The economist in me says the best gift is cash. The rest of me rebels. Some people argue that the reason we don’t give cash is because that is too easy – to show that we know the person well we must signal by shopping for something "special."
Yet this can’t be quite right, either. Imagine the following thought experiment. Someone gives you $100 cash. You go out to the store and buy a set of car tires. Purchasing the tires clearly maximizes your utility. Now imagine that instead of $100 the gift giver gave you a set of car tires. Would you be happy that they know you so well that they purchased for you just what you would have purchased for yourself? I don’t think so.
The example illustrates that we want the gift giver to buy something for us that we would not have bought for ourselves. Or more precisely one of our selves wants this – the self that is usually restrained, squashed, and limited, the wild self, the passionate self, the romantic self.
Gift giving, therefore, is about reaching out and giving to the wild self in someone else. Why would we want to do this? Because we want the wild self in someone else to be wild about us.
The bottom line? If you want to please the economist in me, send me cash. If you want to please my wild self (I know, not many of you, but you know who you are!) use your imagination.