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Why Scrooge got it right about no Christmas gifts
By Wu Jiayin |
December 5, 2009, Saturday
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Print Edition
Print Edition
AS I am scheduled to attend two wedding ceremonies at the end of this month, I have been pondering what kind of gifts I could buy for the couples to avoid following the traditional but tacky practice -- giving cash.
My enthusiasm for buying gifts has been greatly reduced, however, after reading "Scroogenomics" by University of Pennsylvania professor Joel Waldfogel, who argues that gift giving is wasteful most of the time because people often receive gifts that they would not have bought for themselves.
There's a lot of truth in Waldfogel's argument and insightful analysis.
After all, rational people buy things only when they think the benefits of the products exceed the purchase price.
For example, you would decide to buy a sweater for US$50 only when you believe that it is worth US$50 or more to you.
So receiving a gift that you would not have bought sometimes means that you deem it to be worth less than its price.
On my previous birthdays, I received several stuffed toys from my friends, who might take it for granted that females of all ages take to stuffed toys.
But I consider the toys more than meaningless -- they take up too much room as well.
From an economist's point of view, similar mismatches cause loss of value, the author notes. And the gap between the recipient's perceived value of the gift and its price is a "deadweight loss," since the loss incurred by one person did not result in someone else's gain.
He further quotes a 1993 Yale University survey, which discovered that "gift giving destroyed at least 13 percent of the value of the resources transferred."
Hence Waldfogel's observation: "Gift giving matches resources poorly with users, producing a meager amount of material satisfaction for the amount of money spent."
Waldfogel does acknowledge, however, that there are exceptions.
For instance, people are likely to appreciate the gifts from their close friends, who know their wants and needs.
Acknowledging that gift giving, especially during this holiday season, is a social norm for most Westerners, Waldfogel makes a suggestion:
"The idealized Christmas gift is a carefully chosen item that delights the recipient, opening his eyes to a new consumption possibility and at the same time functions as a conduit of warm feeling between giver and recipient."
The suggestion might sound abstract, but it serves as a reference for those at a loss as to what to give.
For those who don't understand this principle, Waldfogel offers simpler advice, depending on individual choice.
Cash is no doubt a good alternative, as it enables people to buy whatever they want, thus preventing the possible value loss in gift giving.
But the biggest problem with a cash gift, besides its lack of taste, is that it may be socially taboo in some areas, Waldfogel says.
In the US, while it is natural for an older relative to give cash to a younger relative, it would be inappropriate if the cash flow is reversed; the young giver would be stigmatized.
"Under the stigma view, cash is a handicapped gift in that it certainly results in less value for the recipient than what I spend," Waldfogel explains.
Such taboos don't exist in China, thus we are able to give cash instead of gifts in almost all occasions.
When it's inappropriate to give cash, a compromise would be gift certificates or donations to a charity or cause favored by the recipient.
In the US, for instance, the stigma on giving cash does not affect giving gift certificates, which people rate near the top of their most-wanted holiday gift list.
But shopping certificates are not perfect, as it is estimated that around 10 percent of those issued in the US are never used.
So Waldfogel prefers the idea of donating to charity, which not only largely diminishes the waste from unwanted gifts but also raises money for deserving causes.
Well, the idea is good, but it may take time for people to accept it.
My enthusiasm for buying gifts has been greatly reduced, however, after reading "Scroogenomics" by University of Pennsylvania professor Joel Waldfogel, who argues that gift giving is wasteful most of the time because people often receive gifts that they would not have bought for themselves.
There's a lot of truth in Waldfogel's argument and insightful analysis.
After all, rational people buy things only when they think the benefits of the products exceed the purchase price.
For example, you would decide to buy a sweater for US$50 only when you believe that it is worth US$50 or more to you.
So receiving a gift that you would not have bought sometimes means that you deem it to be worth less than its price.
On my previous birthdays, I received several stuffed toys from my friends, who might take it for granted that females of all ages take to stuffed toys.
But I consider the toys more than meaningless -- they take up too much room as well.
From an economist's point of view, similar mismatches cause loss of value, the author notes. And the gap between the recipient's perceived value of the gift and its price is a "deadweight loss," since the loss incurred by one person did not result in someone else's gain.
He further quotes a 1993 Yale University survey, which discovered that "gift giving destroyed at least 13 percent of the value of the resources transferred."
Hence Waldfogel's observation: "Gift giving matches resources poorly with users, producing a meager amount of material satisfaction for the amount of money spent."
Waldfogel does acknowledge, however, that there are exceptions.
For instance, people are likely to appreciate the gifts from their close friends, who know their wants and needs.
Acknowledging that gift giving, especially during this holiday season, is a social norm for most Westerners, Waldfogel makes a suggestion:
"The idealized Christmas gift is a carefully chosen item that delights the recipient, opening his eyes to a new consumption possibility and at the same time functions as a conduit of warm feeling between giver and recipient."
The suggestion might sound abstract, but it serves as a reference for those at a loss as to what to give.
For those who don't understand this principle, Waldfogel offers simpler advice, depending on individual choice.
Cash is no doubt a good alternative, as it enables people to buy whatever they want, thus preventing the possible value loss in gift giving.
But the biggest problem with a cash gift, besides its lack of taste, is that it may be socially taboo in some areas, Waldfogel says.
In the US, while it is natural for an older relative to give cash to a younger relative, it would be inappropriate if the cash flow is reversed; the young giver would be stigmatized.
"Under the stigma view, cash is a handicapped gift in that it certainly results in less value for the recipient than what I spend," Waldfogel explains.
Such taboos don't exist in China, thus we are able to give cash instead of gifts in almost all occasions.
When it's inappropriate to give cash, a compromise would be gift certificates or donations to a charity or cause favored by the recipient.
In the US, for instance, the stigma on giving cash does not affect giving gift certificates, which people rate near the top of their most-wanted holiday gift list.
But shopping certificates are not perfect, as it is estimated that around 10 percent of those issued in the US are never used.
So Waldfogel prefers the idea of donating to charity, which not only largely diminishes the waste from unwanted gifts but also raises money for deserving causes.
Well, the idea is good, but it may take time for people to accept it.
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