The Christmas decorations adorning our streets and shops give multiple messages. All are intended to be cheerful but they cause some minor anguish by reminding us of the necessity of gifts. We all have friends and relatives for whom it's hard to buy.

What can I get someone who has everything or the ability to buy for themselves far more than I can readily afford? Everyone gets stumped over gift ideas, whether you are a child giving to your parents, an employee shopping for your boss, or giving to wealthy friends.

The problem of gift giving increases as we become ever more wealthy. It's easy to buy for those in poverty. They suffer deprivation and we can ease their situation with simple, useful gifts. During the depression, the problem was not what to buy family or friends but rather, what could we afford?

Economics can assist with those hard choices which plague us when ever a gift is deemed necessary. Economics is analytic not empathetic. Yet, economic analysis can help us cope with this problem of warm, spiritual holidays, and other special days. The underlying logic applies to all occasions meriting meaningful gifts.

Some economists recommend cash. With cash recipients can buy what they value most with the amount available. But unless it implies genuine sacrifice, cold cash demeans the spirit of giving, so I strongly recommend a different approach.

A gift of cash is insensitive unless the recipient is genuinely poor. (Or, like most college students, living in voluntary poverty.) Cash neglects the key economic principle of "comparative advantage". Nobel laureate economist Milton Friedman reminds us, "we should concentrate on doing those things we do best, those things where our superiority is the greatest."

This could be find an out of print book, or getting excellent tee times at a favorite course. Searching where you have an advantage yields ideal gifts. They cost you much less than would other gifts offering equal satisfaction. The Microsoft employee has a huge comparative advantage in getting discounted software, so we'll expect "Win 98" in her friends' stockings.

If your comparative advantage wouldn't make a good gift, then look towards the "comparative disadvantages" of the receiver. If the recipient has a relatively tough time doing something, then their disadvantage can be turned into great gift ideas.

Applying this principle requires knowing the recipient's interests and tastes. Fortunately, these are exactly the people we want to please, those we know and care about. This could mean setting up your technologically inept parents' home computer with access to Netscape sites they might enjoy, or sending "Made in Montana" treats to friends in New York. These gifts, while quite easy for one person, can be rare and precious to others.

Economists recommend taking advantage of knowledge differences. Friedrich A. Hayek notes that "practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made." For many well off people, discretionary time is the most scarce resource. You may apply your special knowledge or skill toward obtaining something they like but lack the time or skill to acquire.

For example, an old friend had long wanted rail road China from the executive dining cars of the Missouri Pacific RR. He "knew" it was no longer available for that rail line was long out of business. But I knew of dealers in railroad china and surprised him with a memorable Christmas gift. Some of the best presents are gifts that others wouldn't have thought of getting themselves, either because they weren't aware of them, or because you have a particular expertise in that field. Giving someone with similar tastes a book you've already read and enjoyed takes advantage of this technique.

Comparative advantages, disadvantages, and knowledge differences are things that successful people use every day, usually unconsciously. In doing so, they increase their wealth and the goods and services available to others. By thinking about these principles and applying them to gift giving, the task of pleasing others will be easier and our friends and loved ones more pleased. When well applied economic thinking can make the world a better place.

A version of this article appeared several years ago and has been requested by several of my friends. This is a small gift to them.