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'Scroogenomics': Finally the Perfect Xmas Gift

Business prof Joel Waldfogel taught me why exchanging presents just doesn't make sense.

Shannon Rupp 6 Dec

Shannon Rupp was a Tyee contributing editor. For permission to reprint this article please contact the author: shannon(at) 

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Cost of giving: poor choices for others hurt everyone.

Ever since some wily Dark Age monks with a flair for branding hijacked Winter Solstice to further the Christian cause, Christmas has been the holiday of social transformation. So it's no surprise that a practitioner of the contemporary dark arts (economics) has come up with a book that delivers a Christmas strategy for the End of Oil era.

Scroogenomics: Why You Shouldn't Buy Presents for the Holidays was published in late 2009 by Joel Waldfogel, a Wharton School business professor at the University of Pennsylvania, and I'm worried that it's not catching on as I had hoped.

Perhaps that's because, sadly, the title is a bit of lie. Prof. Waldfogel isn't opposed to all Xmas gifts. He just wants us to stop buying bad gifts. And really, who doesn't?

I was thrilled to get my freshly pressed copy of his book a couple of turkey roasts ago, since I appreciate gifts aimed at my hobbies, which include embracing irony and hating Christmas. In fact, that gift is just the sort Prof. Waldfogel would approve of since it delivered far more than the cover value (of about $12) worth of satisfaction, because the giver found something I would adore before I even knew it existed.

That is the economist's idea of the perfect gift: one that holds its value (or even gains value) in the transaction. As we embark on Shoppapalooza this year, I think it's worth taking Waldfogel's message with us about the financial consequences of choosing crappy presents.

Well, that's not quite how he phrases it. He argues that the way in which we pile up the duty-gifts for all and sundry is actually destroying value because the recipients appreciate these offerings at well below the price the giver paid. On average, 20 per cent lower. But if you're talking about things like golf-themed mugs, you might well drive the value down to zero. Add it up, factor in Hanukkah and Diwali, and he estimates the U.S. alone is destroying about $13 billion of value in the giving process.

Fancy wrapped stinkers

Waldfogel shows remarkable common sense for one of those practitioners of the dismal science and I was sure that his book would put a swift end to reindeer-festooned sweaters and those nasty antlers for cats.

Alas, not yet. Although he's been banging this drum on the true cost of giving since the early 1990s, when he first found that if people don't choose gifts for themselves, they rarely get the satisfaction equal to the money the buyer spends. The further removed the giver is from the recipient -- grandparents, in-laws, and coworkers are among the worst gift-givers -- the greater the likelihood of delivering a stinker under the tree. So gifting anyone outside of your immediate family and closest friends is likely to be an exercise in slapping a big shiny bow on a box of wealth destruction.

In the case of a $50 sweater, for example, it may be the wrong colour, the wrong fabric, or just not quite the recipient's taste. She might be willing to pay $40 for the satisfaction to be gained from that less-than-perfect object, so the remaining $10 of the price vanishes. Or she might hate it so much that it's never worn, leading to a dead weight loss -- that's what the economists call it when we spend money on something that returns no value. You know: like a Justin Bieber album.

When I first read his book, I hoped that just as Dickens invented a Christmas sensibility for the Industrial Revolution, Waldfogel would give us a road map for doing Christmas in an era when waste is an enormous problem.

Spendfest is over

It's a step in the right direction -- at least someone with financial sense is talking about this obvious conundrum and not raising that red herring about how retailers need our misspent Christmas dollars to survive. (Why? Do they have some god-given right to retail products no one wants?) But Waldfogel hasn't addressed the crux of the Christmas dilemma, which is that the whole wretched SpendFest no longer reflects who we are and how we live.

We inherited our style of Christmas from the Victorians, who resurrected the holiday that the Puritans killed (because they knew it was just paganism in a manger). Victorians were faced with factories cranking out excess stuff, and Scrooge's savvier colleagues were looking for ways to spur the fledgling consumer economy. They hit on the notion of connecting Xmas spending with all manner of virtues from love and charity to good citizenship. While encouraging buying for the sake of buying drove the 19th century economy (and led to their cluttered decorating style) it no longer makes sense in a time when landfills are overflowing.

Even more of a problem for us is that the Christmas Victorians imagined and romanticized was based on vague records of the medieval celebrations, which couldn't be further removed from our modern lifestyle. Medieval Christmases were a pre-Industrial affairs that followed the rhythms of farming communities, when they had to feast before the food spoiled and party to fill the long, cold, dark days.

Not since electricity arrived has anyone needed to kill time in December, which is the busiest part of the working year in many industries. And as you sit on the runway waiting for the plane's wings to be de-iced on about Dec. 23, consider just how much you'd rather be making that sentimental journey home for a grand family meal in July.

And speaking of medieval values, while it's true that our economic and political structure increasingly resembles a handful of lords enjoying luxuries at the expense of their serfs, I'm not so sure we want to be encouraging this sort of thinking.

Stop the madness

What we really need is a new concept of Christmas for the 21st century.

Unfortunately, like many an economist, Waldfogel is good on defining the problem, but he's not so hot on finding solutions. The obvious cure for disappearing value is for people to give each other money -- but that's a faux pas in Western cultures.

Waldfogel applauds the growing enthusiasm for gift cards -- which are just cash in a more socially acceptable form -- because they hold their value in the transaction. In theory, at least. A quick glance at the post-Xmas bargains on Craigslist and eBay reveal a host of gift cards being sold for 20 per cent off their face value, suggesting they have the same satisfaction levels as the average ill-chosen sweater. And he admits that about 10 per cent of cards are never redeemed, and suggests that retailers might be persuaded to have those unclaimed cards default to charities. (Yeah, that's gonna happen.) But he also seems to have forgotten how many card-issuing shops declare bankruptcy after Solstice sales prove disappointing.

The logical conclusion of Waldfogel's thesis -- despite the business prof's fervent denial -- is that we stop obligatory gift giving. But his research also shows that people view winter presents as a necessity, akin to toilet paper. So the trick is convincing Aunt Belle, your brother-in-law, and the coworker demanding one of those dreaded Secret Santa exchanges that we're not just over-burdening the environment and ourselves, we're hurting the economy with this blizzard of wealth destruction!

With that in mind, this year I'm killing two birds with one stone. I just did a bulk buy of Scroogenomics and solved a host of this year's gift-giving challenges, not to mention ensuring that Christmas dinner conversations will be really lively.

© Shannon Rupp. For permission to reprint this article please contact the author: shannon(at)  [Tyee]

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