November 23, 2009
Posted by Lisa Fairfax

Apparently it is not a good idea to give gifts for the holidays--at least it is not a good idea to give them to people you do not really know.  This according to Joel Waldfogel, a Wharton professor and author of Scroogenomics: Why You Shouldn't Buy Presents for the Holidays, published in October.  Waldfogel says that when you buy gifts for people you do not really know, you not only spend more money than they normally would spend, but you also spend more money for things that the recipients do no really want.  Hence, surveys that he has conducted suggest that people value gifts at about 20% less than what was spent.  Since we spend some $65 billion on holiday gifts, that amounts to about $13 billion a year wasted on gifts.  Not to be a total scrooge, Waldfogel does have at least two solutions to the gift giving dilemma.

The first is to donate an amount to charity in someone's name or buy a charity gift card, such as the Good Card, that allows people to pick the charity to which they will donate your gift.  To be sure, such a gift seems to assume that people actually have a favorite charity, but perhaps the gift will encourage them to identify one.  

But for those that you want to give an actual gift, Waldfogel suggest gift cards.  But this seems problematic for at least two reasons.  The first is that gift cards seem just as wasteful as giving an unwanted gift.  Indeed, as we've noted at the Glom, because too often people forget to use gift cards that then subsequently expire or people do not use them for their full value, gift cards turn out to be a multi-billion dollar waste of money.  Of course, the Fed recently proposed legislation that would prohibit certain fees on gift cards and require that they do not expire for five years, and such legislation could make giving gifts cards less wasteful.  Moreover, Waldfogel has a novel idea for unredeemed gift cards.  He suggest that their value should go to charity.  That is, we should encourage companies to issue gift cards under which, after some time period, the unspent value automatically gets transferred to a charity.  Although a nice concept, he admits his idea has not really caught on--no surprise given that companies, and in some cases states, can profit from unredeemed gift cards.

Another problem with giving gift cards is that they seem impersonal as compared to a gift.  But viewed in the context of Waldfogel's observations, an unwanted gift doesn't really seem all that personal.  So if the thought really counts (and you are trying to be economically prudent), Waldfogel suggests that we should think in terms of gifts cards, though it is not clear that the proposed new laws can really minimize the economic waste associated with such a gift.  This ultimately may suggest that, as gift-giving thoughts go, we really should just think in terms of cash--pretty sure that's a gift that wouldn't go to waste.

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