Gifts that people buy for other people are usually poorly matched to the recipients' preferences. What the recipients would willingly pay for gifts is usually less than what the givers paid. The measure of the inefficiency of allocating value by gift-giving is the difference between the yield of satisfaction per dollar spent on gifts and the yield per dollar spent on recipients' own purchases.Oh, George, you're all about efficiency. But seriously, the author of this book, Joel Waldfogel, has estimated that about $85 billion are wasted each year because of gift-shopping. And it hurts our economy, rather than helping it.
As Will writes,
If all spending justified itself, we would pay people to dig holes and then refill them -- or build bridges to unpopulated Alaskan islands. Spending is good if the purchaser, or the recipient of a gift, values the commodity more than he does the money it costs. Otherwise, there is a subtraction from society's store of value.(Without saying so, Will is giving a subtle lecture on politics. One can easily see how the same principle would apply to the idea of government "stimulating" the economy. The question is not how much money goes through the system, but whether net value has actually been added.)
But don't people get net value from presents? It's the thought that counts, as they say. Maybe it's not all about efficiency, as stodgy conservatives think it is.
And yet, let's be honest--the thought that supposedly counts isn't usually very deep. My own family tradition has often involved excruciatingly excessive gift-giving, and the fact is you just have no idea what to get people. It's not just inefficient in terms of cost, it's inefficient in terms of people's feelings. You have no idea whether that person is going to like it.
As Will so cleverly puts it, "Were it not for sentimentality about sentiments, which are highly overrated, we would behave rationally..." (He goes on to suggest giving cash, which I admit is a little crass... but there's always gift cards!)
I think conservative religious types probably deserve to feel vindicated about this. In constantly harping on the excessive commercialization of Christmas, they're actually condemning something that legitimately hurts our economy.
So what can we do instead of gift-giving? Well, there's nothing wrong with gift-giving--as long as it's limited (the average American currently gives 23 gifts a year!!), and as long as it's meaningful. You don't add net value to an economy unless you provide something that will actually matter to people.
(Could it be that better relationships with one another would actually help our economy? Maybe a fundamental problem with this insane gift-giving is that we don't know each other well enough to see what would actually be meaningful.)
So this year, tell your friends and relatives you're going to help the economy by making your gift-giving more efficient. Limit the number of gifts you give, and make them meaningful.
Maybe you could buy them Waldfogel's book...
Happy Thanksgiving, everyone.