4/14/2005

The Real Lump of Coal in Christmas.

What is the lump you ask? Deadweight loss. The article “Is Santa a deadweight loss?” states on average, a gift valued by the recipient well below the price paid by the giver. The most conservative estimate put the average receiver's valuation at 90% of the buying price. Where givers spend $40 billion on Christmas gifts, at least $4 billion is being lost annually. What to do? The best present is cash it is the most flexible. Next Christmas, ask for and give cash.

5 comments:

Diane said...

I think that resource waste could largely be avoided by gifting cash. All parties would win. The gifter wouldn't be wasting money. The giftee would have an asset they would actually use. The stores would still benefit unless the giftee chose to invest the money or spend it on schooling.

kenny said...

Gift cards are a good way to make sure the recipient spends it on a gift instead of a bill.

Rex said...

Giving money and gift cards can be very impersonal. The thing is do we ever really get what we want for Christmas? Not that often. If we do we probably had to be very specific about what we wanted. If it isn’t what we wanted do we exchange it or shove it in a drawer and hope to never see it again? On second thought, an impersonal gift doesn’t sound that bad.

Harry said...

I would have to agree cash is a great present. Some don't think so but why get something you hate or will never use. So if you are not specific then just go with the cash.

Dr. Tufte said...

The transformation of all of you into emotionless economists is complete!

Bwooahahaha.

On a saner note, the real trick here is explaining why it is optimal and rational for us to give gifts to each other if recipients prefer cash? One answer may be that we are also giving the gift of the time we spent shopping - which may be more valuable to the giver than the cash we spend (suggesting that we care about the recipient enough to shop for them).