# Joel Waldfogel is an economics prof. at Wharton School (UPenn.). His

1. Jan 24, 2010

Joel Waldfogel is an economics prof. at Wharton School (UPenn.). His latest book is Scroogenomics. In it, he estimates that the recipient of a gift usually values the item less than its cost. By his measure, Christmastime gifts amount to $12 billion lost value ("deadweight loss") each year, which is inefficient and irrational. Modern economics postulates that the "best" gift is money -- it lets the recipient to spend it as he or she pleases. Prof. Waldfogel's book seems a special case of this general postulate. But writing a jolly check payable to the grandchildren is not a popular choice among the grandparents currently, and unlikely ever to become one. What is your take on his claim? Should holiday gifts be discontinued, managed, regulated, banned? Or replaced by handouts in the form of cold cash? 2. Jan 26, 2010 ### arildno Re: Scroogenomics Waldvogel might ask a parent of a 5-year old, who has laboured over, and made a nice drawing as a gift to him/her, for a second opinion. 3. Jan 26, 2010 ### mheslep Re: Scroogenomics I heard a review of Waldfogel before the holidays and it nudged me into a decision I had been mulling for some time for my family during the holidays: all gifts must be something one makes, not buys, with some reasonable caveats. Ties, scarfs, and the like are banished. The result is that Waldfogel's theory of gift value is, I think, reversed. If the house was on fire, I might run back for my xmas gift family photo collage made by Mrs mheslep while letting a hundred flat screen tv's burn. 4. Jan 26, 2010 ### mheslep Re: Scroogenomics Exactly, though I vaguely thought Waldvogel was in the main talking about purchased gifts. 5. Jan 26, 2010 ### Evo ### Staff: Mentor Re: Scroogenomics I like money, but no amount of money can replace the thoughtful gifts my two girls get for me. They know what I care about and the time and thought they put into getting me something that will be meaningful to me just blows me away. They're not expensive, but each one brings tears to my eyes and each time I walk by one of their gifts, it tugs at my heart. 6. Jan 27, 2010 ### Astronuc Staff Emeritus Re: Scroogenomics It depends on what is behind the gift. The most important thing, no amount of money can buy. It must be given freely. 7. Jan 27, 2010 ### mheslep Re: Scroogenomics I missed this phrasing the first time. Did you really mean to say "managed, regulated, banned"? Even assuming Waldvogel is 100% correct, why not phrase the question something like "does this make you reconsider holiday gifting" or "knowing this, would you behave differently". Who or what third party entity do you imagine has even the slightest authority or right to "manage, regulate, or ban" holiday gifting? 8. Feb 5, 2010 ### EnumaElish Re: Scroogenomics The language you suggest is sensible but I was trying to be ironic. I understand that some gifts are managed, regulated, or banned all the time, and all gifts may have to be managed, regulated, or banned sometimes (for example, as a punishment), but all gifts cannot be managed, regulated, or banned all the time. 9. Feb 5, 2010 ### mheslep Re: Scroogenomics Yes because the item is perhaps toxic or otherwise presents some kind of harm to the recipient, not ever because some third party believes it is not an efficient use of funds. 10. Mar 11, 2010 ### calculusrocks Re: Scroogenomics The most efficient purchases are those you make on yourself, because obviously you know exactly what you want. Less efficiently, you can buy something for someone else, or someone else can buy something for you. Least efficiently, someone else can buy something for someone else. This concept is called the "efficiency of purchases" presented by Nobel Prize winning economist Milton Friedman. Getting money is the best gift, because obv. if you get money you know exactly what you want, and can get it. Even for sentimental moments, etc. with the money you can buy a family photo, or even a family vacation, or a romantic getaway. Food for thought, would anyone honestly prefer a$20 best buy gift card to a \$20 bill? If not, then why are you more likely to receive the former as a gift rather than the latter?

11. Mar 13, 2010

### arildno

Re: Scroogenomics

WOW!

I didn't know that there exist persons like you, who have a total knowledge about what pleases you most.
Furthermore, I didn't know you have such idiotic significant others who never can be better judges than yourself about what you'd really profit from.

Or is it, perhaps, that you do not have any significant others at all, because you are too full of yourself?

12. Mar 13, 2010

### DanP

Re: Scroogenomics

Cold cash works work me. Most useful present I ever had. I also tend to give cash very often (but not in all situations) and it works out pretty well.

But holiday gifts should not be "discontinued, managed, regulated, banned". I mean , what gives the society the right to legislate gift regulations ?

13. Mar 13, 2010

### calculusrocks

Re: Scroogenomics

Huh? This psycho-babble you gave me is a waste of time.

I'll just quote from the text of http://en.wikipedia.org/wiki/Milton_friedman" [Broken] (winner of the Nobel prize in econ.) Free to Choose complete with the explanation, and I'll follow up with an example.

He then goes on to speak to us about welfare.

Here is an example. Jay Leno went to Michigan (very poor by American standards), and gave some workers free comedy tickets. He then was so upset that the workers put them up on eBay, that he http://www.techdirt.com/articles/20090318/0134084161.shtml" ordered eBay to ban the sales. This is in Category II. Apparently he thought that the worker's would rather see his show than get some food.

Bear in mind when discussing economics that in economics we are talking about getting the most for a dollar, yen, etc.

Last edited by a moderator: May 4, 2017
14. Mar 13, 2010

### arildno

Re: Scroogenomics

Actually, you are the one psycho-babbling, because you totally ignore highly important factors.

For example, I don't know about all books that exist that I would enjoy if I got them.

Having friends&family who DO know what sort of books I like multiplies my chances manifold of getting books I will like if they give THE BOOKS to me, rather than giving me cash so that I myself have to go looking for them at random.

Giving me "useful tips" about books along with the cash is still not good enough, because I must go and buy them, instead of geting them in my hand right now.

15. Mar 13, 2010

### DanP

Re: Scroogenomics

Isnt simpler to keep an Amazon.com wish list, and buy from there with the cash you got ? This is what I do. I also have a public wish list, so other persons can see what are the books I want (not matter that some would be able to make a pretty good educated guess)

16. Mar 13, 2010

### arildno

Re: Scroogenomics

What about those books I'd love to read, but have no idea that I would want to read before being given them?

That's where knowledgeable friends and family can extend my eventual possessions.

Similarly, you go to a picturesque antique shop on your holidays, finding a bracelet you KNOW your mother would love.

What do you do?
Wait till you are back, hand her the cash and the ticket to wherever you had vacation, saying she sjould go and buy that bracelet?

Wouldn't it be much simpler to buy the bracelet and hand it over to her yourself?

17. Mar 13, 2010

### turbo

Re: Scroogenomics

My wife and I cook for others. Regardless of monetary value, people appreciate the effort and thoughtfulness behind the gifts. I would feel crass, just handing out money, and would be quite uncomfortable about giving gifts without putting a lot of thought and effort into the selection.

Today, my wife got into a baking mood, and while I did some spring-time clean-up she made soft German sugar cookies filled with lemon curd, a couple of round loaves of substantial pumpernickel bread, and 4 different kinds of bone-shaped dog cookies. Most featured rolled outs, whole grains, and garlic powder, and were built around main ingredients such as fresh herbs, ground beef, and fresh beef liver. Some of those cookies smelled REAL good when they were baking, so I'm going to have to sample them when giving Duke treats. I stopped in at the neighbors' this afternoon and dropped off a loaf of the bread, a bag of the filled cookies, and another bag of mixed dog-treats for Max. Max did NOT undervalue his gift. He got to sample a garlic and parsley cookie first, and he was kind of clingy afterward (more!). I think gifts are more fun to give when they are unexpected and not tied to some event.

18. Mar 13, 2010

### DanP

Re: Scroogenomics

A lot of ppl would be just happy to receive money as a gift. So why would you feel crass ? A large percentage of gifts are always returned if you let the receipt in the packet. Especially some pretty expensive ones, when temptation to have the cash is big.

19. Mar 13, 2010

### turbo

Re: Scroogenomics

Let's put it this way - one of my neighbors's grand-daughters has a birthday coming up on the 20th. She'll be 5. She loves rocks, animals of all kinds, and astronomy (among other things). My wife is going to cook treats for her birthday party, and she has already bought her a big bag of assorted sea-shells, and a bag of mixed polished agates with a wide range of colors. She'll love those. Would she love a check? Don't think so.

My father is 84. He is not wealthy, but he has everything he needs. Should I write him a check on his birthday or father's day? Generally, my wife and I fix him up a multi-course meal that lends itself well to left-overs. Maybe pork rib roast with gravy, mashed potatoes with onions and garlic, sweet peas with pearl onions, pastry biscuits, rye bread, and vegetables that are compatible sides. He'll call over and over again as he demolishes that feast. Think he'd like a check?

Last edited: Mar 13, 2010
20. Mar 13, 2010

### epenguin

Re: Scroogenomics

21. Mar 13, 2010

### CRGreathouse

Re: Scroogenomics

Certainly -- and I imagine many people feel similarly. But isn't the point of this thread -- or one of its points -- that those societal feelings ("crass", et. al.) should be changed, if efficiency is to be achieved?

Certainly while that's a common feeling, cash gifts will be rare.

22. Mar 14, 2010

### calculusrocks

Re: Scroogenomics

That's basically where I'm at. I don't think I've ever given money as a gift because of societal pressures. Cash does buy books. Cash does buy baked goods. Cash even buys health care for the elderly. Cash is a thoughtful gift, because almost anything you can dream of cash can go towards buying.

23. Mar 14, 2010

### calculusrocks

Re: Scroogenomics

This is a common act of charity. Companies frequently donate their services rather than money, because their services can be given away at cost, and is also a good way to demonstrate their value to the community. If your wife's time is very valuable, then she's gotta be costing herself, but assuming she has nothing to do, then doesn't that save money in the long run?

It's almost as though we give children things in the hopes that they don't grow up.

Also, we are ignoring all the not-so-stellar-gifts that we must be giving because obviously we've all received them. What if you get a book that you don't like, or an ugly tie, whatever. The purchaser has incentive to make sure he gets a good deal on the good (or to prepare it well), but the good itself may or may not meet with the preferences of the recipient. That's the main point. Sometimes the gift is right on the money, but sometimes its a total miss.

24. Mar 18, 2010

### imiyakawa

Re: Scroogenomics

Waldfogel is totally missing the point. He's looking at this from the neoclassicalist perspective: all that matter is monetary. What he should be looking at, and what the neoclassical model tries to increase, is net utilitarianism (with consideration of the Kaldor-Hicks efficiency - if you don't know what this is, ignore.).

THE MOMENT he gets data asserting that receiving cash as a gift derives more utility on average than an actual physical gift, THEN he has a theory.

25. Mar 18, 2010

### Matterwave

Re: Scroogenomics

I think the point that most people brought up, but economists tend to ignore, is that the act (of receiving a gift that is NOT cash) itself provides utility to many people. Even if the gift is not exactly what an individual needs or wants, it can become the thing that individual wants simply because it was chosen by someone important to him (e.g a child or significant other). In this way, the net utility gain from mandating all gifts be in the form of currency is offset (at least somewhat) by the net utility loss by people who wanted others to choose stuff for them.

As in all economics, it's impossible to tell which factor outweighs which. Utils are not uniform across all consumers.

Simply put, consumer surplus in this case cannot simply be measured by the amount of money someone would have payed for the item minus the amount the gifter actually payed because the act of someone else picking the item for giftee may affect their demand curves in unknown ways.