“Buying presents for other people is a recipe for resource misallocation”
Joel Waldfogel
Buying things for ourselves can be disappointing, but buying presents for other people is a recipe for resource misallocation and buying the wrong thing.
When we spend €100 on something for ourselves, we usually get something worth at least €100. If we spend €100 on somebody else, there’s a good chance we’ll buy something that’s worth nothing to them — or much less than the €100 could have bought if they had chosen a gift themselves.
Like many things in life, we find wisdom from our elders. In the US, grandparents, aunts and uncles quite often give cash instead of choosing particular presents. They understand that they don’t know what their recipients want and don’t want to disappoint them with something useless. It’s as if they know not to destroy value.
Thirty years ago, Christmas gifts in the US tended to be things. Today, something like a third of all present-giving is done through gift cards. People can be efficient in a way that’s popular but not tacky. It’s also easy to give to charity in the name of a gift recipient. So, instead of buying your brother-in-law something he doesn’t want, you can give money to charity in your brotherin-law’s name. A similar thing would be to take a trip together this year, instead of giving each other gifts you don’t want. It all helps to minimize waste and environmental degradation.
GDP is reflective of some psychological satisfaction that’s generated for the economy. Normally, every dollar we spend generates at least a dollar’s worth of satisfaction. However, when we’re buying for others, this isn’t the case.
There’s often a heavy element of obligation to gift-giving, which is not good. This is a kind of buying that is not inspired by a specific idea but by a sense of having to buy for people we don’t know well. We don’t know what they have or what they like or want. So, let’s try to get some satisfaction out of our seasonal spending: something that delivers warmth and affection, and employment for sellers and producers, but that gets the right things to the right people.