Developing a new approach to Christmas gift giving

Christmas is big cultural practice in the Philippines from the decorations to the social gatherings to the practice of gift giving.  Often times do this beyond our financial means to afford doing it. Please read this article to get some new ideas on gift giving.

Just what you need: a Christmas audit

From the Sydney Morning Herald By Jessica Irvine December 3, 2011

There seems little point in denying it any longer: Christmas is just around the corner. Which is to say, Christmas Day is still several weeks away. But the pre-Christmas madness of gift-buying, card-posting and work-party-cavorting is in full swing. Economists are both enthralled and dismayed by the prospect of Christmas. Retail spending in the lead-up to and following Christmas is closely watched as an indicator of consumer confidence. But economists are troubled by all the buying of hideous ties, humorous mugs and popcorn makers destined for the spare cupboard. It’s not so much the overconsumption that bothers – in fact, economists believe consumption is the ultimate end game for all economic activity. It’s the mismatch of consumption that economists can’t stand. When you shell out $50 to buy me that handmade macrame handbag, but I value it at only, say, $25, there is what economists call a $25 ”deadweight loss”. This deadweight loss is the difference between how much you are out of pocket and the benefit I derive out of receiving that gift. In a much-quoted paper in the December 1993 edition of The American Economic Review titled ”The Deadweight Loss of Christmas”, economist Joel Waldfogel tried to estimate the total deadweight loss caused by such spending. He asked some Yale undergraduates to estimate the value of the presents the had received the previous Christmas. He then asked them to estimate how much each of those presents was worth to them, i.e. how much they would have been willing to pay to get them. On average, the students valued their presents only at between 66 per cent and 90 per cent of what was paid. This gap, of at least 10 per cent, is a ”deadweight loss” to society. Of total holiday gift spending of about $US38 billion in the US in 1992, Waldfogel estimated the total deadweight loss of Christmas at $US4 billion. Now you see why economists make miserable gift givers. They know they will never be able to buy something that would exactly mirror your preferences as a consumer and therefore maximise the economic benefit you would get from receiving it. ”Why don’t you just go buy yourself something you want, and I’ll do the same?” says the economist to his or her no-doubt long-suffering spouse. So, what to buy the economist in the family? According to Waldfogel, who went on to write the book Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, it’s OK to keep buying presents for close loved ones. In his surveys, the deadweight loss of gifts was smallest the closer the relative or closer in age of giver and receiver, because, presumably, of such people’s increased familiarity with the receiver’s innate preferences. The solution for more distant acquaintances is to simply give cash, or, the more socially acceptable option of gift cards. Economists also endorse the idea of wedding gift registries, which get over the deadweight loss of possessing five hand-held blenders. A final solution is to give to charity. This is particularly good when you don’t know a person well enough to know their preferences. Much better then, that a charity receives the money and presumably spends it in some social-welfare-enhancing way. Charitable giving also has the benefit of being what economists call a luxury good: we tend to spend more on it as incomes rise. So your gift will send an unconscious signal to the receiver that you consider them rich enough to desire a charitable gift. Win win.

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