2. Giving and receiving value

By: Andrea Terzi

Economics is about giving and receiving

Within the social sciences, different disciplines overlap significantly with respect to their subject matter. Common themes in economics, such as money, production, consumption, or income distribution, fall within the realm of economics as much as they fall within other disciplines such as history, archeology, sociology, philosophy, or anthropology. Yet, each of these fields of knowledge looks at a specific dimension of the social world through its own glasses. The specific lens that economics looks through when studying the social world defines the economic dimension of social matters.

We take an “economic” view of social matters when we center our attention on how such matters relate to the act of someone providing something to or obtaining something from others. Such acts are significant insofar as they affect the individual sphere because, when giving or receiving, the individual feels a consequence from his or her action. In this sense, economics studies the circumstances and the consequences of people’s acts of giving and receiving.

There is, indeed, one special condition that many economists would include in the subject matter of economics and which is abstracted from the social world. This is the individual acquisition and use of natural resources aimed at personal consumption, exemplified by Robinson Crusoe’s problem of allocating time and available resources toward his wants, outside the social world. The theory developed in the “Arrow-Debreu track” builds on the hypothesis that one single best approach to the allocation problem exists (i.e., utility maximization), irrespectively of whether it is applied to a single individual in nature or an individual in society. By contrast, the approach chosen in this tutorial is to consider only social systems, most notably monetary economies.

Giving and receiving entail a subjective measure of value

The view of the economic dimension as being associated with giving and receiving paves the way to introducing a notion of value. This is a measure of the consequences of giving and receiving, something the individual either obtains from or transfers to others. The notion of value has been traced back to the earliest known civilizations when sacrificing to gods meant the destruction of some form of value, when a form of deference to the gods was to bring valuables to the temple, and when social rules set value compensation to prevent vengeance.

People accept to give or to receive if they think it is worthwhile. A decision to give or receive is based on some evaluation of the expected net benefits of giving or of receiving. An individual accepts a gift if the net benefit of the gift (and its consequences) is perceived (at the moment of the act) to be positive. Even an act such as killing a valuable animal to burn can be worthwhile if the individuals who make such a sacrifice have faith that some future consequence of their act will be more valuable than the loss of the animal or if they believe that by so doing they are paying their liability to the gods for being born. Being forced to pay a duty to a sovereign landlord or a tax authority has value if the individual who pays can avoid future negative consequences or simply feels good about meeting an obligation. The value of any thing or act is commensurate with an individual’s appreciation of that thing or act.

Next module: Three means of transferring value
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