Matt Nolan

The economics of valentine’s day

/in /by

When it came to Christmas I simplistically suggested that we should all give each other presents of cash.  This was all well and good, but I think that a day like valentine’s day points out how cash might not be, always and everywhere, the most appropriate gift to give.

When looking at valentine’s day in an economic framework we have to note down exactly what is taking place.  It is a day where you give a gift to your “better half”.

Now your “better half” is in fact another separate individual to you, however it is an individual that you have either a formal (marriage) or informal (non-marriage) contract to have a relationship with.  Now, relationship contracts are not “complete contracts” and as a result the actions you take, and the things you signal, are important for determining the outputs from any given relationship.

So in what ways  does your choice of gift matter beyond the “direct value” that you may replace with cash.

  1. It may signal knowledge of the other persons wants and desires,
  2. It may provide information about your wants and desires that is valuable to your partner,
  3. Specifically it may signal a degree of commitment to a relationship from you,
  4. Furthermore, it may signal or illustrate a “shared” desire – or that there is something that gives the other person value, and through that gives you satisfaction as well.

In this sense the gift means more than just the sheer value of the present itself – it also provides information and signalling value that is used to shape the relationship for at least the next year.  The significant increase in breakups post-valentine’s day may in fact be a signal that sometimes individuals are not able/willing to do this to a sufficient degree.

So just remember as you pass over your gift today, that it will be seen as a signal of the relative value you place on matters inside your relationship that are not explicitly contracted – and if you get in trouble, I’m sure a good excuse would be to explain how they are misinterpreting this signal …

Update:  XKCD points out one of the issues that this causes.