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ChristmasThe enormous holiday season from Halloween to Elvismas, is upon us. Another seasonal standby is the article about the value of presents, both in religious and in economic terms. Many cultures have different ways of compelling people to redistribute wealth and/or give alms to the poor. Many of the Native tribes of the Northwest United States and Western Canada have a practice called the potlatch, in which people celebrating a significant family event such as a marriage would hold a party, invite people for dinner, and then give everyone gifts or cash payments. These were controversial with the European missionaries and colonists because families would bankrupt themselves trying to impress people with their potlatch. To properly celebrate the Jewish festival of Purim, each person is expected to give at least two gifts of prepared food to another person (often cookies or pastries) as well as a “substantial” gift to at least two poor people. At Chinese New Year, married people give unmarried people (usually children) gifts of cash known as lai see in Cantonese or hong bao in Mandarin, traditionally given in elaborate red envelopes. Then you have different family events: weddings, christenings, bar mitzvahs, quinceaneras, birthdays, etc.

All of these events include a socially obligated transfer of wealth, usually from older members of a family and community to the younger members.

Every December, the business press does stories on the value of gift giving. Most quote research by Joel Waldfogel, an economist at the Wharton School of University of Pennsylvania, on the deadweight loss of Christmas. He says that because consumption choices are made by someone other than the recipient, each gift comes at a loss. In other words, $10 spent on a gift will leave the recipient worse off than if he or she had spent the $10 on himself or herself. Even a gift card has a loss because it might be for a store you don’t usually frequent – it’s a chore to use it. An efficient gift is a good match; the most efficient gifts are those given by close friends or romantic partners, while the least efficient are from members of the extended family. Presents from aunts, uncles, and grandparents had the greatest losses, up to 1/3 of its value. That may explain why people are most offended by cash gifts from people close to them and least offended by cash gifts from people further away from them.

Others have argued differently. Megan McArdle of Newsweek Daily Beast says that the difference between the price and the perceived value should be thought of an option: a present may expose you to something new that you may love, and that adds value – and offsets presents that get moved to the Goodwill box. When I was in high school, a neighbor gave me a Chanel No. 5 gift set. I suspect it was regifted, but I also loved it and still wear Chanel No. 5.

There’s another possibility that I will through out there: the idea of a control premium. Gift-giving includes an element of power because it is arbitrary. A crotchety aunt who gives you a savings bond when you really want a gift card to Abercrombie & Fitch (not like any crotchety aunts I may resemble) is exercising a tiny bit of power over your life, saying that college and the future are more important than a new top. This power can be used for good (ahem) or for evil, as anyone who has received a present intended as an insult knows.