Scroogenomics: Give gold, not myrrh | The Economist
When people buy something for themselves, they believe that their purchase is worth at least the price paid. But most gift-givers are only dimly aware of the desires and tastes of the beneficiaries of their largesse. As a result, they often give people presents that are worth far less to the person getting them than the gift-giver paid for them.
The result of all these inappropriate presents—ranging from the sweaters that people will never wear to games they will never play—is what Mr Waldfogel calls a “deadweight loss” from Yuletide generosity. This is the difference between the satisfaction a person gets when she spends a dollar on herself and when a well-meaning benefactor spends that dollar on a present for her. Over a period of time, a series of surveys have led him to conclude that the average deadweight loss from gift-giving is around 18%. Given his estimate that Americans spent $66 billion on Christmas presents in 2007, this amounts to a whopping $12 billion of lost value. Where others see generosity, Mr Waldfogel sees an orgy of value destruction.
December 24, 2009, 2:24pm
