Economists Are Not Scrooges, but They Suggest More Efficient Gift Giving
Shopping for holiday gifts on a fixed income? You might want to consider giving cash or at least choosing an item from a wish list.
Economists say tremendous amounts of money are spent on items that aren’t valued by recipients, thus evaporating money from the economy.
A 1993 study by Joel Waldfogel, The Deadweight Loss of Christmas , published in the American Economic Review, estimated that gift-giving destroyed between a tenth and a third of the value of gifts. That’s a lot of dough when you consider the National Retail Federation expects Americans will spend between $942.6 and $960.4 billion this holiday season.
Waldfogel, an economics professor at Yale at the time, used the economic term “deadweight” to signify when one party has losses that are not made up by gains for another party.
“Gift giving on average delivers things that recipients value less than items they purchase for themselves,” Waldfogel said in this article, which gives this example:
If you give someone a $100 coat but they already have a coat they love, they might rarely or never wear the gifted one. They might only value your gift at $10, while they could have bought something for $100 that they really value. The deadweight loss is $90, the value that…
