Timothy B. Lee:
It’s everyone’s least favorite part of the Christmas season: You’re expected to get a present for your brother-in-law, but you have no idea what he wants. Or conversely, your aunt gets you a sweater that you have zero interest in ever wearing. The result: People often get a lot less value from their presents than the giver spent on them.
More than 20 years ago, economist Joel Waldfogel dubbed this the “deadweight loss of Christmas.” It’s the gap between how much a gift giver spends on a present and how much the recipient values the gift. Waldfogel’s research found that “holiday gift-giving destroys between 10 percent and a third of the value of gifts.”
But Waldfogel told me in a Tuesday interview that it’s often not realistic to stop giving gifts altogether. Instead, he suggested some strategies — like giving gift cards or making donations to charity in a recipient’s name — to minimize the wastefulness of the holiday season.
The transcript has been edited for length and clarity. ...
via www.vox.com
Whatever happened to "it's the thought that counts"? This phrase suggests that there is a component of getting a gift (a signal that someone cares enough about you to try to buy you something you like) that increases utility. The discussion misses this benefit.
And here is the A part of the Q&A where they are looking critically at gift cards (as a way of giving cash):
Suppose I spend $100 on a card and give it to a friend. Then suppose he redeems $75 and forgets the rest. The $25 eventually belongs either to the company issuing the card or to the state government, depending on the state.
While my friend only got $75 worth of spending out of my purchase, the other $25 is not destroyed. It's just transferred from me to the retailer's shareholders. It would be way worse, in some sense, to spend $100 on a sweater that my friend values at only $75.
Having said all that, I have long advocated a simple tweak to gift cards: Stores should issue cards whose unredeemed balances go straight to charity after 24 months. Stores could crow about the money that they're sending to charity, and buyers would be assured that someone worthy — either their recipients or some good cause — is getting their money.
If the $25 transfer from the buyer to seller is OK for a gift card, why doesn't the same argument hold with the sweater? I think it does. There is a transfer either way. Gift cards help avoid the mismatch of preferences but they detract away from the "it's the thought that counts" utility boost.
And considering the tweak, my guess is that the sweater ends up with charity (Goodwill) too.
Let's just say that Scroogenomics is not on my Christmas list.
