TEXT OF INTERVIEW
Kai Ryssdal: Even in a lousy economy most of us are still probably thinking about what to get for our kids or for grandma or for Aunt Mary for the holidays. Just 'cause that's what you do this time of year. But Joel Waldfogel says we should rethink the whole gift-giving thing. It just doesn't make sense, he says, once you do that math. Waldfogel is an economist at the Wharton School at the University of Pennsylvania. And his new book about the season of not-giving is called "Scroogenomics." Joel, welcome to the program.
Joel Waldfogel: Thank you.
Ryssdal: I have to say this plays right into my prejudice here, because I'm just not a good holiday gift giver. But you say it actually doesn't make any sense.
WALDFOGEL: Well, the problem is, you know, normally we go out and buy things for ourselves, we'll only spend $50 if we find something that is worth at least $50 to us. But with gift giving, it's entirely different. You know, we're operating at an enormous handicap. We don't know what the other person wants or needs, so if I spend $50 on you, I might buy something that you wouldn't pay anything for.
Ryssdal: But I place value on that gift that you give me, right, so isn't there value there?
WALDFOGEL: You may place value on the fact that I gave you something. The problem is the actual thing I get you is something that you typically place less value on than the thing that you would have purchased with the same amount of money. So the spending doesn't produce as much satisfaction as we expect spending to produce.
Ryssdal: On the theory that my mother is listening, I will ask this question on her behalf because this is what she does with my kids, her grandchildren. Cash, man -- $25 bucks is $25 bucks.
WALDFOGEL: Well, she's an efficient spirit. And I wouldn't advocate it for everyone because some people find giving cash distasteful. But it is quite common. Grandparents and aunts and uncles, especially, are most likely to give cash. And it's a real interesting evidence of a desire for efficiency because those are precisely the givers who are in least frequent contact with their recipients; they know least about the specific wants of the recipients. And what would you do if you were in that circumstance and you didn't want to destroy value? You'd give cash. So I'd say that your mother is a paragon of efficiency.
Ryssdal: Do we have any idea, I thank you on her behalf, by the way. Do we have any idea, can you quantify how much value is destroyed in Christmas gift-giving?
WALDFOGEL: I wouldn't be much of an economist if I didn't take a stab at that. We spend on holiday gifts in the U.S. about $65 billion per year. Now, I get that number from the difference between December, non-seasonally-adjusted retail sales, and the average of November and January. Others will estimate them to be much higher, but I think that's a conservative way to do it. So $65 billion in spending. I've done a lot of surveys over the years in which I've asked people: How much do you value the stuff you've received as gifts? And what do you think the giver paid? And I've also asked them the same questions about items they've purchased for themselves. The answer I've come to is that people value stuff that they've received as gifts 20 percent less per dollar spent than stuff they buy for themselves. So multiplying that 20 percent times that $65 billion gets to you about $12 or $13 billion a year in destroyed value, or missing satisfaction in the U.S. Worldwide the number is about twice that big.
Ryssdal: Has it always been this way? I mean 100 years ago, when folks shopped for Christmas, was the value destruction metric the same?
WALDFOGEL: Well, I don't have any direct evidence about the size of the value destruction, but what I was surprised to learn in researching the book was that the Christmas of our parents and our grandparents and perhaps even our great-grandparents in the U.S. was as much of a commercial big deal, if not more of a big deal. I mean the amount of holiday spending in relation, say, to the size of the U.S. economy actually was larger in 1935 than it is today.
Ryssdal: Before we let you go I have to observe that your book is small, it's quite compact, just the perfect size to, oh I don't know, fit into a stocking, maybe?
WALDFOGEL: That is a thought.
Ryssdal: And one that I'm sure you're just coming to now, right?
WALDFOGEL: Well, my handlers I guess came up with that. My view on this, of course, since I'm a bit skeptical of gift giving, I guess my view is buy it for yourself. And if you don't like it, give it as a gift.
Ryssdal: Joel Waldfogel. His new book is called "Scroogenomics." Thanks so much.
WALDFOGEL: Thank you.