Three Nobel Prize-winning economic reasons to give gifts : Planet Money Cold economic reasoning says, supposedly, that gifts are inefficient transfers of wealth. But Planet Money host Jeff Guo believes in the economic virtues of gift giving. On today's show, Jeff tries to win over Planet Money's resident Scrooge, Kenny Malone, by going on a quest to find him the perfect gift. Along the way, they're visited by the spirits of three Nobel prize-winning economic theories that can explain why gift-giving is actually good. And by the end, Kenny's heart may just grow three sizes larger. Subscribe to Planet Money+ in Apple Podcasts or at

In defense of gift giving

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All right.


Are any of these breakable?

GUO: Stop shaking it. Stop. Kenny, stop shaking it.

ERIKA BERAS, BYLINE: I lost track of what's going on right now. What are we doing?

GUO: The other day, I organized the first-ever PLANET MONEY Secret Santa.


AMANDA ARONCZYK, BYLINE: Sarah, maybe you should wait to open yours.

GUO: Well, wait. Before we get started, I just wanted - just want to say I'm very excited. I'm very excited that we're doing this.

MALONE: Aww (ph), Jeff.

GUO: I have...

Because I wanted it all to be a surprise, even for me, I wrote a little computer program to secretly assign all the gift-givers and recipients.

GONZALEZ: What is it?

GUO: First up, the algorithm told Greg Rosalsky to give a gift to Sarah Gonzalez, who, you should know, is always talking about how freezing it is.

GREG ROSALSKY, BYLINE: Let's just say that I originally thought Snuggie, but...


GONZALEZ: Oh, my God.

ARONCZYK: What is it?

GONZALEZ: It's bear hooded blanket.


GONZALEZ: Oh, my gosh.

ROSALSKY: I thought it'd be funnier.

GONZALEZ: It's perfect. And I like that it's brown. I love brown things.

GUO: And the reason I went through all of this trouble to organize a Secret Santa is - have you ever given, like, a really good gift? There's, like, this magic to it. You're watching someone tear off the wrapping paper, and suddenly their face just, like, stretches out in surprise. And then they're laughing, and you're laughing and - man, I just love those moments.

MALONE: Mary, the box you have is from me.

MARY CHILDS, BYLINE: Is this money?

GUO: So, Kenny, you should know, is our well-known staff Scrooge.

MALONE: Instead of just going and buying some random piece of garbage, I did try to come up with the best way to transfer money to you.


ARONCZYK: Oh, my God.

CHILDS: It's my own book.

GUO: Mary published her first book this year, a book that took her seven years to write.

CHILDS: Well, Kenny, there's no book that I love more and hate.

MALONE: "The Bond King" now available at your local bookstore.

GONZALEZ: That's the gift - the free advertising.

GUO: Next, my algorithm assigned Amanda Aronczyk to Greg Rosalsky. And Greg's always telling us about his snowboarding adventures, how the powder was just perfect.

ROSALSKY: It feels like - they are indeed socks.


ROSALSKY: Oh, these are not just any socks. Like, these are...

ARONCZYK: Those are not just any socks, Greg.

ROSALSKY: Oh, this is amazing. And now I'll always think about you, Amanda...


ROSALSKY: ...When I'm out there - when I'm putting on my socks.

GUO: Erika Beras got a gift for Alexi Horowitz-Ghazi.

ALEXI HOROWITZ-GHAZI, BYLINE: Is it a headphone-shaped bolo tie?

BERAS: How did you guess?


MALONE: Wait. What?

BERAS: Yeah, that's actually it.


ROSALSKY: Wait. What?

GUO: By the end of our Secret Santa ceremony, there was only one person who hadn't opened their gift yet. And here is where I'll admit that the Secret Santa algorithm I designed was not completely random. I wrote the program so that I, Jeff Guo, would always get assigned to give a gift to the same person.

Mr. Kenny, I gave you your gift. However, you're not allowed to open it yet.


GUO: Because there's a whole lot of explanation. There's a whole thing I got to...


GUO: ...Tell you. So it's going to be a journey. I'll tell you about it. But just hang on to it, and I promise you can open it soon.


MALONE: Is this where we say, hello, and welcome to PLANET MONEY?

GUO: Hello and welcome to PLANET MONEY. I'm Jeff Guo.

MALONE: And I'm Kenny Malone. And, Jeffrey Guo, what am I doing here? Why have I been roped into co-hosting this particular episode?

GUO: Because, Kenny, everyone knows you think gifts are a bad idea. You're like the resident Scrooge of PLANET MONEY.

MALONE: I mean, I think good gifts are a good idea. I do, however, think most gifts are bad. That is true.

GUO: OK, OK. Well, today on the show, I'm going to give you my economic defense of gift-giving. We're going to talk about three economic ideas, three Nobel Prize-winning theories, that explain why gift-giving is actually good. And I'm going to harness those ideas to give you the greatest present ever.

MALONE: OK. OK, and then I can open this present and pass judgment on the institution of gift-giving, I assume, yes?

GUO: Yes, yes. And then you can do all those things.


GUO: So, Kenny Malone, the Scrooge of the Money Planet, you have been on a crusade to rid the world of bad gifts and to have people give cash as gifts.

MALONE: Crusade seems a bit strong, but it's not inaccurate, I suppose.

GUO: Well, did you or did you not, last year, commission an entire original Christmas Carol called "Cash Is King?"

MALONE: I was involved in this, yes.


LEO SIDRAN, AMANDA SIDRAN AND SOL SIDRAN: (Singing) Well, here's the thing. Cash is king. When your memories fade and your sweater's frayed, cash, cash, cash, yes, cash is king.

MALONE: OK. It is true. I want to normalize cash as a gift because it is a more efficient transfer of value than a bad gift, Jeff, which I believe most gifts are. That's my stance, and I'm sticking to it.

GUO: (Laughter) OK. I mean, that is a classic econ argument, I'll give you that. But today, you, Kenny Malone, are going to be visited by three Nobel Prize-winning economic theories.


GUO: And my argument is that these theories can make anyone a better gift-giver. And I will use them to find the perfect gift for you, to convince you that cash is not actually the best gift. Gifts - gifts are the best gifts.

MALONE: OK, Jeff, cue the clock striking midnight or whatever is supposed to happen.


GUO: OK. The first big economic idea that we're going to talk about is something called signaling theory.

MALONE: Signaling theory. Got it.

NAVIN KARTIK: This is had a tremendous impact on the way economists think about, you know, almost every branch of economics.

GUO: This is Navin Kartik, he's an economist at Columbia University who specializes in signaling theory and, more broadly, game theory.

KARTIK: Game theory is a branch of economics that tries to understand how people make decisions when they care about other decisions that people are making.

GUO: So it's just, like, trying to figure out how people psych each other out.

KARTIK: So, you know, that's not the way we usually describe it, but, yes, that's right.

GUO: Signaling theory is all about how people in a market try to convey information in a way that is believable, which is harder than it may seem. Like, Kenny, say you're applying for a job. You're a hard worker. How do you convey that to someone?

MALONE: I mean, yeah, I would say I'm a hard worker in a cover letter. I don't know.

GUO: Yeah, but those are just words, right? Signaling theory says it's better to show that you'd be a hard worker with some kind of signal that's costly and hard to fake.

MALONE: Cover letter etched into gold.

GUO: I mean, that's closer.


GUO: And economists say that maybe this is the real benefit of college. It's not what you learn in college, it's the fact that you did this really hard thing that cost you a lot of time and energy. And that sends a signal to future employers.

KARTIK: The fact that you're willing to bear that cost conveys some information to a potential employer that you are the kind of person that they will want to hire.

GUO: So signaling theory, to me, it sounds like those shirts that you get when you, like, get off a roller coaster that you can buy - like, I survived.

KARTIK: Yeah, yeah, yeah, exactly.

GUO: And, Kenny?

MALONE: Yes, Jeff?

GUO: You know, of course, gifts can also be powerful signals.


GUO: They can say, hey; I know a lot about you or I care about you, so I spent a lot of time and effort getting you a gift. And so Nobel Prize gift-giving trick No. 1 is, if you want to send a signal that you care about someone, you need to make sure that you do the hard or expensive thing. And in your case, Kenny, we did have a $30 limit...

MALONE: That's true.

GUO: ...So expensive wasn't going to happen. So I needed to find a way to show you that I put a lot of hard work into that present that you're holding right there.

MALONE: Yes. OK. I'm intrigued. I'm intrigued.

GUO: So I went on a quest to learn everything about you.

MALONE: The what now?

DANIEL FLYNN: Hey, Jeff. I'm doing...

GUO: So I called your old friend Daniel and also Jim.

Thanks for making time this morning. I appreciate it.

JIM ANGELO: No worries - anything for Kenny.

MALONE: Oh, Jeff. Oh, no.

GUO: Oh, yes. I've been totally spying on your entire life.

HANNAH SAMPSON: (Laughter) Hi. How are you?

MALONE: Jeffrey, you have called my wife - that is my wife, as well. Yes, OK.

GUO: I had a lovely chat with Hannah. I actually have two hours of phone calls with your friends and loved ones. I have a whole dossier. And, you know, we talk, right? Like...


GUO: ...I know you love comic books and movies and - oh, my God, "Lord Of The Rings." But everybody was like, oh, no, no, no. You are just scratching the surface of Kenny Malone. You like crafting...

MALONE: I do. I do like crafting.

GUO: ...Cross-stitching.

MALONE: Love cross-stitching.

GUO: I had no idea that you used to sing in choirs, that you starred in a musical in college.

MALONE: Starred is strong, but yeah.

SAMPSON: He also is really into the classic sport of jai alai. It's a Basque sport with, like, the fastest ball in all of sports.

GUO: I literally have never heard those words come out of his mouth, and now I'm learning that this is a major part of his life.

SAMPSON: Major, major.

GUO: (Laughter).

SAMPSON: If you ever go - if you ever are in Miami with Kenny, he will try to take you there to see some jai alai games.

MALONE: Oh, yeah. Jai alai is great. But OK - signal taken. I'm impressed, if slightly alarmed. I feel like you've really put the secret into Secret Santa here. Like, this is a lot.

GUO: I will say, everyone I talked to, especially Hannah, told me that buying you a gift is probably the hardest thing to do in the world.

SAMPSON: That's a tall order.

GUO: Tell me why you think it's a tall order.

SAMPSON: Well, because Kenny is the kind of person who, when he realizes there's something he wants, he just buys it for himself.

GUO: No.

MALONE: This is true. Poor Hannah has had to deal with this a lot.

GUO: But I was not worried because this transitions us perfectly to our second Nobel Prize gift-giving idea, which is the theory of search costs.

MALONE: OK, theory of search costs.

GUO: So a search cost - right? - is all the time, money and energy you spend looking for stuff, like looking for the right house or the right car or the right job.

MALONE: Sure, yeah.

GUO: And if you think about it, the job market - right? - is just full of all these workers searching for the right job, all these companies searching for the right workers. And this is actually one reason economists say that the unemployment rate will never hit zero because there are all these inefficiencies built in, all these search costs. And, Kenny...

MALONE: Yes, Jeff?

GUO: This brings me to Nobel Prize gift-giving trick No. 2. Gifts are an opportunity to help someone you care about deal with their search costs.


GUO: OK. So Hannah did tell me that you're the kind of person who just buys stuff that they like.

MALONE: Correct.

GUO: But you are just one person, and there are infinite products out there, right? So you don't even know what things are out there that you might like.

MALONE: Yes. This is technically true. I suppose there is a limit to my willingness to bear the search costs for new products beyond a certain - I don't know - threshold or something.

GUO: Exactly. And so to make this the awesomest gift ever, I set out to find something that you had never heard of. I went to where all the weird things live - eBay.

MALONE: Oh, boy.

GUO: Let's see. Kenny loves "Lord Of The Rings."


GUO: OK. Let's see. (Vocalizing). "Lord Of The Rings" - oh, my God, a hundred seventy thousand-plus results for "Lord Of The Rings."

The internet is vast and overwhelming. But that's why economists say that recommendations from friends, gift guides, algorithms - all that stuff's never been more important 'cause it helps us cut through all this noise.

Oh, my God. What is this? A "Lord Of The Rings" Galadriel cosplaying duck - (laughter) oh, my God. It is a rubber ducky, but it's shaped like Galadriel.

MALONE: A Galadriel duck is pretty funny, but I don't want that, A, and B, I should also tell you, like, I have dozens of eBay alerts. Like, I truly - if there's something out there that I might want, I have methods of finding it. Like, I don't know, man.

GUO: Yeah, yeah. Hannah did warn me that I probably wouldn't be able to beat your search algorithms.

MALONE: They're very good.

GUO: So I...

MALONE: I'm very proud of them, yes.

GUO: So I tried to cast a wider net, and I came up with something that I thought you'd probably never heard of before.


GUO: I was so excited. I texted Hannah right away. You want to - I'll read you the text. Hi. Secret random question - has Kenny ever tried miracle berries? Miracle berries are this obscure fruit that magically makes sour things taste sweet. And let me read you her reply.


GUO: LOL, LOL, LOL, LOL, LOL. We actually had a whole tasting a couple of years ago with a whole sour foods charcuterie board.


GUO: Charcuterie board.


GUO: So I replied, ugh (ph) - all caps - why - all caps.

MALONE: Yeah. I mean, look. Like, it's dawning on me, Jeff, that when I say most people are bad at giving gifts, part of this is clearly my own fault. Like, I have made it very hard to buy me, in particular, a gift.

GUO: Yeah. So I did spend an entire weekend completely demoralized...


GUO: ...Wondering, what the heck am I going to get you?

MALONE: Oh, no.

GUO: But then I did have one more person to talk to and one more big Nobel Prize-winning economic theory that might save the day. To explain it, here is an example that, I will admit, comes a bit out of left field. It comes from health care or, more specifically, what's wrong with health care.

AMITABH CHANDRA: I feel like, you know, health care economics is really just market failure. It's like every market failure that economists worry about, they're amplified when it comes to health care.

GUO: This is Amitabh Chandra. He's an economist at Harvard, where he studies the many market failures of health care. And he says one of the big ones is that people are really bad at choosing their insurance plans. They get confused about their premiums. They misunderestimate (ph) how much copays are going to cost them in the future.

CHANDRA: The consensus on the literature is that people waste, you know, 600, $700 a year picking plans that are not the right plan for them.

MALONE: Jeff, this sounds like you've bought me insurance or something.

GUO: I saved you $700 a year on your health insurance, Kenny Malone.

MALONE: OK. What - but what's the idea here?

GUO: Well, in the case of insurance, maybe you've noticed that some employers automatically choose plans for their employees. And Congress has totally outlawed some really bad types of insurance plans. And the idea here is that sometimes it's good to have someone else help you make choices...


GUO: ...Especially when we're facing, like, really complicated choices. We procrastinate. We forget about stuff. We get hangry (ph). I get hangry. Economists call these behavioral biases. And the economists who have studied these biases, I will say, have won the Nobel Prize multiple times, which brings me to Nobel Prize gift-giving trick No. 3, which is that we should give gifts paternalistically sometimes.

MALONE: (Laughter) OK.

GUO: Right? Gifts can be economically efficient if they help people who might be bad at making choices make good choices, so, like, when parents buy their children's socks when their children probably want to buy candy. And I ran this idea by Amitabh.

CHANDRA: Absolutely. But the question is, how good at paternalism is the gift giver?

MALONE: Yes. Jeff, how good at paternalism is the gift giver here?

GUO: OK. Amitabh did warn me that this is a high-risk, high-reward strategy. You really have to know the person better than they know themselves.

MALONE: Well, you do have hours of interviews about me, so...

GUO: Exactly. And after going through your dossier again, that's when I got really inspired because I realized I was worrying too much about what you would like. And instead, I started thinking, what's something that I want for Kenny?

MALONE: Well, OK. I should warn you, I do have very specific tastes in socks, if that's where this is headed.

GUO: Oh, this is so much better than socks.


GUO: But that is after the break.


MALONE: OK. Are we here? Can I - can we - can I finally open this gift...


MALONE: ...And decide whether you've proven me wrong about gifts or not?

GUO: I do feel confident that this gift will complete your Ebenezer transformation and change your mind about gift giving because this is the best gift ever. It signals my time and effort, discovering that you're musical, you're crafty. It has saved you immeasurable search costs 'cause I went out and found this thing. And finally, it's a little paternalistic because it's something that I think you should like. And, you know, I am a big science nerd, so this is something that I wanted to share with you.


GUO: So now, Mr. Kenny Malone, will you please open your gift at long last?


MALONE: OK. So it's about the size of, like, a jewelry box or something, I would say - maybe a little bigger than a jewelry box.

GUO: More precious than jewelry, for sure.

MALONE: Let's see. All right.


MALONE: (Laughter) Jeff has got me a theremin kit. Now, theremin - I do love theremins. A theremin is an instrument - a very weird instrument that is exactly what you think of when you think of a science fiction UFO sound. Like, that is probably a...

GUO: (Imitating theremin).

MALONE: ...Theremin being played. That's exactly it.

GUO: The best part about it is that it's not just a theremin. It is an introduction to the beautiful world of electronics and circuits and electromagnetic fields 'cause you know how a theremin works, right? It turns your body into a giant capacitor.

MALONE: Jeff, this is a very good gift. I will not deny that you have got a very good gift for me. I will also not deny that it took you an insane amount of time to find this gift and get to this conclusion.

GUO: If I were to bill NPR...

MALONE: Yeah, how much?

GUO: ...For all the hours I spent thinking about this gift, I don't know. I've been thinking about it literally in my dreams.

MALONE: You can't bill for dream hours, to be clear.

GUO: I don't know. I don't know. I don't know. So, Kenny, will you play us out with something festive?

MALONE: All right. (Playing theremin). All right. From the top. And - (playing theremin, singing) Christmas. We wish you a merry Christmas and a - (laughter).

Jeff, it's really hard. You're going to need to get me lessons next year, Jeff. This is not easy. Whoa. (Playing theremin). Pretty good, pretty, pretty good.


GUO: Do you have a secret theremin talent? You can email us at or find us on all the socials. We're at @PlanetMoney. Our show today was produced by Willa Rubin with help from Sam Yellowhorse Kesler and James Sneed. It was edited by Jess Jiang, engineered by Robert Rodriguez and fact-checked by Sierra Juarez. Special thanks to Kenny's wife Hannah Sampson and to Kenny's college buddies Daniel Flynn and Jim Angelo. I'm Jeff Guo.

MALONE: I'm Kenny Malone. This is NPR. Thanks for listening to my theremin.


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