The perfect seasonal present for economists arrived in today's post – Joel Waldfogel's Scroogenomics. It sets out the economic case for not buying gifts, which of course are highly inefficient. If resources must be transferred, cash is best. The waste in the US, according to Waldfogel, starts with the $66bn of satisfaction which costs $78bn to buy, and then you have to add on the costs of time and shoeleather (or whatever the online equivalent is).
This is all done in a very lighthearted way, and leads Waldfogel to recommend (on a more serious note) that one gives either gift cards or charity christmas gifts, that is, spending the money that would have gone on a gift on say a goat or bicycle for a village in Kenya instead.
I enjoyed the book, and it's another of those very appealing and nicely produced small books (this one with a sensible sub-$10 price). I particularly liked the cover picture: how, one wonders, did they get the child to cry so appealingly? However, I do profoundly disagree with the moral.
Whenever I've received a notional goat, it's annoyed me. Surely, I think, people shouldn't use the pretext of giving me a 'present' to make their charitable donations. Charitable giving is something we should be doing anyway. Presents at Christmas have an entirely different function, namely the tangible expression of social and familial bonds. My feeling (and this is especially for any of my friends and family who happen to be reading) is that gifts will afford me more pleasure than it will cost the giver to buy them, even if I wouldn't have chosen it for myself. And added to that is the pleasure I derive myself from giving presents to others.
So nice try, Prof Waldfogel, and I hope lots of people buy your book as a nicely ironic stocking filler.
DianeC, I don't find it surprising that people don't buy the exact same items as gifts that people would have bought for themselves. What I found strange though is that Waldfogel's book doesn't really address what I thought would have been obvious responses. Take an example, gift giving has existed in all societies over time because it provides information on people. It provides information on how well others know you. It provides information that others care about you and they demonstrate that by getting you gifts that they think you will like. If they guess correctly, that tells the person getting the gift that you have cared enough about them to find out what they really like. Giving people money as Waldfogel suggests wouldn't provide this benefit at all. Let me ask you another question. Why do parents give gifts? Do they give them to give the child exactly what the child wants? Probably not. They give the child what the parent thinks that the child should have. Does that represent a social loss? It does not seem so. Personally, what irks me is that this book is so intellectually thin. Besides disagreeing with the moral here, don't you also find the logic pretty silly? Thanks for your time.
To be fair to Prof Waldfogel, I think he too finds the logic suspect and so presents it very much tongue in cheek – and then also tries to draw some more sensible conclusions in addition.
DianeC, thanks very much for your response. I really wish that you were right. I have read his original piece in the AER and his responses to his critics, his book, and I have seen the interview that he did for press that published his book (http://press.princeton.edu/video/waldfogel/), and I have to say it certainly seems like he really believes what he has written in the book. Are you saying that he wasn't serious about his claims in his earlier academic debates? Are you saying that he was joking about him explaining to his kids or his wife about his ideas on presents? I hope that you are right, but just to make sure that I hadn't completely misunderstood his arguments now, I just looked again at the video interview and this guy is really serious. I also looked again at his chapter 11 where he responds to critics. While he doesn't deal with the strongest arguments against his claims, he does argue that people are making mistakes. Are you saying that he doesn't believe his claims about norms trapping people into bad equilibriums? Is he joking about his discussions on the benefits from redistribution? Could you please point to someplace where you think that he is actually not serious about this measure of the deadweight loss from presents? Thanks. I would really appreciate a response.