Post No.: 0457
Perhaps strangely when viewed on the face of it – people are far more willing to do something for free than do the exact same thing for a very small amount of money. For instance, we’d rather mow a neighbour’s lawn, babysit a friend’s child or help a stranger lift a heavy item up a flight of stairs for free – as a gift or favour to them – than be paid a few pennies for it, even though a few pennies appears rationally better than nothing.
This is because gifts build social capital and create a sense of long-term, rather than one-off transactional, social reciprocity. Conversely, exchanging cash for an item/service totally changes the meaning of what’s just happened – it changes something from being a social interaction into being a market interaction. It changes something from being a hobby into being work. It changes someone from being a romantic date into being a paid escort! And we’ll find it easier to turn play into work than work into play too (although increasing the sense of autonomy might help make work feel more like play).
Doing something for free can feel more intrinsically pleasurable than doing the same thing for money. Part of the reason might be the pressure to perform well once one is getting paid to do something, which reduces the enjoyment and sometimes in turn the performance – which means that paying someone highly doesn’t necessarily increase their performance and could in fact decrease it. Meanwhile, when something that has an uncertain monetary value is given in return for the completion of a task, performance isn’t affected by the monetary value of the item (as long as it’s not disclosed via a price tag). This behaviour is similar to altruism in the sense that people don’t modify their performance based on the expected reward. Doing something for free doesn’t necessarily mean we’ll do a poor job or not care either – we can put in a lot of effort when doing something for charity, for instance.
So if a friend asked you to do a simple favour for them, you’d do it no problem if you can – but if they said they’d pay you a small amount of money to do it, you’d probably feel really awkward about it, and possibly even (if you agreed to do it under these circumstances) do a worse job than if you were to do it for free.
Once you make a relationship a ‘market’ one, it’s difficult to make it a ‘social’ one again – if a nursery starts to fine parents a small amount for being late in picking up their children, this after-nursery time will turn into a ‘market’ relationship, the guilt of being late will stop, and parents will assess whether the fine is large enough compared to the cost of paying for childcare elsewhere for that same time period, which might result in an increase in the number of parents being late or how long they’re late for! Of course, a large enough financial penalty should begin to deter parents according to their own price – but social guilt is a better deterrence than small financial penalties. Therefore if a publicly-funded healthcare service starts to treat its patients more like customers then a risk is that more nurses and doctors will become more concerned about ending their shifts on time rather than serving what’s best for their patients, which could reduce the overall quality of care they provide. Social norms also suffer to a degree when we try to write complete and explicit contracts like prenuptial contracts.
If you treat your friends, family and personal relationships like business accounts, where you’ll expend only the effort or other resources into them that you’re hoping or expecting to receive from them in return, with perhaps a positive ‘return on investment’ and without a care if it’s zero-sum or not, then you shouldn’t be surprised if this attitude is eventually returned strictly like-for-like. And if you’re ever found lying in the gutter with no perceived prospects for the future and you therefore have nothing left to give to others, then you might just be left there i.e. you won’t really have any real fluffy friends at all :(.
Be loyal to friends, family and romantic partners, but not to businesses, brands or products. It also makes tremendous sense for advanced civilisations to not only transact in one-to-one value transactions (as in you scratch my back and I directly scratch yours in return) but to give to those you can give to and receive from those who can give to you (i.e. paying it forward, which generates a greater total utility and community spirit where everyone feels that everyone is looking after each other, including strangers – that’s why helping strangers for nothing is valuable in society even though we’ll likely never bump into them again for them to directly reciprocate something back to us). You cannot always pay for what you might need, no matter how rich you may be. The only concern is of free-riders, yet don’t assume somebody is one unless you can prove that they are (e.g. highly-paid executives of wealthy companies exploiting government job retention furlough schemes during a time of crisis when everyone else is accepting a hit to their finances).
Going into business with friends is therefore tricky. Friends going into business together create potential conflicts of interest – between serving the friendship and serving each individual’s financial interests. These interests aren’t always aligned even though the partners are apparently on the same team (e.g. one person might seek more power and control of the business). Conflicts of interest can create zero-sum situations – positively serving one interest will directly negatively affect the other interest. So it must be like a strong family unit where the self-interests don’t override maintaining the relationship(s) (albeit this shouldn’t mean being nepotistic and literally keeping everything in the family!) Married couples in some ways will have their finances intertwined (e.g. via shared mortgages) thus spiting the other will be like spiting oneself – and that’s the kind of setup one needs in a business partnership too so that there’s no conflict between self-interest and the partnership.
Anyway, gifts and the sense of reciprocation they evoke are often exploited in market contexts too. Free gifts (which are usually cheaper than they appear) in these contexts are often used as enticements for securing future custom. Customer loyalty programs, such as reward points, can help boost sales. However, customers soon start to see these rewards as expected and view them as something they’re entitled to rather than as an incentive, and so are difficult to wind down if unsuccessful. Surprise gifts are therefore better, although these gifts must increase in value each time in order to increase customer loyalty – if these rewards decrease in value over time, it’ll potentially have a worse effect than just giving a one-off gift, and is close to not giving anything at all. The increase only has to be slight each time though. People respond to reciprocation, and show a preference to increasing sequences of rewards due to quickly adapting to the expectation of receiving a certain amount, and therefore a loss aversion if they suddenly receive less. Having said that – are such loyalty points truly gifts because, after all, you must buy something (i.e. pay something) in order to receive them?! Maybe that’s why they’re seen as more of an entitlement per purchase and the rest? Well we certainly don’t expect true gifts to constantly escalate amongst friends.
A lot of gift giving in social contexts is from the elderly to the children, who then grow up and become elders who give to the children of the next generation, and so forth. Children aren’t expected to give gifts to their elders because they’re not expected to be able to afford to.
Some gift giving in social contexts is also between peers, but even though there’s no legal contract to reciprocate, there can be a huge social pressure to reciprocate, and to do so cost-for-cost even when one person cannot afford the same amount as the other. This can create undue stress during times like Christmas – thus it can help to make it clear that an expensive gift isn’t expected to be reciprocated by someone who’s not expected to be able to afford as much, or to have a prior agreement to not give each other expensive gifts, or to have a ‘Secret Santa’ arrangement with a spending boundary. These expensive gifts often aren’t that useful or desired by the recipient either, but the pressure to reciprocate with a similar-priced item will still be felt regardless of the utility of the gift. This is all okay if both sides can afford all this without debt problems – but sometimes one of the parties needs to count the pennies and not make Christmas time ruin the rest of the following year because of money concerns. So when gifts are given in a social context, it doesn’t mean that we don’t feel an enormous urge to reciprocate – quite the opposite – and this above scenario is one where we must be mindful of when this can create an undesirable effect.
In some cultures, people typically split restaurant bills between friends or family – but try alternating who pays the bill in full. For the recipients, the ‘pain of paying’ is eliminated and they get a free meal as a gift, and for the payer it gives them a warm furry feeling and the ‘pain of paying’ has diminishing effects as the costs rise (e.g. paying £20 compared to £10 feels worse than paying £100 compared to £90). So unless it’s an unusually large outlay, don’t split the bill – have someone pay it all one time then have another person pay it all the next time and so forth. It sort of implies that the group will meet again soon too. It’s similar to whose round of drinks it is, except try not to keep tabs so strictly between friends or family otherwise it’ll again start to feel more like a market relationship; where things aren’t personal but just business. If someone fails to reciprocate and this is gratuitous of them because they can (now this doesn’t have to always be directly in the context of paying for or providing dinner or drinks though because gifts or favours come in many forms, and you might consider that your relationship with them is worth more than mere monetary terms and you don’t have debt problems), or they take too much when they know it’s not their turn to pay, then take note of this and reconsider inviting them in the future!
Favours certainly don’t have to be monetary, and some favours might even be considered priceless (e.g. paying a stranger to be there for you when you were ill wouldn’t have felt the same). So not every personal gift we receive or give, or contribution to society, is or can be measured or compensated for with money.
Overall, a thoughtful gift can mean so much more than money, and be so much more motivating than giving someone plain cash, even if the cash amount would’ve been higher. And it’s not shameful to ask for things or to accept gifts as long as you reciprocate or pay it forwards where you can.
(This blog definitely feels more like a hobby than work because money hasn’t been the focal point in any way. If it wasn’t regarded as a gift to the world from me then the schedule and amount of research and effort I put into all this would’ve felt oppressive and I would’ve ceased this blog a while ago. To those who are reading these posts, I thank you, and I hope I can continue to share little puppy (and kitty) pieces of love, peace, happiness, health and wisdom that are useful to you. <3)