A quick word first
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Bah, humbug?
In 1993 a then-young economist, Joel Waldfogel, made a name for himself by publishing an article, “The Deadweight of Christmas,” in the prestigious journal, The American Economic Review. Waldfogel’s point was simple, though I don’t mean that as a compliment.
He argued that when your aunt spends X dollars on a holiday gift for you, with that same amount of money you might well have bought something else that you like better. In his eyes, such a gift is inefficient because it doesn’t maximize the welfare of either the giver or the recipient. If your aunt really wanted to be thoughtful to you and herself, she should sent you cash and not wasted her own time browsing in stores or online, for that matter.
No surprise, Waldfogel’s position raised a howl, as did his subsequent book, Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays. His views continue to be debated to this day.
Many people’s reacted viscerally. It was as if the Grinch was poised to snatch gifts out of everyone’s hands, young and old alike. Count me as one of them. The one-size-fits-all aspect of handing out checks obliterates any sense of individuality, of our understanding and treasuring the particular person we’ve chosen a special gift for.
On top of that, I’m perplexed by the book jacket. Are we to believe that the child is miserable because she didn’t get a gift card, or is it because her parents just told her that they are sending the unopened package back to Aunt Clara?
Many saw Waldfogel’s work as exemplifying an all-too-common flaw in economic analysis, namely a myopic view of costs and benefits, one that ignores the social value of relationships. Dashing off a check and tucking it into an envelope is hyper-efficient since it takes but a minute. But the haste with which it is done signals that sender can’t be bothered to spend much effort in bestowing the gift.
The underlying issue goes beyond holiday gift-giving. It goes to generosity more broadly. Take the “suspended coffee” phenomenon several years ago that sparked both applause and criticism. The practice started in Naples, Italy, where some customers at coffee bars would buy two coffees, one for themselves while leaving a receipt for a second for a stranger who couldn’t afford to treat himself or herself.
The custom spontaneously spread to other countries. It’s an anonymous act of paying it forward, without any expectation of being repaid (at least not in a material sense). Who could argue with that? Well, some people did, calling the gesture ”stupid can inefficient." How can you be sure, they asked, that the person getting the gift is needy? And if they truly are penniless, shouldn’t they get something more nutritious than a double cappuccino?
In the abstract, I suppose so, though in this contentious age, I’m glad for small acts of kindness even if they’re inefficient in strict dollars and cents terms. They kindle gratitude on the part of recipients, a measure of satisfaction for those who who enjoy being generous, and for some of us who merely hear about them, a reminder that the world is not a wholly hostile place.
This isn’t wishful thinking. There’s compelling research that shows giving can be better than receiving. (See, for example, Happy Money: The Science of Happier Spending by Elizabeth Dunn and my colleague Mike Norton.) And for more on the topic, check out “Smiling at a deadweight loss,” published just a few days ago.
Holiday cheer
My posts focus mostly on negotiation, so readers may wonder where these musings fit in. The point is this: we shouldn’t treat all our interactions as financial transactions. Monetizing everything that we give and get in life overlooks how we are connected to one another. “Not everything that can be counted counts,” Einstein is credited with saying. “And not everything that counts can be counted.” That’s the point here.
Real world experience sometimes transcends clever theory. In 2014 a New York Times article reported that Waldfogel himself admits to buying presents for some people. Good for him, I say. In economic jargon, his “revealed preference” shows that doing so gives him pleasure. And, no doubt, his recipients enjoy the fact he disregards his own advice, at least with them.
In this holiday season and beyond, I wish you happiness, in its abundant forms, for you and your family, and many opportunities to bring happiness to others, as well.
Housekeeping
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