Joel Waldfogel is a professor at the Wharton School of the University of Pennsylvania. His book, Scroogenomics, was published in October by Princeton University Press.
You’re not really a Scrooge, are you? No. I don’t advocate not giving. Gifts are appropriate for kids and the people we know well. We have a good idea what they want, and we’re not going to disappoint them. But when we don’t know what recipients want and we feel obligated to give to distant relatives or people we don’t see very often, it’s a recipe for disaster.
How so? We spend about $65 billion on gifts over the holidays, but surveys that I’ve conducted over the years show that recipients value gifts at about 20% less than what was spent. That’s $13 billion a year wasted.
Explain, please. When I buy for myself, I spend $100 only if I see something that’s worth at least $100 to me. But if I buy gifts for other people, how do I know what they would have spent for them? Maybe they wouldn’t have paid anything. I don’t know what they own or what they like -- they might not be caught dead in a sweater I’ve chosen. That’s as bad as lighting a $100 bill on fire. Or maybe lighting the sweater on fire.
What’s the solution? The increased use of gift cards reflects a trend toward being less wasteful. Most cards have no expiration date, and they let recipients have some choice. More people are also buying charity gift cards, such as the Good Card [from Network for Good at www.networkforgood.org]. The Good Card lets recipients pick their cause and donate your gift. An 8-year-old might not appreciate such a gift, but for an adult you don’t know well, it’s an opportunity to do something worthwhile.
Still, we could do better. The value of unredeemed gift cards -- about one-tenth of total gift-card value -- could go to charity. Retailers with a reputation for social consciousness could make some hay out of this.
Will your idea catch on? I’d like to join the ranks of jet-setting, do-gooder economists. I’m hoping Bono reads this and calls me.