An Economist’s Guide to Ruining Christmas
A lump of coal from the dismal science
Did you know researchers have actually studied what the perfect Christmas gift is?
And that their answer was ... no gift at all?
Ok, not exactly.
In 1993, the economist Joel Waldfogel studied how much people valued their Christmas gifts vs. how much those gifts actually cost.i
His conclusion? Christmas gift-giving wastes a lot of money, because most people value their gifts at less than the retail price.
Waldfogel calculated that of the $38 billion Americans spent on gifts the previous Christmas, as much as $13 billion was wasted.ii
The group that did the best at giving people what they actually valued? Significant others.iii
The group that did the worst? Grandparents.iv
So, what do economists think we should do instead? Cash (or at least gift cards).v
That way, people’s gifts align with what they actually value.vi
Of course, some economists admit that gifts have value that goes beyond money, because finding the right present “is a signal of intensity for search effort.”vii
(Which is how economists say “It’s the thought that counts.”)
While the world has benefited a lot from the insights of economists, at Christmas time they can be real Scrooges.
WHAT YOU NEED TO KNOW:
- Of the $38 billion Americans spent on Christmas gifts in 1992, as much as $13 billion was wasted.
- Significant others did the best at giving people what they actually valued, while grandparents did the worst.
- Economists argue that giving cash is the best way to ensure people’s gifts align with what they actually value.