Gift Exchange

by Kieran Healy on March 14, 2007

James Joyner is perplexed by John Quiggin’s beard. Or, more precisely, by this:

bq. All manner of worthwhile charities hold events wherein people are “sponsored” based on how many miles they bike, laps they walk, hours they go without sleep, ropes they jump, or what have you. Why the need for the gimmick? Are there some significant number of people who don’t give a damn about curing leukemia but are nonetheless willing to donate to the cause for whatever pleasure seeing people shave their beard yields? Or who aren’t sure whether breast cancer is more worth curing than some other disease and make that determination based on what physical challenges the antis are willing to undergo to prove their point?

It’s a good question. But I think the answer will not be found in differences in degrees of pleasure or utility between “Cure for cancer” and “Cure for cancer plus John Quiggin having no beard.” Neither is it quite a question of uncertainty about one’s preference for giving money to a charity being clarified by the knowledge that someone is also doing a sponsored walk.

Instead, what we’re seeing here is the norm of reciprocity in action. You give me something, and that means I can give you something back. A cure for breast cancer or leukemia is very worthwhile but from the point of view of the immediate exchange it is a long way off. I know that my money will not buy a cure, at least not in any direct or immediate way. Moreover, when it comes to giving away my money, there are innumerable worthwhile charitable causes that might plausibly make a claim on some of it. What things like sponsored shaves or Walks for the Cure or a Free Car Wash (with a donation) do is establish a local gift relationship with someone in particular, for something in particular. Sure, the particular thing being given (a shave, a car wash) is trivial in comparison to the overall cause (a cure for cancer). Nevertheless, it is the small relationship of reciprocity that makes the exchange meaningful for the giver and thus makes it much more likely to actually take place.

In a strictly economic framework, these kinds of activities are analogous to the deadweight loss of Christmas gifts (why not just give money, after all?), or are simply advertising gimmicks whose only function is to attract attention. But the resolution to the puzzle is also similar: without the framework of mutual reciprocity, the exchange likely wouldn’t happen in the first place — even if in principle a more efficient (no shaving, no car-wash) solution would be available to narrowly rational agents with the right preferences. That is why almost all forms of charitable giving in fact involve some kind of reciprocal exchange, whether it’s something as trivial as getting a badge, or as heavily mediated as the performances by celebrities on a telethon.

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dsquared 03.14.07 at 11:14 pm

exactly – in general when “an economist looks at everyday life” (TM), when you come to a choice between two seemingly inconsistent alternatives, the thing to give up is expected utility theory.


Doug T 03.14.07 at 11:23 pm

I’m not so sure it’s really reciprocity in a lot of cases. I don’t really care if my brother shaves his head for leukemia. Rather, it’s a guilt trip. The person decides to run laps or shaves their head or whatever and hits up all their friends and family, who feel obligated to donate because the person doing it is a friend or family member.


radek 03.14.07 at 11:39 pm

I always thought that that “Deadweight Loss of Christmas” paper should’ve been entitled “Estimating the non-pecuniary value of Christmas” but I guess Waldfogel wanted to be provocative.


ebenezer 03.15.07 at 12:27 am

Why do social scientists outside of economics always want to call everything reciprocity? Reciprocity involves payback. These sorts of charitable campaigns have absolutely nothing to do with “the social norm of reciprocity.” Donors do not expect to benefit from the activities they sponsor (what do I care if you walk 20 miles or shave your beard?). And it’s certainly not plausible to expect John to contribute in turn to the favorite charities of every one of his sponsors.

You’re on the right track when you note that “Moreover, when it comes to giving away my money, there are innumerable worthwhile charitable causes that might plausibly make a claim on some of it.” These gimmicks are signaling devices, whereby the solicitor demonstrates a real commitment to the charity in question by undertaking some costly action. Anybody can solicit money from me for any number of noble-sounding causes. By asking me to sponsor you on a charity walk, you are telling me that you strongly believe this particular charity to be especially important and worthwhile. To the extent that I trust your judgment and share your values, this is informative to me. In fact, my donation becomes a function of how much effort you are willing to expend in the walk.

By sacrificing his beard for the first time in 30 years, John is communicating how strongly he feels about the charity… it means something significant to him, and readers who have developed some regard for John will be more likely to donate than they otherwise might. This is signaling, plain and simple.


Henry 03.15.07 at 1:10 am

I’m not so sure it’s really reciprocity in a lot of cases. I don’t really care if my brother shaves his head for leukemia. Rather, it’s a guilt trip. The person decides to run laps or shaves their head or whatever and hits up all their friends and family, who feel obligated to donate because the person doing it is a friend or family member.

There’s no reason whatsoever that gift exchange shouldn’t involve guilt-tripping – indeed it often does. Hence, for example, those little stickers that charities often send you in the post – the economically rational thing would be to pocket ’em, use ’em and not give the charity one penny, but I suspect that few people actually do this – they either donate money, or guiltily chuck the things out. Or in slightly more academic language, Jon Elster (_The Cement of Society_, pages 111-112):

These norms [norms of reciprocity] enjoin us to return favours done by others. The potlatch system among the American Indians is a well-known instance. According to one (contested) interpretation the potlatch was something of a poisoned gift. ‘The property received by a man in a potlatch was no free and wanton gift. He was not at liberty to refuse it, even though accepting it obligated him to make a return at another potlatch not only of the original amount but of twice as much.’

Elster also quotes Colin Turnbull on the Ik of Uganda.

you have the odd phenomenon of these otherwise singularly self-interested people going out of their way to ‘help’ each other. In point of fact they are helping themselves and their help may very well be resented in the extreme, but it is done in such a way that it cannot be refused, for it has already been given. Someone, quite unaskedl may hoe another’s field in his absence, or rebuild his stockade, or join in the building of a house that could easily be done by the man and his wife alone. … The work done was a debt incurred. It was another reason for being wary of one’s neighbours.

Now this obviously isn’t what is happening here – there isn’t any established norm that because John is shaving his beard that everyone should donate, nor any practical way of monitoring who does or doesn’t contribute. He’s appealing not so much to people’s sense of guilt or specific relations of exchange as to their sense of _generalized_ reciprocity (which is what may be hanging up doug t and ebenezer); that if someone contributes something that is personally costly to the general good, others should do so too. But it does suggest that reciprocity under different conditions may indeed be used as a weapon. Which is one of the reasons that I’m suspicious of communitarians who fetishize reciprocity (as Etzioni did in his response to Kieran last week) – reciprocity doesn’t by any means exclude self interested behaviour. Under some circumstances, people may prefer to conduct exchange through cash, precisely so as not to incur poisonous obligations.


sara 03.15.07 at 1:32 am

Consider the audience’s intangible gratifications (minor sadism). When an org sets up “Weight Loss for Charity,” the attraction is seeing whether your co-workers and bosses can stay on their diets or whether they will stupendously fall off. A guy who’s had a beard for 30 years and never changed it may have the odd scar or facial lumps that might get nicked in the shaving.


Richard 03.15.07 at 1:33 am

Why do social scientists outside of economics always want to call everything reciprocity?

Henry’s already beaten me to the punch, and done it better and more thoroughly than I would have… but I’d add that gift exchange gets so much play in social sciences because Mauss’ thesis is so damn seductive, and because the sheer pleasure of Mauss plus the unfalsifiability of psychological explanations can take you anywhere you want to go: it’s often said that psychology has nothing to say about society because it only deals with the individual – here’s a way to apply it in group context.


Kieran Healy 03.15.07 at 1:38 am

Why do social scientists outside of economics always want to call everything reciprocity?

As Henry’s already mentioned, it’s important to bear in mind that reciprocity is not altruism, it is a mode of exchange.


Helen 03.15.07 at 2:04 am

There’s a thing called “fun” which you economists might care to look up sometime.


jacob 03.15.07 at 2:32 am

I’d be looking at this as an organizing method. If a friend says “I care so much about cause X I’m willing to do unusual or unpleasant action Y,” I’m more likely to care about cause X than if I just get a circular in the mail. An example I think will resonate with lots of people: I don’t give money to AIDS research or care, not because they aren’t worth endeavors but because they’re just not my issues, and I give my limited donations elsewhere. But when my friend ran in an marathon to raise money for AIDS, I wasn’t about to say, No, I’m not giving money to you. So I gave a small amount, but that small amount was more than I would have given anyway. It’s not because I saw greater value in “curing AIDS plus Margaret running am marathon”–it was because when there was a personal request, I was more likely to answer it.


Slocum 03.15.07 at 2:34 am

Alex Tabarrok at Marginal Revolution talked about this topic a while back:


John Quiggin 03.15.07 at 2:55 am

Just to clarify, the Leukemia Foundation mainly gives help to people with leukemia and their families. So it’s here and now, but not as beneficial as a cure would be.


radek 03.15.07 at 3:23 am

Economics = fun


radek 03.15.07 at 3:24 am

Or at least (economics C fun)


Walt 03.15.07 at 3:32 am

Helen’s comment is accidently very funny. Economics is in fact good when explaining things that are fun. What Kieran is trying to explain is why people do things that are not fun.


engels 03.15.07 at 3:50 am

economics ∩ fun = Ø


John Quiggin 03.15.07 at 6:25 am

“A guy who’s had a beard for 30 years and never changed it may have the odd scar or facial lumps that might get nicked in the shaving.”

That’s what makes it all so terribly interesting, said Eeyore. Not really knowing until afterwards.


magistra 03.15.07 at 8:13 am

There is also a longer-term reciprocity and gift-exchange issue here, at least when you’re talking about local networks. Many people at some point find themselves doing some kind of fund-raising activity, either voluntarily or semi-voluntarily (your church/child’s school/social group/charity you support needs to raise some money and you are morally blackmailed into assisting). If you give money to one of your neighbours/friends/relatives being sponsored now, in the future, you can legitimately ask them to do similar things for you. If you refuse to give, it’s harder if you ever want the charitable favour returned.


Alex Gregory 03.15.07 at 8:22 am

I’ve always thought of it as “Well, if he’s going to the effort to shave off that beard, it’s only fair that I should do something too”. It’s not that I’m returning the favour to him, but that I feel that if the other person is doing something for a third party, that it’s only fair that I should do so too.


Helen 03.15.07 at 8:38 am

Helen’s comment is accidently very funny. Economics is in fact good when explaining things that are fun. What Kieran is trying to explain is why people do things that are not fun.

No, I mean something like the Greatest Shave makes it more fun to contribute to something worthy but perhaps not very exciting (of course,, to Leukaemia sufferers and their families, nothing could be more exciting)– especially if the beard owner has a somewhat iconic beard like JQ’s.

Rolf Harris, you’re next!


abb1 03.15.07 at 8:54 am

I don’t understand the sponsorship thing at all, it doesn’t make any sense.

Well, OK, the only possible explanation I can think of is this:

Suppose I’m a very rich guy. Theoretically I would like to make a donation, but being (obviously) a greedy selfish SOB, I’m thinking: “Why should I suffer giving my money away while all these poor people around me don’t sacrifice anything? I know they don’t any money to donate, but they should sacrifice something, suffer in some other manner, it’s only fair.”

And so, then, when some poor guy offers to run a marathon for a particular charity – that satisfies my SOB-ish sense of justice and I donate.

This is the only meaningless context I can imagine.


abb1 03.15.07 at 8:59 am

I mean meaningful.


Harald Korneliussen 03.15.07 at 9:21 am

Publicity, man, publicity. For a fundraiser to be successful, it needs publicity. Quiggin knows that if he shaves off his beard, people pay attention, and when people pay attention they are more likely to contribute. I don’t see why this isn’t a completely sufficient explanation.


Richard 03.15.07 at 2:14 pm

I don’t see why this isn’t a completely sufficient explanation.

Because this is a humanities issue. The point is not to find sufficient explanations, the point is to extend the discussion.


Kieran Healy 03.15.07 at 2:26 pm

A little cranky this morning, richard?


eweininger 03.15.07 at 2:38 pm

One among the various factors:

Charitable givers often have their names listed in brochures, engraved on plaques, or, in extreme cases, have buildings named “in their honor”–all public attestations to their generosity. Conspicuous virtue.


Alison 03.15.07 at 2:54 pm

There are two kinds of signalling going on in most of these instances. The first is that the fundraiser gets to tell his friends and family how important the cause is to him. Without a demonstrable investment, there is no signal and no way to evaluate the claim on the person being asked. WIth a signal, the importance can be evaluated.

Philanthropists use reciprocity of donations: I will give to your cause if you will give to mine. The signalling is vital here as well: I can ask you for a large donation only once I have already demonstrably and publicly committed to give my own larger donation.

The second type of signalling benefits the cause in other ways: AIDS Walks done en masse in the downtown core of cities with high profile sponsors signal that the issue is important and acceptable to a lot of people.

If a lot of people are visibly sacrificing their comfort on a weekend morning, the rest of the population will ask why. It’s a big signal.


C. L. Ball 03.15.07 at 3:03 pm

I think ebenezer, jacob, and magistra offer more plausible accounts. It is signaling — the sponsoree pays a non-monetary price (though some costs are usually involved) to signal the worthiness of the cause. Sponorship usually involves — but not always — invoking existing relationships. The generalized reciprocity that Elster cites is more exchange in kind (I hoe your field, you hoe mine) rather than the example given here, unless magistra’s I sponsor you, you sponsor me is activated.


Walt 03.15.07 at 3:53 pm

Signaling is the deus ex machina of economics.


abb1 03.15.07 at 4:03 pm

the sponsoree pays a non-monetary price […] to signal the worthiness of the cause

This is not rational. John could simply explain to you why he feels it’s important to give money to this leukemia fund; how does shaving his head help here? It does signal that he is very enthusiastic about this charity for some reason, but it doesn’t signal its worthiness to you.

People are enthusiastic about all kinds of things; football, for example – they paint their faces, fight, do all kinds of stuff. These are signals too, but what do I care?


C. L. Ball 03.15.07 at 5:24 pm

Re #32, the economists have an answer to that: it’s called ‘cheap talk.’ John may say he cares about the charity but when he shaves his beard he demonstrates he cares about the charity.

Consider statements by three Johns (not the set-up to a hooker joke):

John1: Support charity X for reason Y.

John2: Support charity X for reason Y and I will run 5 miles.

John3 Support charity X for reason Y and I’ll drink beer.

John2 has made a costly signal of the value of charity X. The other Johns have not.

Re the football example, if you were deciding what football teams to support, you might say: team X’s fans paint their faces; team Y’s fans do not. I think team X’s fans demonstrate greater support for their team.


Kieran Healy 03.15.07 at 5:40 pm

Contrast the signalling argument with Alex Tabbarok’s professedly rational approach, cited above:

I forget the charity but showing early signs of an economic mind, or perhaps a lazy body, I decided that it would be much more efficient to get the money and avoid the running (today, I would say avoid the rent seeking). Thus, I solicited donations with the promise that I would run just one lap. Unsurprisingly, the other students were most displeased when I sauntered around the track finishing just as everyone else was beginning to work up a sweat. More surprisingly, the charity organizers didn’t like my methods even though I raised a lot of money.

If you run, it’s rational because you’re emitting a costly signal, and if you don’t, it’s rational because you raised the money efficiently by not wasting your time with all the stupid running.


abb1 03.15.07 at 6:00 pm

C. L., I agree that there is a signal, I don’t doubt that John2 is truly enthusiastic, but why should I care that someone is truly enthusiastic about something?

I’m saying that this only works only if you’re already inclined to contribute to this particular cause, but reluctant because you suspect that everybody else is free-riding. This is (imo) the only scenario when the signal is meaningful to you.

Same is the case with the telethons: you’re already interested in contributing -> you see many others contributing -> and you feel that, because you’re contributing along with a bunch of other people, you’re not a dupe (perhaps a mistake).


SamChevre 03.15.07 at 6:15 pm

Abb1–you’re missing something crucial.

The signal can be a way to avoid free-riding (that, IIRC, is Tabbarok’s key point), but htere’s another kind of signalling as well. That is, I don’t really know much about the issue, but I trust John Quiggin’s judgment; if he’s willing to publically commit to it, I’m willing to support it because I trust his judgment. His “signal” is a public commitment; its value depends on how much I trust his judgment.


abb1 03.15.07 at 6:44 pm

Sam, sorry, but I don’t think so. First, typically you don’t know anything about people who walk-run-swim-paint-faces, so this is an exception.

And secondly – more importantly – what’s there to trust? Is there a secret reason why fighting leukemia is the most important cause in the world, the reason that only John knows but won’t tell us? Of course not.

I think the brain process here goes something like this: John is a much respected person -> a lot of people will listen to him and contribute -> fewer free-riders -> safe for me to contribute. Voila.

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