By timestaff
December 24, 2009

Some highly effective people have most of their Christmas shopping done before the Halloween pumpkins are even carved. Others dillydally until the literal night before Christmas. Either way, almost everyone who’s ever shelled out hundreds of bucks for gifts that might not be appreciated has wondered if Christmas — at least the annual gift-giving orgy aspect of it — is really worth it.

Wharton School economist Joel Waldfogel hasn’t just wondered. He’s done the math, and says that, economically speaking, the answer is no. In a tiny little stocking-stuffer of a book called Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, Waldfogel urges us all to think twice before burdening our friends and relatives with presents they don’t want. I interviewed Waldfogel for an item that ran in MONEY’s December 2009 issue; in this Q&A he expands upon his Scroogey logic.

David Futrelle: A lot of people complain that Christmas is too commercialized. You say it’s economically inefficient. Why?

Joel Waldfogel: When I spend $100 on myself, I’ll only buy something if that spending will really produce $100 worth of satisfaction to me. If somebody else spends $100 on me, and they don’t know what I like or what I already have, there’s no guarantee that they’ll buy something that I would have been willing to pay $100 for. It might be worth nothing to me. If you think about the purpose of spending, at least from a consumer perspective, the purpose of spending is to produce satisfaction. When other people are spending for us, it’s a recipe for not creating satisfaction.

DF: If you get an ugly sweater from Aunt Sally, why is that a problem for anyone but you and Aunt Sally?

Waldfogel: It’s a problem because real resources were consumed. If she buys me something I wouldn’t be caught dead in, $100 will have been spent for zero dollars worth of satisfaction. Holiday spending is about $65 billion a year in the US. [The surveys I’ve conducted suggest] that if people spent that much money on themselves rather than on others, they would have gotten about 20% more satisfaction for the same amount of money — that’s $13 billion a year in “deadweight loss.”

DF: This seems awfully unsentimental. Isn’t the pleasure of getting a thoughtful gift from someone you love worth more than whatever the dollar cost was?

Waldfogel: Yes. If I have a good idea of what somebody wants, if it’s somebody I’m close to, I really do want to give a gift that shows how well I know them and what they like. And kids can pretty clearly communicate what they want to their parents — especially when they get to be teenagers.

But if you only see someone a couple of times a year, say, you’re much more likely to destroy value by choosing the wrong present. Then cash or a gift card makes more sense.

DF: A lot of people still consider gift cards awfully tacky.

Waldfogel: If you look at surveys of most desirable gifts, gift cards actually appear pretty high up on the list. Consumers have adopted them, both as givers and recipients, in a big way.

There are a lot of situations where we’re obligated to give a gift and we have no idea what the person wants. I think it would be nice in those situations if people could give to charity in the name of the recipient. Obviously that won’t go over well if the recipient is an 11-year-old boy.

DF: What sort of gift giver are you?

Waldfogel: I’m pretty cautious. I try to be thoughtful about it. With people I’m close to, I try to give them things they might have wanted if they had thought about it. I couldn’t tell you if I’m successful at it. The people I know are more polite than I am about these things.

Add More Money to your favorite RSS reader. Subscribe at

You May Like