The economics of gift giving

At a loss for what to give? Then, don't spend a lot on someone you only know a little.

Image of Scroogenomics: Why You Shouldn't Buy Presents for the Holidays
Author: Joel Waldfogel
Publisher: Princeton University Press (2009)
Binding: Hardcover, 192 pages

'Tis the season for family, friends, food, and oh yeah, gifts. Deciding what holiday presents to buy and who to buy them for can be stressful. We'd all like to buy everyone their dream gift if we could. Joel Waldfogel, an economist at the University of Minnesota and author of the book "Scroogeonomics: Why You Shouldn't Buy Presents for the Holidays," says we need to re-think the gift-giving process.

"The problem with gift giving has nothing to do with the intentions, those are all good. But when we allocate resources through gift giving, we do it in a kind of perverse way. I'll only spend $100 if I see something that's worth at least $100 to me. Normally, $100 worth of spending produces $100 worth of satisfaction. With gift giving, I can go out and spend $100 on you, let's say, and I don't know what you want, my expenditure of $100 can produce $0 worth of satisfaction. So it's just potentially a very, very bad way to allocate resources," says Waldfogel.

Waldfogel says most people do a good job buying gifts for family and friends they are close to. But he says there's an opportunity to make the process more"economically efficient."

"In the U.S. we spend about $80 billion on holiday gifts and it would be nice to get $80 billion of satisfaction out of it," he says.

But it can be difficult to measure that satisfaction. Everyone appreciates gifts, but they don't always enjoy the item.

"In those situations where we know we have to give, but we also realize that we have no idea what to give, there are some alternatives to shooting in the dark and choosing an item," says Waldfogel.  "A very popular alternative is gift cards. In the last 15 years, these have grown from a very small share of giving to now at least about one-third of holiday gift giving is in the form of gift cards. What's nice about them is that they surrender the decision-making authority to the recipient so he or she ends up with something that they actually want -- at least from the store where you got it."

Waldfogel says while gift cards can seem less thoughtful than buying an actual item, they are a good option when the gift giver doesn't have enough knowledge to buy something they know will truly satisfy the recipient -- like in a Secret Santa exchange.

About the author

Veteran journalist Tony Cox has joined American Public Media as guest host of Marketplace Money.
Image of Scroogenomics: Why You Shouldn't Buy Presents for the Holidays
Author: Joel Waldfogel
Publisher: Princeton University Press (2009)
Binding: Hardcover, 192 pages
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This is easily one of the most insipid pieces of reporting from Marketplace Money this year. It's worthy of Ric Romero. You took 4 minutes to say that giving gift cards to someone whose tastes you're unsure of is a good idea, something that's obvious, especially to the 30% of the gift givers who already give gift cards.

I understand that the departure of Tess Vigeland implies that it will take some time for the show to find a direction with a new anchorperson, but for goodness' sakes, please make an effort to stay relevant to your audience and avoid the easy puff pieces I can hear anywhere.

The holiday season is a very pleasant time, but this time is also full of different expenses. We try to present our beloved as best presents as possible, but it’s not worth to forget about budgeting. I think it would be very good to create a spending plan to see how much money you need to buy all the gifts. Take an advantage of different discounts, happy hours and coupons. No need to think that only expensive present can be good – the most important is to show your attention and care. Also do not buy presents to every one you know – for some familiar people it’s enough to buy some post cards and souvenirs to show your attention and good attitude.
Jen from http://paydayloansat.com/

I was astonished to hear that the conclusion of the most "economically efficient" gift was a gift card. I believe that a significant percentage of gift cards are never redeemed (nearly 50%), so it's a terrific benefit for the store. However, it provides zero dollars worth of satisfaction for the recipient at 100% cost to the giver. Even a very poorly chosen gift gives a little satisfaction!
My solution is to try to chose an item I believe the recipient will enjoy, but include a gift receipt for exchange if necessary.
I also believe that some of the satisfaction of receiving gifts is getting something you wouldn't have chosen for yourself, but that you turn out to enjoy. No gift card does that.

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