The wisdom of Scroogenomics

At this gift-giving time of year, I’ve been thinking about Scroogenomics, the theory of why you shouldn’t buy presents for Christmas.

OK, I hear you. Grinch! Santa hater! Fun thief! Go crawl back into your illbegotten little cave of misery and stay there until January.

Fair enough. But bear with me because I’m going somewhere with this. I’m not a Yuletide buzzkill.

Scroogenomics is a book published by University of Pennsylvania economist Joel Waldfogel. He argues that for every dollar spent on the gift for, say, Uncle Ebenezer, there is a net loss in value.

Why? Because we don’t necessarily know what our Uncle Ebs really likes.

Maybe he just doesn’t “get” that mustard yellow sweater with the big red pigeon embroidery you gave him last year. Your humour escapes him and anyway he doesn’t have an ugly-sweater party this year, what with COVID and all. But the sweater is warm so there is some value there.

What this amounts to in the big picture is billions of dollars in lost value in the economy of holiday gift giving.

When Scroogenomics was published in 2009, Waldfogel estimated that loss to be somewhere in the neighbourhood of $25-billion globally.

He labels this “the deadweight loss of Christmas.”

I suppose this is why the

“dismal science” of economics gets a bad rap. It’s also what former Prime Minister Stephen Harper meant when he told us he became an economist because he didn’t have enough charisma to become an accountant.

As an alternative to wrapped gifts with pretty bows, Scroog economists suggest giving straight-up money. This way, our Uncle Ebs can maximize the value of your gift by going out and purchasing that five-horsepower, 230-volt air compressor motor he’s always wanted.

If you take holiday gift giving as an exercise in the redistribution of financial resources, then yes, I suppose, money gifts make more sense.

This approach might work with Uncle Ebenezer, but imagine the look on Sweetheart’s face if Honey handed her an envelope stuffed with five $100 bills on Christmas morning and said, “go get yourself something.” Yeah.

What the Scroogenomics school misses is what psychologists call “signalling.” The value of the gift is more than just the commodity itself. The value is the thought and love that went into the purchase, and not just the money. That is why we remove price tags from gifts.

But there is one instance in which the Scroogenomics school really does make sense. When it comes to food banks, for example, money trumps gifts of food.

You can organize the food drive and collect tins of mushroom soup, boxes of Cap’n Crunch, and bottles of HP sauce. Food banks are grateful for these donations, but they can extract far more value from a donation of money.

Food banks understand food needs in the community. If a food drive brings in a mountain of tinned goods when what is really needed is fresh produce, there is a misalignment of need and value.

The other issue is that the food bank has to deploy resources to sort through the hard donations. Even if those resources are volunteer, there is a cost to this. In some cases, the cost of sorting through surplus cans may exceed the value of the donation itself.

Food banks can stretch the value of money further than the cash value of a hard donation. Through relationships with grocers, food banks can buy in bulk. They can make that can of soup go five times as far with an equivalent money donation.

Food banks have been trying to tell us this for years. It’s a fine line. They don’t want to look a gift horse in the mouth or appear ungrateful.

They just want us to think about the Scroogenomics of gift giving. It may seem cold, hard and unsentimental, but money really is the best gift and “signal” for the food bank.