Personal Finance: We are all givers at heart

photo Chris Hopkins

Many economists have argued (at least theoretically) that the whole concept of gift-giving is economically inefficient, meaning that the total financial welfare of the parties involved is actually reduced by the transaction. Consider, for example, all the ugly ties and garish sweaters shunted off to the attic over the years for eventual dispatch to the Goodwill. Not to mention $100 million in annual fruitcake sales.

Their solution generally involves an elegant if unsentimental construct: exchange cash, or better yet, declare a halt to swapping gifts and simply shop for yourself, dramatically reducing the odds of receiving a white elephant (unless you possess an epic lack of self-awareness.) Voila! A model of economic efficiency.

For obvious reasons, not many economists apply their own prescription, opting instead for the more traditional approach in practice including a Christmas Eve dash to the mall. One might imagine that previous dinner table dissertations expounding upon "inefficiencies" and "dead-weight losses" have left spouses somewhat unmoved.

Our English word "give" comes down nearly unaltered from a primary term in Old Norse, implying that gift-giving is certainly older than our ability to describe it. By definition, a gift is a voluntary transference of value without any expectation of reward or recompense. Psychologists believe that generosity is actually a primal human instinct, linked with our need to cooperate in pursuit of communal survival. It is in our nature to give.

Christmas Day and the liturgical season surrounding it is the epicenter of generosity and giving for the Christian world. Although not widely observed until the third century A.D., the festival celebrating the birth of Jesus is heavily imbued with the symbolism of gift-giving and rapidly grew to resonate strongly with believers. The Gospel of Matthew recounts the pilgrimage of Persian astrologers to the home of the young child and their presentation of valuable gifts of gold, frankincense and myrrh in his honor.

Christians soon adopted the custom of exchanging presents on Christmas Day, Christmas Eve, or Epiphany (Jan. 6) in recognition of and rejoicing in God's gift to mankind. For them, Christmas is one of the two most holy and festive days of the year. Merriment, feasting, and of course handing out gifts are much anticipated and relished highlights of the annual ritual.

Surely, however, not every festal garland adorns the window of a devout Christian. Nevertheless, the instinctive motivation to give during this season clearly transcends the purely theological justifications. Forget all the familiar criticisms of over-commercialization; the basic truth of human generosity often finds its best expression at Christmas time in the countless volunteer hours and contributions to food pantries, homeless shelters, toy drives, and change kettles by brothers and sisters of all faiths, and of none at all. That is also the Spirit of Christmas.

Economists have difficulty modeling this peculiarly irrational behavior. In all probability they are too busy today opening their presents anyway.

Merry Christmas to all, and best wishes for a healthy and prosperous New Year.

Christopher A. Hopkins, CFA. is a vice president for Barnett & Co. Advisors. Email your personal finance questions to

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