Tuesday, December 11, 2012

Happiness research we can use

Economist Joel Waldfogel has demonstrated that most gifting is a waste.  There would be no deadweight losses if we give cash.  But non-cash gifting is also universal and has been around for a very long time.  What is going on?  The giver and the receiver usually get something from the act which goes above and beyond the item being gifted.

I have no idea whether tongue-in-cheek prompts Waldfogel, but we should all grasp the limits of homo economicus.  It is a useful theoretical abstraction, but like all such abstractions, it cannot be taken to extremes.  Critics love the straw man and use it to attack all economic thinking.

These thoughts come to mind as I read a gift I just received, Paul Zak's The Moral Molecule:  The Source of Love and Prosperity.  On the book's jacket, Helen Fisher calls it "an important book".  Tyler Cowen says of Zak, "We need more daring economists like him."  There is also praise from Matt Ridley and Frans de Waal.

Zak concludes (p. 209) this way:  "In the nineteenth and twentieth centuries, economics tried to achieve scientific rigor by cutting off recognition of the human element of motives, epxectations and psychological uncertainties.  Fortunately, behavioural economics and now neuroeconomics, has put us back on what I consider the right track, which is a path that combines both rigor and perspective."

Zak's research on the moral molecule explains traditional gifting and acts of kindness.  It also helps us understand various virtuous cycles.  The positive feedbacks between trust, exchange and prosperity are just a few that Zak elaborates.

It is safe to gift Zak's book and not worry you are being wastful.