"Anyone who has studied microeconomics knows... that an income transfer, as opposed to a gift in-kind, gets you to a higher level of utility," but as WSJ reports, putting theory under the tree is another matter. After years of studying the economics of gift-giving, economists have found that some gifts are valued more highly than others, and that some gift-givers seem to be better than others...
Pets appear to be the worst gifts. Travel, the best. The recipients of jewelry and computers seem pretty happy, too.
They also analyzed the best and worst gift-givers.
In fact, as The Wall Street Journal reports, economists’ arguments against presents have deep roots. Some evoke Adam Smith, who espoused rational self-interest, or Milton Friedman, who praised the efficiency of spending money on oneself.
A 1993 paper, “The Deadweight Loss of Christmas,” gave the notion its first real academic ballast. The author, Joel Waldfogel, then at Yale University, calculated yuletide waste by asking 86 students to estimate the cost of presents they received. Average answer: $438.
He asked how much they would have been willing to pay for the same gifts. Average answer: $313. Recipients valued gifts at 71.5 cents on the dollar, a significant economic inefficiency.
Gifts, Mr. Waldfogel wrote, “leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash.”
Since then, economists have enriched the Grinch school of economics.
A 2009 Journal of Socio-Economics paper measured gifts across the holiday catalog, from books (which recipients valued at 74% of the amount spent) to footwear (92%) and kitchen gadgets (77%).
“We find no evidence of significant welfare gains in any gift category,” the paper concluded, calling gifts a “considerable market failure.”
Finally, some scholars have examined which relatives give the worst gifts, economically speaking.
Two economists in 2012 surveyed German students on gifts from relatives and on perceived value.
“The efficiency loss of Christmas presents,” they concluded, “is highest for gifts from grandparents.”
* * *Bah Bloody Humbug!!