Gifts and the Destruction of Value

Philosophy Forums Society, Government, and Economics
1

In general, gift giving, particularly in compulsory gift giving events like holidays, destroys value by encouraging exchanges of capital for goods that are worth less than the money that is spent to the recipients. In a market, voluntary exchanges create value when the sum of the values of the goods received is greater than the sum of the value of the goods traded away. While this isn’t the outcome of all voluntary exchanges, a market actor is optimally placed to evaluate her own values, and so will generally be best able to identify when an exchange adds value for her. Gifting undermines this, by having goods intended for one person be selected by another, often without an explicit request or evaluation from the recipient.

The easiest case to see this is when a gift is unwanted by the recipient. If a gift received is disposed of, the value it represents to the recipient is nil. Comparing the values before and after the exchange shows that there is a net loss of value:
Before:

  • Value of the good to the seller: this is non-zero, because it has value as a commodity to the seller.
  • Value in cash to be exchanged for the good: call this X.

After

  • X (the value in cash exchanged for the good remains constant, because cash is liquid).
  • Value of the good to the receiver (here, the person given the gift) is zero. It has lost its value as a commodity because the cost of selling an individual item will generally be greater than the price to be received (for the original seller, this cost is spread across many sales).

Prior to the sale, the total value is X plus some non-zero amount; after the sale, the value is just X. Thus, this exchange has created a net loss in value.

A harder case is where the recipient gets some value out of the gift, but could have gotten more value if instead of the gift she had received the cash spent on the gift. This exchange will often produce a net loss in value. Specifically, whenever the value of the good as a commodity to the seller is greater than the value of the good to the recipient of the gift, the exchange will represent a net loss of value.

With this case we can include a more nuanced understanding of gift-giving. Gift-giving isn’t always about benefiting the recipient, but about social signaling and bonding that is valuable to the gift giver. In a sense, the buyer of a gift acts as a middle man, extracting value from the gift as she passes it from seller to recipient. Society will lose out on this exchange whenever the value of the bonding or signalling is less than the lost value in the exchange between seller and recipient. Moreover, if the gift-giver could have gotten as much or nearly as much of the social benefits of the gift from giving the cash spent for the gift directly to the recipient, society will have lost out if the potential net value creation was greater than the resulting value creation, even if the resulting value creation is net positive.

Finally, there is a significant case where the gift is worth more than is spent on it to the recipient. A good example of this is when the gift has high sentimental value, so that the value to the recipient has little to do with the market price of the good. Also to be included in this case are situations where a gift is more meaningful than the cash spent on it, so that the social effects are great, and the value extracted from the gift is otherwise close to the value of the cash to the recipient. However, it’s is important to note that these gifts are likely to be rare, especially when gift giving is not spontaneous, but compulsory (or effectively compulsory). Part of what makes such gifts possible is that they are rare, and they generally cannot be forced. Your grandmother’s watch may be very sentimental, but if she owned more than one, each subsequent watch is not likely to be received with as much sentiment, nor are any additional possession’s of hers.

Other than sentiment, this case may occur when the difference between the value to the seller and the value to the recipient are large. For instance, when goods are only available in foreign markets, they may be much more valuable to a foreign buyer or recipient than they are to a local seller (for instance, I still have a Chinese Pepsi can I bought in China in 2002, which cost less than a dollar in China but is unavailable in the US). Here, even though a recipient may have spent the money differently in the foreign market, the barriers to participating in that foreign market shift the value enough to make that difference insignificant.

In domestic markets, these gifts are unlikely. As premised above, individuals are optimally placed to identify their own needs. There is the possibility of the rare ideal gift that the recipient “didn’t know he needed,” but even in those situations, telling him about the good and giving him the money for it will probably be better: this will decrease risk, which is a cost, and as long as the gain in decreased risk is greater than the transaction cost to the individual, there will be a net gain.

For the foregoing reasons, gifts can destroy social value, and though they can also create it, the situations in which they do are rare. The most likely outcome of gift-giving is a destruction of value. This is particularly true of compulsory gift-giving occasions like holidays, because the types of gifts that create value are by and large of a sort that cannot be produced on demand: they usually require either sentiment or a restricted market, and both are the result of circumstance and opportunity rather than intentional planning. Therefore, gift-giving holidays generally represent a net loss of value for society.

2

Uhhhh… I think it’s the thought that counts. :smiley: Yes there is negative gift giving on all fronts, but I disagree that there is a net loss to society. You’re focusing only on the purchase and giving, not the added benefits to society of the economic boost to the economy. Factor that in, and it probably is a wash. More of a reciprocal transaction within society than not.

Although if I get one more pair of socks or another pukey sweater, I may be pursuaded by your premise… :stuck_out_tongue:

3

I take it you mean the short term bump that comes around gift-giving holidays. I would argue that this benefit is not actually a benefit at all. I reject that on two grounds:

First, the bump may just an increase in liquidity, so that the goods in stock are traded for more than they’re worth and everyone has cash in hand to buy goods they actually want. Liquidity is good, and the exchanges it permits are probably net beneficial, but I am skeptical that they outweigh the losses from the gift giving itself. This is particularly the case in a society like the modern US, which is awash with cheap credit. That credit already represents a great deal of liquidity, so it isn’t clear that the added liquidity is significant. Furthermore, many gifts are bought on credit anyway, in which case it would be preferable that credit be used by the ‘second round’ buyers (the people who can buy goods as a result of earnings from increased gift-sales), or by the ‘first-round’ buyers as either direct cash redistribution or direct spending on non-gift items.

Second, the economic bump from holiday season can be compared to the make-work fallacy. Putting more people to work is only beneficial if it increases the value output. The apocryphal story of Milton Friedman pointing out that giving manual laborers spoons instead of shovels makes a similar point. Basically, as in the make-work fallacy, here we’re concerned with the wrong indicator of economic benefit. If we look at sales as the indicator of economic health of the country, we’ll be mislead. It could be that these sales just redistribute wealth, without creating any. A clear non-gift example of where this happens when publishers buy up all copies of a new book. The sales don’t represent people getting value out of the book, the companies are just manipulating bestseller lists. In essence, they lie with their sales, getting publicity and only creating wealth if the book is purchased legitimately as a result (i.e., if the investment pays off). It’s a little more complicated when we’re talking about multiple actors, but the point is the same: if sales are the only metric we use, we will be fooled by occasions on which many value-destroying sales are made at once. We’ll call what we see an economic bump, without accounting for the loss in net value that each sale represents.

4

Well okay, so much for getting that car for her. Obviously it wouldn’t be of any value to her.

5

I don’t think China cares.

6

The issue you are raising is especially true for concocted holidays, like Mother’s day, but also plays a large role in other holidays, especially the spending lunacy around Xmas.

Some people will likely say that the thought is what matters and the social messages - w hich you mentioned - must be somehow counted. Here’s the thing: someone convinced us that buying products is the way to ‘think’ this affection we feel for others. And that is just silly. There are many other ways to express the thought - a poem, helping out with the dishes, singing, a beautiful letter - notice how some can actually be thoughts (and feelings) - some other mundane to extraordinary favor. Often these acts can also have value for the giver - certainly writing a poem and meditating in the process on the friend can have value, for example. Magic, value out of thin air!

Of course we are stressed and short on time, but actually the time it takes to go out and buy a present, for those of us not rich enough to have a servant do this, could create a thoughtful non-product gift. And then a phone call expressing appreciation and love, that can make a week.

No wonder people often buy things for themselves as a reward, and often this feeling of being rewarded lasts through the purchase but the product itself doesn’t really get used or appreciated.

This does benefit some people however, that we think along these lines.

7

Carleas,

If sales were the only “benefit” to the equation, then it could be considered a net negative. But… what about the jobs created around holiday sales? Sure, most of those jobs are temporary, but it is still payroll, and checks in the hands of people who buy other things than just more gifts. They actually might pay rent, the mortgage, buy food, gas, and other necessities. There is payroll in re-stocking empty shelves, both from manufacturing to end-of-purchase. There is no part of the economic chain of demand-supply-delivery that isn’t impacted by “gifts”.

I don’t buy the long term outlook. Long term is never more than a collection of short terms. Yeah, we “analyze” all the ups and downs of the short terms and magically arrive at long term prognostication, but short term drives the economy. If that weren’t true, then why the stock market? The economy is always betting on the come. Buy low, sell high. That is axiomatic for all producers-consumers.

The redistribution argument is soooo bogus. Redistribution is all there is. The question is which direction wealth is being redistributed. That is basic capitalism. I tire of the OMG! Redistribution! as if it is automatically a bad thing. Hell, you might as well be one of those socialists…

8

“Might as well”? :-s
:eusa-shhh:

9

you aren’t including the value that the gift giver and receiver gain from the relationship, that probably makes up the difference

10

James, in the paragraph beginning “A harder case…,” I address the situation in which the good is of value to the recipient, but if the recipient had the money she would have spent in on something different (for example, she wanted a car, but not that car).

Mowk, of course you’re right. Neither do the people that profit off holiday sales. But as philosophers chasing the good, we should care.

Moreno, I agree with you completely. Those gifts would fall into the last of the three categories I mentioned, of gifts whose value to the recipient is greater than the price paid. But my larger point actually leaves room for gifts whose value does not depend on meaning, because none of my criticisms apply to gifts of cash. Cash gifts are purely redistributive, generally from the wealthy to their poorer relatives. There is virtually no chance of a loss of value in that exchange, and in a non-ideal world the cash will actually be worth more to the poorer relative than to the wealthy giver, thus creating a net increase in value.

tentative, that’s exactly the make-work fallacy to which I referred above. Even if we take for granted that, all else being equal, employing more people is better than employing fewer. It does not follow that giving laborers spoons instead of shovels is to the good. In that case, we’ve directly increased employment by decreasing the value of each employee. In the case of gifting, we create a lot of jobs to fuel a tradition that as a whole destroys value. The value destroyed is the value of the goods rather than the value of the employees, but still we have decreased value. All else is thus not equal, and society would be better off without the endeavor.

I also don’t mean to disparage redistribution, I’m am heavily in favor of direct, progressive redistribution (I’m the only libertarian I know who would utter those words). I criticized it only as it seemed to be offered as evidence that gifting is good: there is a big shift in capitol from individuals to businesses, and in the US we call that a booming economy. I call that redistribution, and by itself it is not evidence that any value has been created, only that the control of it has moved.

If redistribution is the goal, the Christmas rush is a poor way to do it. Most of the revenue from the sale of goods does not go to workers, it goes to owners and managers. The redistribution will be upward, not downward. At best, that is net neutral. I’m inclined to think that to the extent it increases wealth disparity, it is net harmful.

captaincrunk, I acknowledge and address that value:

While I did not include the social value to the recipient of the act of being given a gift, I think that my comments address that consideration just as well:

11

Yes, and if the giver wanted to give that other car (or the money), he would have done so.
Are you suggesting that if one cannot give exactly what was most desired, then any giving is bad?

12

Tell your mother she’s just geting cash

and we lose out when businesses fail to guage opportunity costs just as well

13

Carleas,

You commie you. :stuck_out_tongue:

It seems to me that you’re saying that value is only added to the extent that the receiver chooses the gift -ie- I get what I want instead of what you think I want. I guess that’s one way of viewing value, but it leaves a great deal out in order to make the argument. I agree that no matter the transaction of material goods, profit goes to owners and managers. That why you have stocks and bonds. That’s why you live in a capitalistic society. It isn’t just gifts, take your argument to it’s logical conclusion and all transactions are societally “harmful”.

14

Sure cash is good. It’s an odd gift in many situations. For example at Christmas to give my brother cash and he gives me cash would be strange, though it could have a nice ritualistic tone to it. But certainly in real and real-hearted trickle down gifts, it’s just peachy. Teenagers - with about as much romance in their bones as a spork - also appreciate cash - because what the hell do we know about what they want and picking something out is pretty much like an arranged marriage as far as they are concerned. Alright, some teenagers.

I have some attachment to the buying something that a person would never get for themselves but will appreciate very much approach. You have to know what you are doing and the recipient. IOW cash might end up being less of a present for the person. This does entail some of the problems you point out in the OP, but, well, there it is.

In general though I prefer more tribal relations, where gifts are made or are acts of kindness.

And a Xmas potlatch would be a nice trend for the world’s current super rich. Don’t just donate money. Give YOUR stuff to the needy.

15

Thanks for your reply to me Carleas,

Value is an abstract concept and its measure is even more so. I am insulted by many commercials that state the value of a product to be X when the product has no value to me. My wife often gloats that she bought an item for $15.00 that originally sells for $50, while I think she purchased an item for $15 that was worth $15. The reason I stated I didn’t think China cares is because they have a job and the value of what they manufacture is of little consequence. Whether they are making a product that is wanted or not is not of concern. They still earn a livelihood of sorts for their participation.

The more someone has the less likely a gift will be useful and not simply duplicate something already owned. I am reminded of the scene from Willy Wonka. Charlie, who lives with his mother and father and four grandparents who share a single bed gets a Wonka chocolate bar for Christmas. It was a pretty big deal to Charlie. A simple chocolate bar. I remember back as a kid getting an orange for Christmas. An orange was a pretty big thing in the dead of winter. This year I bought a bag of oranges and it wasn’t even for Christmas. Oranges are fairly common in the dead of winter now days and I certainly have the 29 cents each it cost to purchase.

So that gift I didn’t really want this year, wasn’t thrown away. It was given to goodwill as are most things that have utility left in them. In this way the value wasn’t deflated at all. I’d say there was a net increase in value. I recycle… a lot. I find it hard to imagine the path an item takes from its creation in a factory to its purchase through a wholesaler and then to a retailer and then to be wrapped and given away, to be unwanted and given away again. If an item has utility it will be found of value to someone. Even if it ends up in the trash there are plenty of “junk pickers” myself included, that may find a value in it. Likely they didn’t have the cash to pay retail price for it but it has a value to them if acquired. If not it can have absolutely no value to them. Even more then the cash price it sold for, just because they could not afford it. I’d guess there is much devaluation taking place in certain channels, and value increasing in other channels.

I don’t think the problem is with the notion of gifting. The problem lies more with the divide between the haves and have-nots. What could a have-not give to someone who has so much more. I have a sister with four kids and a husband who have done quite nicely for themselves. Their kids certainly don’t need the trinkets my wife and I send them for Christmas. But I do spend quite a bit of time thinking of the kids when I am buying their gifts. I can’t say what value that has. Shit it costs a ton of money just to send them the presents. I’d like to think for a moment or two that the kids remember they have an Aunt and Uncle who care enough to try. What value is that? Your guess is as ‘good’ as any ones.

Happy New Year.

16

Another thought.

Isn’t the real problem that all 364 days of the year and primarily in November and December, capital systems over inflate the cost of an item despite its value?

Can value be reached mathematically? Is there really such a thing as actual value?

Cost divided by benefit and utility equals value. If the cost/price of an item is inflated isn’t that what ‘destroys’ its value. Isn’t it the notion of getting the most for an item the market will bear that is destroying the value of the item? Holiday’s and the notion of gifting simply provide one of many opportunities.

17

No. I’m suggesting that value is destroyed when a gift is not as valuable to the recipient as the money spent on it would have been, and the social effects from the gift-giving event do not make up the difference.

This would be an example of a so a case where “the gift-giver could [NOT] have gotten as much or nearly as much of the social benefits of the gift from giving the cash spent for the gift directly to the recipient.”

Could you flesh out your comment about opportunity cost for businesses? I’m not sure how it relates.

I disagree, but that’s a different argument that is only tangentially related. Here, I only mean to argue that gift giving in particular destroys value. That argument does not depend on wealth disparity being harmful, nor on transactions tending to benefit owners. I brought them up only to make the point that the jobs created by gift-giving holidays don’t offset the losses from gift-giving.

I agree with most of your post, but I thought this last bit was interesting. Giving of one’s own possessions solves some of the problems I identify with giving, since one may well have gotten all or most of the value out of an item before it is given. If, for example, you give someone a book when you’re finished reading it, you give them some value, and you have already gotten most if not all of the value you could out of the book. Clothes are another example where this is possible, since styles change. Other things are still valuable to you, so you lose more of the value, but you might not use them or not use them as much as someone else would, such that giving them away would increase the amount of value that can be extracted from them.

But I think, generally speaking, that giving in kind is less beneficial than cash gifts, because as much as a book or a new wardrobe would be nice, paying rent or buying food are more pressing concerns and the recipient is better placed to know. Gifts of ones own possessions may increase social value, but the recipient might still be better off with the cash equivalent (even the cash equivalent to the benefit to the rich person; often the wealthy are better able to sell goods for cash, e.g. they may have better access to the internet or to acquaintances with the means to purchase new goods). Ultimately, though, whether from the perspective of society or the recipient, it may be hard to say whether cash or used goods are better. I’ll say more about this in my response to Mowk, below.

As I said to Moreno above, this kind of charitable giving certainly complicates things, and to some extent confounds the situation I set out in the OP. I have a few thoughts:

Whether a gift of a used good, or a donation of an unwanted new gift, there is certainly a greater extraction of value. For some goods, it is a pure gain in value (books, clothes). For others, value is only salvaged, i.e. instead of the value of the gift going from its value as a commodity to zero, it goes from its value as a commodity to its value as a used good. I think we can say for certain that giving an unwanted gift to Goodwill is better than throwing it away, but we cannot say for sure that the donation makes the net social value positive.

There will still often be a net loss in value. People buying from Goodwill are often forced to settle for a good-enough good instead of exactly the good they want (I speak from experience as a long-time Goodwill shopper). Thus, they end up potentially extracting less value than the good would have been worth as a commodity to the original seller. While they will generally benefit from getting a good for significantly less than the value they get from it, over the entire equation from original seller to Goodwill buyer, there will be a loss in value. Moreover, along the way, there is a lot of risk that the item will be broken, that parts or instructions may be misplaced, or that it may never get to Goodwill at all. This risk must be factored as a cost.

There are also costs in time, in human resources, and in the infrastructure needed to make Goodwill giving possible. The overhead of that operation further reduces the final value output from the transaction from original purchase through Goodwill purchase.

Another interesting factor is that Goodwill giving generally does not address gifts with nonzero value to the recipient. If a shirt is acceptable, but not the one the recipient would have purchased, she will probably not give it away, but will keep it and simply get less value out of it. The existence of Goodwill changes things only at the very low end of value to the recipient, so that the amount of social value destroyed by gift-giving will increase as the value to the recipient decreases, until the value to the recipient is so low that they would rather give the good away than keep it, at which point the donation offsets what would otherwise be lost value.

I’ve been intentionally vague about how to calculate value. My armchair understanding is that in economics, value is usually expressed as a quantity of cash. I dislike that for a number of reasons, the most important of which is that cash is itself valued differently by differently people in the same market (if it weren’t, forex markets wouldn’t be possible). But I don’t think a precise understanding of value is necessary to make the case the gifting has a uniquely negative impact on value. In short, value is benefit, and people get less benefit on average from things that are given to them than from things they select themselves, because others have an informational disadvantage.

Value can’t be cost divided by anything. If it were, paying more for the same thing would increase the value, which seems incorrect. Instead, value and cost shouldn’t be connected at all. A thing has equal value whether it’s free or way overpriced, it’s just that when it’s overpriced it is less valuable than the cash that would need to be traded for it. The value is what an individual would get out of the thing. That value is destroyed when before the exchange, people get more value out of the things they have than they get after the exchange. And that doesn’t seem to be the case in most market transactions. In most transactions, both parties will end up with more than they started with in terms of value. Otherwise, the transaction is not likely to happen. Value is destroyed when people incorrectly predict the value to them of a thing.

That’s why crimes like fraud or false advertising hurt the economy. Gifting is like the contrapositive of fraud: rather than the buyer being deceived about the characteristics of the good that indicate value, the buyer is deceived about the characteristics of the recipient that determine value for that person. Value is similarly destroyed in either case.

18

Carleas, I’m once again stymied by your words. I honestly don’t understand what it is you’re trying to say.

Maybe that’s because I don’t understand what you feel is a ‘gift-giving’ event. Can’t any day be a ‘gift giving’ day? Or maybe I don’t understand what you mean by ‘gift.’ Does a gift have to cost money?

Christmas and birthdays are ‘gift-giving’ days, which makes them more memorable than just any-old-day; but any-old-day can be an occasion for gift giving, no?

A gift to someone shouldn’t be based on monetary value, unless all you’re trying to do is indicate to that someone the monetary value you place on your relationship. Is this what you mean? If the gift recipient would rather have money, isn’t that an indication of how they view you. (Don’t even try to think of me, just send me money!)

19

These paragraphs seem contradictory.

In the first you state value is usually expressed as a quantity of cash, your dislike and its reasoning doesn’t change that matter. Then you state, value is benefit, and that benefit has a cost/price associated to it. To receive the benefit will cost its cash value. Which is pretty much the expression cost divided by benefit equals value. Then you go on to state: value can’t be cost divided by anything. This is the part that throws me for a loop as it doesn’t appear accurate. “if it were, paying more for the same thing would increase the value, which seems incorrect.”

But this happens all the time and seems accurate, in practice, if not correct. Coin collectors pay more for a coin then its face value which does increase its cash value. Take for example a 1963 silver half dollar. Its face value is 50 cents yet it is roughly 90% silver. As the price of silver fluctuates the melt value of the coin changes. Then there is the notion of its quality. A coin in fair condition will sell for less then a coin in mint condition. Because people are willing to pay more for the mint condition coin its value increases. Paying more for the same thing does increase its value. There is a notion in economics of added value as well. Convenience is considered an added value. The value of that liter of soda at the grocers 7 miles away is less then the value of the same product sold at the local moto-mart.

That just doesn’t appear a sound assessment given the argument you make between the value of the item as a gift and the value of the cash itself as the gift. You seem to imply the cash has more value. So after an exchange the one left with the cash would have the greater value. Particularly true if they can influence the perception of its value.

Something about that last sentence too. “…the buyer is deceived about the characteristics of the recipient that determines value for that person.” Maybe it is the notion of a deception taking place. Where is a deception taking place, a mistake was perhaps made in the assessment of its value to another, but it doesn’t appear as if a deception is involved.

The practice of getting the most for a good or service the market will bear accomplish a similar devaluation.

Look at an orange. It has so many calories, one of its benefits as a food item. If the cost of that orange is a quarter. Then one could divide the cost by the number of calories to arrive at a cost per calorie and its value as a food item. When the price of the orange goes up, it does not affect the number of calories the orange has so the cost per calorie goes up as well. The value of the orange has changed comparatively. If, as a seller of the orange, a change in the perception about the oranges availability can be orchestrated, that too will affect the cost of the orange and its resulting value as a food item.

20

Lizbeth, I mean the gift-giving even to be the simple exchange of a gift from one person to another, not the holiday or occasion associated with it. My argument is that most gift giving destroys value in terms of the total value to all parties prior to the exchange, but I also mean to acknowledge that people benefit for the social effects of giving any gift. The truism that “it’s the thought that counts” indicates that, no matter the value of the goods exchanged, there is a social benefit from the gift-giving event.

As you and others have pointed out, cash isn’t always an adequate substitute for a gift of some good in terms of the social bands it creates or strengthens. That doesn’t change that some value is destroyed by the transaction, only that the net value may still be positive.

Mowk, I think I was too strong in my statement. There is an important distinction between the value to a seller and the value to a buyer, and the value to the seller does seem to depend on cost. The value to the seller of a good will be what she can expect to get for it, and that expectation will change with new information, e.g. a bid or sale at a certain price. For the seller, the value will be a function of the market price for her to buy the good, the market price at which she can sell the good, and the value of her own labor. For the purchaser, though, the value is the benefit he’ll get from the good, and will not depend on the expected resale price (unless the purchaser means only to trade the thing away).

These differences in methods of evaluation seem hard to reconcile, but price tries to let us do that. If a buyer values a good at X, they will buy a good when the price P of the good is less than X, and will not buy it when P is greater than X. From the other side, say the seller values the good at Y dollars. The seller will sell the good only when the price she can get for it is greater than Y. The sale only happens when X>P>Y. So the actual sale price gives us some information about how the buyer and seller value the good, and for the seller this information is partly determinative of value.

Also note how the transaction benefits both parties.

  • When the price is less than X, the difference between the price and X is the consumer surplus of the transaction, i.e. the amount the consumer is benefited by the transaction: before the transaction, the purchaser had cash that he valued at P<X, and not he has a good valued at X.
  • When P is greater than Y, the difference between Y and P is the producer surplus: before the transaction, the seller had a good she valued at Y, and after she has cash valued at P>Y. Both parties are thus benefited by the trade, and they are unlikely to trade when they are not.

I don’t mean to imply this. As I argue above, both the buyer and seller are benefited in an exchange of cash for a good. However, in gift giving, instead of using X as the value the recipient places on the good, the buyer uses Z, the value he thinks the recipient places on the good (whether it is mistake or deception doesn’t seem to change the social damage done, only the culpability of those involved). If Z is greater than X, the buyer could buy at a price P that is greater than X, so that the recipient would have gotten more value out of receiving cash than out of receiving the good; the recipient value Z dollars more than the good.

The problem with using a unit of cash for the unit of value is that cash is just another tradeable good. It is highly liquid, but it is not infinitely liquid. It also seems subject to decreasing marginal value, i.e. as you get more cash, the value of each additional dollar decreases. Values of currencies also fluctuate, through inflation and the value of debt, and through trust in the issuing bank. These factors make cash slightly imperfect, so that for example the value of cash can increase or decrease to an individual without that individual changing her preferences. Cash may be the best proxy we have, and it’s useful for being able to quantify and compare values, but it is ultimately still only a proxy.