How to Choose The Perfect Gift

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What you choose to give, research shows, can alter your relationships, the way recipients think about you and even how you feel about yourself.
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With just a few shopping days left before Christmas, time is running out to find the perfect gifts for everyone on your list. If that’s not pressure enough, consider this: What you choose to give, research shows, can alter your relationships, the way recipients think about you and even how you feel about yourself.

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The good news is that science can help. Studies that have looked at the consequences of gift exchanges suggest ways to achieve maximum benefit for both giver and receiver. Among other tips: Spend time thinking before buying. Avoid giving money. Take risks instead. And get people things they want but feel guilty buying for themselves.

“I think people underestimate the social implications of gift-giving,” said Dan Ariely, a psychologist and behavioral economist at Duke University’s Fuqua School of Business in Durham, N.C. “It’s something very basic that gets us to like each other. You can give cash cards or cash but those create no social value. If you give people real gifts, there’s tremendous potential for strengthening relationships.”

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Gift-giving dates back as far as anthropologists have been able to look and traditional cultures have elaborate rituals for it. Yet, despite the practice’s deep history, Ariely said, gift givers usually end up spending more money and achieving less happiness than if the recipients had just bought something they wanted on their own.

“In the rational framework of economics, it’s kind of a terrible, terrible, terrible thing that should never happen and you should protect society from it,” he said. “If you buy me a gift, you have to guess what I like and you have to spend money on it and you’re never going to get it as correct as if I bought something for myself.”

“Say you buy me a computer gadget for $125 and it gives me four units of happiness even though you thought it was going to give me eight units of happiness,” he explained. “I could find something that gives me four units of happiness for $16. Now you’ve wasted $109.”

The only way to understand gift exchanges, he said, is to consider the social value. And multiple studies suggest that presents can facilitate relationships and boost the urge to reciprocate in a variety of ways.

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In a study by Elizabeth Dunn and Michael Norton, authors of "Happy Money: The Science of Smarter Spending," participants were given a Starbucks gift card and were told to use it for themselves, to pass the card along to someone else or to use it to buy something for someone and also spend time with that person. The people in the third group reported the highest levels of happiness.

Another study in Europe found that pharmaceutical representatives who spent a gift of 15 euros on someone else ended up working harder than people who spent the money on themselves. The act of giving seemed to motivate people to care more about each other, Ariely said. Workers became more likely to show up on time for meetings, and they did more helpful tasks for each other.

To get the biggest rewards out of giving, Ariely suggested, think beyond cash. In one experiment, he and colleagues assigned employers to give their employees a $100 bonus, a pizza or a thank-you text. Workers who got the nice note were most likely to work harder afterwards, suggesting that kindness works better than money at inspiring reciprocity.

“It says, ‘You care about me so I’m going to care about you,’” Ariely said. “I think this is what gift exchanges are all about.”