Ho-Ho-Ho! the Economists' Guide to Christmas Presents; ECONOMIC ANALYSIS

The Evening Standard (London, England), December 17, 2015 | Go to article overview

Ho-Ho-Ho! the Economists' Guide to Christmas Presents; ECONOMIC ANALYSIS


Byline: Russell Lynch

TWAS the night before Christmas, when all through the house, not a creature was stirring -- except the economists busily stuffing cash into envelopes for their nearest and dearest, because that's the most "efficient" gift.

Economics really comes into its own as the "dismal science" during the festive season, as its practitioners shake their heads in disapproval on the subject of present buying. The profession's most prominent "bah humbug" merchant is Joel Waldfogel, the father of "Scrooge-onomics" who's been banging on about the "orgy of value destruction" in Christmas present buying for more than 20 years.

'The of the "cost" Christmas billions His theory of the "deadweight cost" of Christmas is that billions are wasted on unwanted gifts, because they're valued less by the recipient than by the giver. The heartwarming 1992 article says "that it is more likely than the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash". Waldfogel's family Christmases must be a total blast.

wasted unwanted gifts' Gifts from friends and "significant others" tend to be the most efficient, he reckons, albeit far from perfect. Noncash gifts from the rest of the family (such as the vile jumper from Auntie Joan) are the least efficient and destroy around a third of the recipient's value.

But if you don't succumb to the world of the purely rational economic beings who only exist in textbooks, and still want to buy a present instead of giving your loved one a few tenners, what then? Gift vouchers may be the way to go, as they come across as more thoughtful than a cash gift and avoid the stigma of handing over notes, according to US economist Jennifer Offenberg. That said, the risk of the "deadweight loss" still looms. That's because gift cards are paid for by the giver up front, but around 10% of them are never redeemed, which is why shops are keen to promote them by the tills in the first place.

Rather depressingly, Offenberg recommends that to play it safe and cut the risk of lost value you should buy gift vouchers for general purpose stores (basically the vouchers as much like cash as possible), while avoiding gift cards to more specialised chains like jewellers. …

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