The Deadweight Loss of Christmas

Sobering paper that touches valid points. Still, a cash gift is kind of soulless.

 “The Deadweight Loss of Christmas” is the sort of academic paper that makes ordinary people think economists are kind of crazy. 

So the NY Times in the article from 2014 'An Economist Goes Christmas Shopping'.

"I find that holiday gift giving destroys between one-third and one-tenth of the value of gifts,” proclaimed Joel Waldfogel, then an economics professor at Yale, in the 1993 paper. He estimated that ill-chosen gifts caused between $4 billion and $13 billion a year in economic waste; for comparison, he cited an estimate that put economic costs of the income tax at $50 billion.

Here is an excerpt from the paper.

In the standard microeconomic framework of consumer choice, the best a gift-giver can do with, say, $10 is to duplicate the choice that the recipient would have made. While it is possible for a giver to choose a gift which the recipient ultimatelv values above its price-for example, it the recipient is not perfectly informed-it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash. In short, gift-giving is a potential source of deadweight loss.

This paper gives estimates of the deadweight loss of holiday gift-giving based on surveys given to Yale undergraduates, I find that holiday gift-giving destroys between 10 percent and a third of the value of gifts.