The year of giving sensibly

The moment you buy a present for someone who doesn't want it, it loses 20 per cent of its value. And worldwide, according to US economist Joel Waldfogel, $25 billion is wasted every Christmas – though surprisingly little of that is in Ireland, writes BELINDA McKEON

THE DAY AFTER Christmas, and all through the house, unwanted gifts will embark on their slow, lonely accumulation of dust. But it doesn't have to be that way, according to a new book by the US economist Joel Waldfogel. Waldfogel achieved notoriety in American economic circles in 1993, when he published a paper on what he called the "deadweight loss" of Christmas, and now in Scroogenomics— subtitled "Why We Shouldn't Buy Presents for the Holidays" – he presents a wake-up call for the credit-crunch age. The deadweight loss of Christmas is a real phenomenon, Waldfogel argues, and it costs tens of billions of dollars every year.

Scroogenomicsworks from surveys of givers and getters – over the past 15 Christmases – to assess just how much of a dead weight the season really is, economically speaking. Put simply, we know what we want for ourselves – what we value – but we are less skilled at knowing what other people will value. On average, Waldfogel calculates, we reduce the value of an item by 20 per cent when we give it to someone who does not want it. And all this off-target giving adds up: the deadweight loss brought about by the "December bump" in US spending is around $13 billion every Christmas season, says Waldfogel. Worldwide, it's close to $25 billion.

Interestingly, on Waldfogel’s scale of national “December bumps” (or retail sales spikes in December) over the past four decades, the US coming in only 20th – Hungary has the highest “bump”, followed by Italy, Portugal, Brazil and Norway. “That shocked me,” says Waldfogel. “I thought we were the world leaders in vulgar commercialism.” And Ireland? “Ireland is quite low,” he says. “In fact, Ireland is the lowest country except for China, Israel and South Korea, which are sort of non-Christmas-celebrating places.” Even during the Celtic Tiger years? “Even in the 2000s, the December bump is low,” Waldfogel says. Which sounds impressive, until you think the spending orgy was possibly bumped up so high all year round that December made little difference.

So, now that we’re back to leaner times, what is Waldfogel telling us to do? To stop the gift-buying altogether? Actually, that Ebenezer-tastic subtitle on Scroogenomics is misleading. “I say, go ahead and buy presents,” he advises, “but only for people you know well.” The more closely we know a person, the more often we see them, the better chance we have of giving them something they will value. And the less we are at risk of doing a Christmas Eve sprint around the shops when every object in sight is desperately snatched up on the basis that it will do, whatever it is, for someone on the present list.

“That mentality, which is very common, really speaks to gift-giving as a way of discharging an obligation,” says Waldfogel. “And those situations of obligation, as opposed to situations of organic thought and organic belief that this item would be good for that person, just seem like the ones that are most likely to destroy value.”

Economists are generally on the side of Christmas spending because of the boost it gives to the retail sector, and when knuckles are rapped the scoldings tend to be about buying on credit and spending beyond our means. But Waldfogel’s “deadweight loss” is something which exists, and which does damage, regardless of the outward health or wanness of the economy. Even if we spend less this recession-time Christmas, our frugality will be no less wasteful if the money we spend goes towards reducing, or even destroying, the value of the items we buy. In Scroogenomics, Waldfogel advocates a return to cash and gift cards in place of giving things and hoping for the best.

But must the giving and receiving of gifts be a purely economic transaction? What about the emotional payoff, the pleasure of giving, the sentimental value which we inevitably attach to even the most useless – and the least economically valuable – of gifts? “I agree that all that can happen, but I don’t think that justifies bad gift-giving,” he says. “It’s such a fool’s errand for everyone.”

If as gift-givers we have responsibilities to give well, as gift recipients – who unwrap the paper with a well-practised, already-overjoyed smile – do we have responsibilities too? Should we give the sort of ruthlessly honest feedback, "Where's the receipt?", at which Scroogenomicshints? "Well," Waldfogel says, "although this promotes continued inefficiency, I'm not unhappy about the way we act in those situations. I think it's part of what makes us civilised. I think it would be awful if we told people what we thought of their gifts."

Scroogenomics: Why You Shouldn't Buy Presents for the Holidaysby Joel Waldfogel is published by Princeton University Press. £6.95