned by now that no central plan, much less some fancy-pants economic and epidemiological theory, can substitute. Gift-giving is how we save the world and ourselves.
Remember too that gifts come in many forms. Sometimes, they’re as small as a kind word or a smile. We nearly lost those too during these past three years.
