Christmas gift-giving: the economist vs. the anthropologist

This is the week in which we move from inklings of alarm to flat-out panic.  Have we done our shopping?  No, we haven’t done our shopping.

Economist to the rescue.  Joel Waldfogel has been arguing since 1993 that seasonal gift giving is dodgy and that we ought to rethink the exercise.

Quizzing students in his classroom, Waldfogel has determined that there’s a discrepancy of 20% between value given and value received.  This is another way of saying that our gift giving acuity is sufficiently impaired that people prize our gifts dramatically less that we think they will.  We give lamb, they get mutton.  Let’s call the whole thing off.

This really is looking the gift horse in the mouth.  In a normal American Christmas, according to The Economist, retailers make 25% of their yearly sales and 60% of their profits between Thanksgiving and Christmas.

What it ignores is the social point of the exercise.  We give gifts to acknowledge, shape, and celebrate our relationships.  How do gifts work to social effect?  We carry in our heads a set of understandings, cultural understandings, about how the recipient is and what gifts mean.  We use these understandings to fashion a match.  Good matches bring delight and confirmation.  Bad matches try the patience and challenge the relationship.  But so much social value is being created here that economic waste, when this occurs, is modest.

We don’t have good metrics for this social value.  But here’s a laboratory experiment you can try over the holiday season.  Try withholding gifts from someone, and see what difference it makes.  For want of a relatively small amounts of value, our social world can change beyond recognition.  Want to live in soulless social world that Dickens threatens in a Christmas Carol?  Just follow Waldfogel’s advice.

Gary Davies, Manchester Business School, understands this.  He says of Waldfogel’s perspective:

[It’s a] typical economist’s view of an issue where it isn’t the economics that are driving the issue. It’s the social side, the symbolism of the gift. [BBC news magazine, ref. below]

The Economist gets it too.

Gift-giving, some economists think, is a process that adds value to an item over and above what it would otherwise be worth to the recipient. Intuition backs this up, of course. A gift’s worth is not only a function of its price, but also of the giver and the circumstances in which it is given.

Somehow, one feels that if Waldfogel had quizzed his students a little more broadly about gift giving he might have glimpsed the larger significance, the true purpose, of all this “wasteful” spending.

But of course many economists are tone deaf when it comes to the social and the cultural.  What Adam Smith took out, they will not return to the field of study  Most of the time, this is a spectacularly success trade off.  Excising the social and the cultural from the field of study made certain understandings, and an entire discipline, both possible and productive.

The trick then is for the economist to know where the model works and where it can not.  (There may be a simple answer here.  Waldfogel was at Yale when this work first began, and as readers of this blog have heard before, Yalies are famously obtuse when it comes to certain real world problems.  They spring from the wrong kind of Protestants, I think, to be really world embracing.)

But this is something more at issue here that insisting on paradigmatic boundaries.  As just about anyone under 35 can tell us, the very of a marketplace is being challenged by a new set of ideas, the so called “gift economy.”  As this idea claims more people, it will claim more and larger parts of the economy.  Unless economists wants to watch the problem set disappear like a polar icecap, it’s time to do better than Waldfogel.


Anonymous, 2001.  Is Santa a Dead Weight?  The Economist.  December 21.  here.

Cowen, Tyler.  1998.  In praise of commercial culture.  Boston: Harvard University Press.  here.

Davies, Gary.  n.d., Gifts and Giving.  Forthcoming.

McCracken, Grant.  n.d., Christmas Trees.  This Blog.  here.  (for more on an anthropological approach to the season, specifically that spectacularly wasteful object, the Christmas tree)

Rohrer, Finlo.  2009.  Should We Stop Buying Christmas Gifts?  BBC news magazine.  December 3.  here.

Waldfogel, Joel.  1993.  The Deadweight Loss of Christmas”. American Economic Review, December, vol 83, no 5.

Waldfogel, Joel.  2009.  Scroogenomics: Why You Shouldn’t Buy Presents For The Holidays.  On Amazon here.

Wikipedia entry on the gift economy here.

Note: This post was lost due to Network Solutions incompetence some 12 months ago.  It just resurfaced on the net and I am reposted this day Dec. 24, 2010.