by Tom Chivers
Friday, 11
December 2020
Idea
07:00

Your Christmas gifts are worth less than you think

by Tom Chivers
Christmas shopping looks slightly different this year. Credit: Getty

My cousin David is an economist, although I do not hold this against him. He mentioned the other day that he and his wife, also a social scientist, have an unusual approach to gift-giving, in that they don’t.

Or, rather, they don’t at Christmas, or birthdays, or anniversaries. Together, they worked out (he wrote up our conversation here) that “Given our average life expectancies (and marriage expectancy?) we are looking at well over 200 gifts” over the course of the marriage, and it’s quite hard to come up with that many thoughtful gifts. Instead, they do nice things together (meals out, day trips) and if — at any point of the year — they happen to see a gift that they think the other would like, they just buy it, and give it then. “It removes the stress involved with time constraints of birthdays, etc,” he says. “It also has the added bonus of being a surprise.”

It’s a well-established economic finding that gifts are (in one, quite narrow, way of working out value) a waste of money: that is, receivers of gifts consider them worth less money than was spent on them. People are less good at buying things for other people than for themselves, so they end up wasting money: a “deadweight loss” (or “welfare loss”) in economic terms.

That means, explains one paper, if “your grandma gives you a jumper worth $100, which you value only $30. The so-called welfare loss is $70, as your grandma spent $70 more than the jumper is worth to you”. The welfare loss is usually less than that (that paper cites other research estimating it at between 10% and 33%), but it’s real: if we all spent the money on ourselves, people would have more things that they actually want.

As David points out, gift-giving is also stressful. I’ve bought three quite large things for my wife for Christmas and her birthday (inconveniently, they fall at almost exactly the same time). But will she like them? I think so. But if I’ve completely misjudged it, she might be forgiven for wondering if I just don’t know her very well.

One response to that might be that you should give cash, instead, so the receiver can maximise their own utility by buying the thing they want. But as David says, that would be to act like a straw man of a bad economist, failing to take into account the more intangible benefits: the pleasant feeling that someone has tried to buy you a thoughtful present, that they went to effort, all the messy human stuff.

David and his wife’s system works brilliantly for them. It would work dreadfully for me and my wife, because we like the ritual aspect of Christmas gift-giving, and also because I would have to work out how to buy my own socks and slippers. It may be that we end up with somewhat less than economically optimal belongings, but from an overall utility-maximising point of view, it seems to work.

Or, to put it in the words of Scott Alexander:

Despite deadweight losses, despite the wrong days/  we think that this matters so much it outweighs/  all the falsehoods and problems; our model predicts/  it outweighs all those things by a factor of six!
- Scott Alexander, Should you have a merry Christmas?

Oh, and if you want to buy a Christmas present that won’t turn up until March, then David and I have written a book together about statistics in the media. So do go and buy that, deadweight loss be damned.

Join the discussion


  • December 13, 2020
    Wow - I didn’t see that coming. Anyway - happy Xmas to you and 7881. Read more

  • December 13, 2020
    This is an idea I least understand. Say their charity of choice is Antifa, or some political group you hold as evil. They gave in your name? Too weird. And WT F is charity giving which carries no cost to ones self? Do you hold you committed a charitable act by requesting they give money in your name... Read more

  • December 13, 2020
    Well, it is rare to find someone missing the point of something as wildly as you have, so made it worth reading just to see how crazy the world is. Read more

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