Everyday situations illustrate economics at work so it isn’t surprising that sitcoms which portray more extreme everyday situations make for even better examples of economics at work.  Two of my greatest interests collided this week when I discovered what I call Seinfeld-side economics.  It started with a simple
“paper about nothing” which discuses the option value problem presented in one episode of Seinfeld about using contraception.  Then I was directed to The Economics of Seinfeld which shows the episodes and the economic concepts they illustrate.  

One of my favorite episodes was “The Deal” since I’ve been in so many long arguments about whether cash is a good birthday gift (or whether gift cards are acceptable).  You can see the Economics of Seinfeld at work:

From what I recall of my own absurd life episode about this situation, the conclusion was:

• utility: thoughtful gift > thoughtful gift card > cash > thoughtless gift card > no gift
• signaling: the trick is what is considered a thoughtful gift card — if your friend shops at a particular store a lot, does a gift card for that store count?  the point I think is to show you put real thought into it and that’s enough
• deadweight loss: cash lets people to at least spend on what they want

The only question that wasn’t ever really resolved was … is an AMEX gift card better than cash?  It seems less tacky but provides close enough characteristics to cash.  

I’m sure there are a lot of similar situations that have been picked apart in day to day exchanges but this one stood out for the length of debate and passion it brought out.