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Loyalty & Respect
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/25/an-economists-guide-to-gift-giving/
An economist’s guide to gift-giving
In January 1993, Joel Waldfogel asked 86 undergraduate students whether they liked their Christmas gifts. But Waldfogel is an economist, so he phrased the question more precisely, asking them how much they would have paid to buy those items for themselves.
The results were grim, at least for the gift-givers: The students estimated that their gifts had cost $438.20 -- but they said the most they would have been willing to pay for them was $313.40. Two months later, Waldfogel rounded up 58 more students and asked them how much cash it would have taken to make them “indifferent between the gift and the cash.†These students estimated that their holiday gifts had cost $508.90 on average. But they would have been just as happy with $462.10 in cash.
In the resulting paper, “The Deadweight Loss of Christmas,†Waldfogel didn’t pull his punch. “Between a tenth and a third of the value of holiday gifts is destroyed by gift-giving,†he wrote. Generalized across the economy, holiday gift-giving was destroying billions of dollars in value annually.
Santa, Waldfogel estimated, was even worse at helping people than Uncle Sam. “Deadweight losses of in-kind government transfers†-- economist-speak for government programs -- “are thus no larger, and in many cases are smaller, than the deadweight losses of holiday gift-giving.†Economists who are outraged by government inefficiency, he argued, should be similarly appalled at Christmas
An economist’s guide to gift-giving
In January 1993, Joel Waldfogel asked 86 undergraduate students whether they liked their Christmas gifts. But Waldfogel is an economist, so he phrased the question more precisely, asking them how much they would have paid to buy those items for themselves.
The results were grim, at least for the gift-givers: The students estimated that their gifts had cost $438.20 -- but they said the most they would have been willing to pay for them was $313.40. Two months later, Waldfogel rounded up 58 more students and asked them how much cash it would have taken to make them “indifferent between the gift and the cash.†These students estimated that their holiday gifts had cost $508.90 on average. But they would have been just as happy with $462.10 in cash.
In the resulting paper, “The Deadweight Loss of Christmas,†Waldfogel didn’t pull his punch. “Between a tenth and a third of the value of holiday gifts is destroyed by gift-giving,†he wrote. Generalized across the economy, holiday gift-giving was destroying billions of dollars in value annually.
Santa, Waldfogel estimated, was even worse at helping people than Uncle Sam. “Deadweight losses of in-kind government transfers†-- economist-speak for government programs -- “are thus no larger, and in many cases are smaller, than the deadweight losses of holiday gift-giving.†Economists who are outraged by government inefficiency, he argued, should be similarly appalled at Christmas