Puzzling Over the Invisible Economy


Last week I did something that felt very 1990’s: I purchased a compact disc. The CD wasn’t for me; it was a Christmas present.

As I wrapped the CD, I pondered the silliness of the whole enterprise. After all, the recipient — like most of us these days — listens almost exclusively to MP3 files. In fact, I’m not even sure if he has a CD player beyond his laptop, which he will use to convert his disc-shaped gift into a more useful set of MP3 files.

But somehow it felt more “real” to give a physical compact disc, rather than to transfer the property rights to a more ephemeral MP3 file. The same thing can be said for books. I now read mostly on my Kindle. You might think that this would lead my family to give me books in the appropriate electronic format; after all, they are cheaper, easier to travel with, and more useful.

Instead, my family virtually stopped giving me books. In fact, I only received one book, a volume that isn’t yet available electronically. A couple of years ago I gave a Scrabble set as a gift, and it was a hit; but our current Scrabble set is no good for traveling, so I thought about purchasing an electronic iPhone version. I passed though, because visiting the App Store on Christmas Eve just seemed to miss the point.

The examples left me wondering: What explains our schizophrenic attitude toward the invisible economy? We embrace the flow of bits and bytes in our daily lives, but we feel reluctant to give them as gifts.

It’s not often you’ll hear me say this, but I can’t see any coherent economic explanation. I’m leaving this puzzle for the psychologists, sociologists, or perhaps a more creative economist.


On the flip side, I really dislike the virtual gifts people are always giving me on Facebook, especially because they usually require me to instal some application, which I am reluctant to do. If there was something real behind those gifts, like MP3 files or an AVI movie, I'd be more inclined to accept them. Given that the virtual gifts cost my friends nothing, I don't feel bad not accepting them.


Even though I listen to most of my music in MP3 format (at my computer or at work), I still buy mostly CDs versus digital files. Yes, the first thing I do is rip my CDs into mp3s, but that doesn't stop me.

Like you say, I enjoy having a physical copy. The few things I buy digitally, I end up burning to a CD-R, anyway.

I know that things I have burned to CD-R get listened to less than actual CDs (despite mostly listening to things on my mp3 player). Maybe it's because I can't listened to burned CDs on my home stereo (it's old and dying). Maybe it's because the slim cases I put CD-Rs into get skipped over when I'm looking for a disc to play in the car. Maybe it's because I tend to buy things I'm less sure about in mp3 format, and thus am less happy about them on average.

I think it's a nasty feedback loop. Since I tend to listen to things I buy digitally less than things I buy on actual CD, I associate good music with real CDs. I then favor the CD format for things I really like and the digital format for things I'm mildly interested in.



CDs are not necessarily useless in the MP3 era. Sure, it takes an extra step (i.e. ripping the music) to get them onto the MP3 player, but the CD remains a relatively high-quality CD-audio-format copy of the music, a de facto backup. MP3 players and computer hard drives are not invulnerable to data loss. Even backup tapes/drives have been known to fail, so the ability to go back to the CD again ... even if it's not likely to be required ... means it has some value.

And I suppose having the CD on hand might be useful if the RIAA ever comes knocking, demanding the license status of all the digital music you have.


could it be we still have an inherent distrust for the permanence of digital media? if i give you a cd, which gets ripped to mp3, when your data is lost, you still have my cd. maybe we're slowly getting over the fear on our own purchases, but aren't as willing to risk it for a gift...

i.e., we're more concerned with the longevity/utility of the singular gift, and less concerned with any one of the multiple things we buy for ourselves... just a theory.


Physical media with no DRM has one major advantage over DRMed media files. For one is that the right holder can not take the persons music away from them at will.

What happens if the company that is selling the files goes under and your file must be 'synced' every 30 days or you lose your rights to listen (to avoid people copying it)? Very suddenly you will have a useless string of bits. This can not happen with physical unencrypted media.


I'll venture my opinion as a non-pyschologist, sociologist, or economist. Unwrapping physical gifts at 25, 45, or 75 is just as fun as unwrapping gifts at 5. Opening an email informing you of an electronic ITunes gift certificate is just not the same.


This might seem trite or obvious, but the simple fact is you can't unwrap an invisible gift. I think of it in the same way as if you were to give your son some extra money for Christmas: would you just deposit it into his account or give him a check? Certainly, the latter requires more effort on his part (like the burning of a CD), but the physicality of the thing makes it "real." Plus, there's obviously more effort in wrapping an actual item than in sending some bytes. The wrapping denotes that you planned for the person, you selected them something, you got it on time, prepared it for them, wrote a card---in other words, you care. In an invisible gift scenario, you could knock out an entire spate of gift giving in a couple hours of clicking. It seems, well, a little off-handed. If the holidays are indeed about showing love through gifts (and we can bemoan this all we want, but there's also something touching about receiving a special item and about selecting it for a loved one), sending an email just seems, not Grinch-like, exactly, but extemporaneous, certainly.



I received an iTunes gift card this Christmas and was very happy. I was able to unwrap it and have my direct to digital files too.


It's amazing how many people go to stores to exchange their gifts after Christmas. Oh how much better off everyone would be if people gifted cash, not items (physical or digital).

The only reasonable explanation I have is that people enjoy seeing others unwrap their gifts. (something you can't see if it's a digital item) I don't believe anything is done for the benefit of the recipient, gifting makes far more sense to me if it's seen as a selfish act.

Seth Mangan

Although I always immediately rip any new CD I purchase into MP3 files, as an audiophile, I absolutely prefer compact discs over MP3 files in major part because MP3 compression is a form of lossy compression.

Of course I realize I probably wouldn't know the difference in a blind comparison, still, when I really want to listen to good music, I put the CD in my home theater system.

Just like the second poster above, I associate good music with CD's.


For similar reasons that gift cards or cash are less desirable than actual physical gifts. Or even more similar to giving someone the rights to purchase something. I recently "received" a 24" computer monitor for my birthday, which meant we both went to the store afterwards and the "giver" purchased it for me. While I got to shop for and pick out the exact monitor I wanted, it just wasn't the same. The visceral act of handing over a tangible thing adds value to the gift or the gifting event. This is why you're starting to see gift cards include special envelopes or even tiny gift boxes.


Michelle beat me to it. Props to her. It's simple...the wrapping. The unwrapping of presents on Christmas and birthdays is a long standing tradition. We have been unwrapping presents on these days for as long as we have been physically able to. The wrapping is symbolic of the occasion, even more so than the gift itself. Is an unwrapped gift really a gift or just a free transfer of property? I know its semantics, but ask yourself this...would you be more likely to buy mp3 files (as opposed to cd's) for someone if it wasn't their birthday or Christmas, but rather just a day in which you felt particularly generous?

Adam Kruszewski

Also if you live in Poland you can't buy foreign music in mp3 format legally (itunes nor amazon mp3 shops are not available in Poland). And I'm pretty sure there are more countries with such a problem. So even if there is a small group of people who are not afraid to embrace the 'invisible' form of such gifts they simply can't do that in many or most areas.



Economic explanations of gift-giving often consider not only the value of what we give, but also the value we get from giving. As Michelle and Tenorca noted, a recipient may place more subjective value on unwrapping a physical present than opening an email. But in addition, I might enjoy shopping for and purchasing that physical gift more than buying its e-equivalent. I bought my father a stack of used LPs for Christmas. The smell and feel of vinyl, and the ambiance of the dingy basement used-record shop with Iggy Pop blasting in the background, made this present by far my most enjoyable purchase this holiday season. Hopefully my dad got as much utility out of the gift as I did (one other benefit of giving used gifts--no need to feel bad about trying them out before you give them)!


Perhaps there's a self-serving aspect to this. We want the recipient of the gift to remember who gave it to him/her. The recipient is much more likely to recall the source of the CD rather then the source of the tracks once they're ripped and thrown in with thousands of other tracks.

Ingeniero Juan Carlos Garcìa

several times as student I bought a bar of a delicious chocolate and wrapped very carefully just to see the smile of the girl and have a perfect excuse to give a huge kiss!

A cybergift lacks the personal touch that real gifts will always have!
Ah!,by the way...the girl who receipt the chocolates more than twenty years ago,said me the past week that She still has the wrappings!...where I did practiced my rudimentary verses.
"dear susana,..while you enjoy this insignificant present,remember that when I get my degree you and I..."

yep!,..technology is terrific,but "there are certain things you cannot do...!


I had a similar discussion about books. There is nothing better to many book lovers, than buying, holding and reading the art. And that's what it is, it's tangible, takes up space, doesn't have to be plugged in or charged, or formatted, or booted, or any of that - and above all it's art. The feel of turning the page is wonderful. Bindings, dust jackets, getting them autographed, first editions, all good stuff. Giving something like that is much more than giving content, it's giving an experience attached to an object.

"This is the book that so and so gave me," is much better than, "Hey let me bring up the insubstantial string of zeros and ones that Bob emailed to me."

I've read a lot in both media and I don't ever see books going away. You can see the Mona Lisa any time you want to google her, and then you can go see the Mona Lisa. For my part I have a love hate relationship with technology. Each item on it's own is wonderful and taken as a group I'm way too connected - much like the matrix. It's a recipe for high blood-pressure.

Digital content is growing but I'd rather read about it in a book.


T.C. Moore

Transferring digital media is still too difficult. You can't buy a particular MP3 file or book file and say "I want to transfer this file to another person." Even without DRM on the file, most online stores don't even support the notion.

You could get a gift certificate, but what if you wanted to buy them a particular book, album, or song? It's a little silly to say "Here's a gift card, now use it to buy this book."

What those shopping for me need is a Visa gift card (or similar) that can only be used at clothing retailers. Then you can give someone "clothes" without guessing what they want or need, or where they like to shop and hence their favorite styles. And without giving them cash or a gift card that can be used for anything at all. Since I must be forced at gun point (or the threat of letting money go to waste) to buy clothes.


My number one favorite gift is someone's time. My first choice is if they come visit an better, help me do something. My second choice is a letter or email, not a forwarded spam, but a missive they took the time to write personally to me. I keep a lot of things, but letters are best and email is second best. To me, the measure of my self-worth is the determined by the effort these friends make to remain my friend.

Instead of an electronic card or mp3, I am happy to hear about a recommended song or book. Then it becomes a project of mine to seek it out and see for myself. I was very sad when my favorite radio station, KBAC (Radio Free Santa Fe) fell off the internet airwaves. They were handed around by various corporations until they ended up back in private hands, and are still transmitting their eclectic version of musical reality. It's one of the few quirks of Santa Fe that I personally enjoy. Sadly, I am 35 miles away, blocked by mountains, so I can barely get their signal. They ended up on a tiny transmitter that runs out about 20 miles away. But, every time I go through SF, I tune in and note the time of day if a song I like pops up. Then I go to their website and look it up, and perhaps add it to my collection. Just as if an old friend made a gift to me.

I like being obstinate. Most of what I hear on mainstream radio does not appeal to me. And, mainstream radio has mostly left me behind anyway, because I don't tend to buy the things that are advertised on radio, so my favorite stations have changed into other demographics that I don't recognize, so I delete them from my radio memory.

I still have CDs and vinyl, and I am slowly converting them over to mp3. But I need the fresh input from old friends and KBAC to keep my world from closing in and grinding to a halt. So, please, if you must send a spam, please write a personal note about why you think it's funny and why I'd like it. Better yet, look out the window and tell me what's interesting in your zip code.

: )



Years from now people's home will look very different compared today due to the lack of bookshelves! Most people have a collection of books and/or CDs (records years ago?) that can be seen by a visitor. Not that we display them to impress a visitor, but it does add something to a room. It quietly expresses something about us, our interests, etc. I think years from now we'll miss that once everything goes digital.