Freakonomics: Avoiding unwanted gifts and deadweight loss

FedEx workers sort through a pile of boxes at the FedEx sort facility at the Oakland International Airport on December 13, 2010 in Oakland, California. FedEx Corp. is predicting that Monday will be the busiest day in company history for delivering packages worldwide with an expected 16 million shipments, up close to 13% from last year's biggest shipping day.

TEXT OF INTERVIEW

Kai Ryssdal: It's time for some Freakonomics Radio. Every couple of weeks we talk to Stephen Dubner, he's the co-author of the books and the blog of the same name, about the hidden side of everything.

Hey Dubner, welcome back.

Stephen Dubner: Thank you very much. You know, I was listening to my radio the other day and I heard you say this:

Ryssdal clip: This is Marketplace from American Public Media, and I'm Kai Ryssdal with an apology to the e-shoppers among you who might be listening. I took a swipe at online gift-giving the other day, said there's not much effort or emotion involved in just clicking and gifting.

Dubner: Now I'll be honest with you, I was disappointed that you're apologizing, "not enough emotion"?

Ryssdal: Yeah I said it. I'll own that.

Dubner: See here's the thing: I like the sound of clicking and gifting, that sounds efficient to me. That's what we need to bring to the holidays, is more efficiency, less emotion. Let's get rid of that.

Ryssdal: Scrooge! Scrooge! But go ahead on this.

Dubner: All right imagine this: there's something you want, right? So you know what you do? You just ask for it directly; adults ask. Kids do it -- they get Santa. But we're not allowed to, and what happens is, we get a bunch of junk. That's what happened to Shannon Dobbins. Listen to her talk to you about a gift that did not exactly set her on fire:

Shannon Dobbins: My internal reaction was 'Great, just another thing that's going to catch dust in my house.' But of course my external reaction was, 'Oh thank you! Just what I wanted.'

Dubner: Now Shannon is an engineer in Greenville, S.C.; her aunt gave her this big candle for Christmas. She didn't like it, she didn't need it.

Dobbins: My power never goes out, and I guess I'm not dating anybody so I have no need for ambiance.

Dubner: Now this was a half-gallon size sandalwood scented beast that sat there, unlit and unloved. Now there's an economic term for this kind of wasted gift-giving. Do you know what that is, Kai?

Ryssdal: In fact I do actually, I host a program on business and the economy -- did you know that?

Dubner: I've heard it on the air once in a while.

Ryssdal: So anyway, it's called "deadweight loss." It's that thing where my wife's great-grandma buys me a sweater at $85 and to me it's worth like $1.50. Because I don't like it.

Dubner: All right, so that's $83.50 deadweight loss, exactly. And the holidays are jam-packed with that kind of waste. So Shannon, as an engineer, she spends her days crunching numbers. So we asked her to do a little bit of math to calculate the waste on this horrible candle her aunt gave her.

Dobbins: I would say that it took up .01 percent of my floor space, and when you multiply that by my rent by 12 months, it comes out to $1.50 per year. Now for the mental space that it takes up in my life, I would say that I regret having it maybe three times a week.

Ryssdal: I love that image of her looking at the thing three times a week for five seconds saying, 'Oh I regret this.'

Dubner: And she can't stop herself apparently, right? So she may have some issues besides the candle, but the fact is, there is a lot of waste going on. The $25 she estimates her aunt spent on the candle, it costs Shannon, in her mind, money to keep it around. Now multiply this by everyone across America every year, massive deadweight loss. So to put an end to this insanity, I propose to you Kai, the Freakonomics holiday gift registry: a place where anybody can ask everybody else directly for what they want.

Ryssdal: But here's the thing: this is the American retail industry's worst nightmare, because people won't be going into stores, they won't be making the impulse buys, they won't be doing all that spending off the cuff that needs to stimulate the economy.

Dubner: Wrong. I'm not saying people shouldn't buy gifts, just that they shouldn't buy horrible, unwanted, wasteful gifts, that's all.

Ryssdal: But it's the thought that counts, right?

Dubner: You know, I was afraid you'd say that. I checked with an expert, Viviana Zelizer, who's an economic sociologist at Princeton. She actually studies the meaning of gift-giving.

Viviana Zelizer: You should not have to ask because if you ask, it means you are spelling out what kind of relationship you have. And part of gift-giving is discovering it.

Dubner: Yeah so I hate to say it, Zelizer kind of persuaded me that society just might not be ready for my brilliant idea yet.

Ryssdal: So the registry's on hold then, yeah?

Dubner: Yeah, unfortunately. Give me until next year, I'm going to work out some kinks. In the meantime, though, I sent you a little something, Kai. You got a box there.

Ryssdal: I do. You know, this is my favorite part of the segment, because it seems that every time I go on the radio with you, I get something. I kept the $5, by the way, from the lottery thing, I kept it.

Dubner: I noticed.

Ryssdal: Should I open this?

Dubner: If you dare open it, you should open it. Now keep in mind, I did not have a registry.

Ryssdal: And as you can see, I'm enthusiastically ripping it open. Haha. Oh, I hate you. You know that I'm a Yankees fan, and you sent me a Boston Red Sox Santa Claus hat.

Dubner: Oh gosh, I guess I forgot you're a Yankees fan. Kai, I am so sorry.

Ryssdal: Pure deadweight loss here, Dubner, pure deadweight loss.

Dubner: Maybe just dead. Maybe now you're convinced of the need for a registry. Next year, you want to let me help you give you a better gift, Kai?

Ryssdal: All right, fine. Sold. Stephen Dubner, Freakonomics Radio. You can find more at his website, FreakonomicsRadio.com. I'll see ya.

Dubner: See ya Kai.

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