If I buy a birthday present for someone, I care very much about the content of the present.
I believe in MF quote "someone" is better described as "someone you do not personally know or maybe see once". A model for that is buying a gift for a Yankee Swap party. Or for a child I do not know: something to cheer them up, but as I do not know if (s)he likes dolls or trucks I can go with a safe, generic choice, e.g., a book.
That is, I am still trying to do a good thing, but am not too worried that I will guess incorrectly.
This is because if the receiver can afford it and thought it was good, he would already have it. Because he doesn't, getting it as a gift is worse than getting money.
Alternative economic interpretation: if you gave someone the choice between item X and money worth X, the gift is good only if the recipient would choose item. If they were to choose the money, then they are always short-changed.
Gifting is economically inefficient.
> This is because if the receiver can afford it and thought it was good, he would already have it.
Assuming they a) know about it and its qualities, b) know how to get it, c) can do so without hassle, and d) truly know what they want and need.
Then there are people who hate to choose, but trust certain others to make a good choice for them.
When you buy something for you, you know your exact needs and how to evaluate compromises. For gifts you care, but not as much since you lack significant information. You get something that is "good enough". For close friends you'll land a great gift in value and cost, but when you don't know the person very much, the gift usually tends to become an Amazon gift card or the like, since any guess may be a poor choice.
For example, many years ago I bought a projector with all the money I had saved (still student, at my parents), and I projected films on the wall, which was suboptimal but I was fine with that. On my birthday my friends got a sliding screen to hang from the ceiling! And I thank them very much for it! But even if they took the measures and all while visiting me, they missed the fact that the ceiling was ultra light drywall, rendering the gift useless.
This is one of the premises underlying rational choice theory that doesn't hold up to empirical investigation.
In the private sector there are plenty of cases where you're spending someone else's money on someone else and you care about doing a good job of it—and often without the requirement of personal mores as motivation. Banks and investment managers, for instance, basically do this. Some of course are awful, but some (loosely correlated with the ones who have been around for a while and built a reputation) actually do care about getting good results without excessive risk and without deception. Do the people who agree with Friedman's statement about government also conclude that private banks are bad too and people need to look out for their own money?
;)
When buying for someone else, my biggest concern is to not look cheap. When buying for myself, my biggest concern is getting the best value. When using someone else's money, I'd be less cost conscious because I'm not feeling the hit.
I definitely care about what I give someone, but I care about different things than when buying for myself. You can see this in politics. Politicians have the best benefits in government, and when they pass a bill, they want to significantly affect the most people, even if the impact isn't as good as a better thought out system. Case in point: the ACA impacts most Americans, but prices for medical care overall have gone up. For those 87%, it sure seems like a good deal because they don't see the true cost (lots of deficit spending and worse care than a single payer system).
That kind of emotionality is what keeps people from making reasonable decisions on economic policy. It would be nice if the kind of naive Keynesianism that politicians love to apply actually worked. It would be nice if you could spend yourself out of a recession. Unfortunately, politicians only like the spending part of the equation, not the savings part.
It's important to note that the Chicago school does build on Keynesian insights. It's an attempt at improving upon its failures.
I suspect that the truth of the matter is that conscientiousness varies across the human population and that the best analysis takes into account this fact.
To ignore rational self interest is naive and plainly wrong- but it is also wrong to ignore the impact of high conscientiousness on decision-making. I say this without condoning or condemning either configuration.