Puzzling Over the Invisible Economy

Photo: tanakawho

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.