Economists are probably not the best people to have around at the holidays- evidence shows that economists tend to be more Scroog-ey than most, and we're not particularly fond of gift giving due to its economic inefficiency.
Wait- its what now? You read that right. Economist Joel Waldfogel, author of the appropriately-titled Scroogenomics: Why You Shouldn't Buy Presents for the Holidays, argues that gift giving is inefficient because it often results in people receiving gifts that they don't value enough to have actually purchased themselves. Professor Waldfogel gives a good example:
My objection is that the holiday spending doesn't result in very much satisfaction. Normally if I spend $50 on myself, I'll only buy something if it's worth at least $50 to me. But if you buy something for me, and you spend $50, since you don't know what I like, and you don't know what I have, you may buy something I wouldn't pay anything for. And so you could turn the real resources required to make things into something of no value to me. And that would destroy value.
You can read more in a good Q&A on the subject here. Ironically, I am told that the book makes an excellent holiday gift. :)
Comments
My grandkids are going to think I’m soooooo economically inefficient this Xmas!
But what if I just gifted $50? Then the receiver can buy whatever he wants with that money..so that will no destroy value, would it?
I just transfer money into my kids (who are all in college) checking accounts. Let them decide what they want.
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