The high cost of ugly, useless Christmas gifts

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They are yuletide traditions as common as turkey and tinsel: the fake gasp of glee, the toothy forced smile, the rote thank you over the gift so ugly or useless you're immediately calculating how long you have to wear it/hang it/use it before tossing it into the back of a closet with all other unwanted offerings of Christmas past.

And now, in a new book called Scroogenomics , a U.S. economist has helpfully done the math on the holiday he declares, as only an economist would, an "organized institution for value destruction."

Or, as he concludes rather ominously: "A spectre has been haunting the rich economies of the west, and that spectre is wasteful gift-giving."

According to Joel Waldfogel, the chair of business and public policy at the Wharton School of the University of Pennsylvania, what people pay for gifts rarely matches how much the receiver values them. That's because, except in certain circumstances (mostly involving savvy spouses), people are just better at buying their own stuff.

In surveys, he asked undergraduates to compare their own purchases to gifts, estimating the value of the each item against what they would actually pay for it. Gifts were, on average, 20 per cent less valuable. Grandma's gifts, while well-meaning, were worth even less.

Given that Canadians spent $7.3-billion in 2007 on holiday gifts, according to Dr. Waldfogel, that's an annual loss of $1.5-billion. Worldwide, he suggests, it's the equivalent of throwing $25-billion in the garbage, which might make a person rethink those endless hours spent circling the crowded mall.

And Christmas isn't alone: A similar pattern of loss has been found for other gift-giving holidays, such as Diwali in India.

Despite his book's catchy title, Dr. Waldfogel is really no Ebenezer - though his introduction to Christmas and its wrapper-ripping orgies came later in life with marriage. As he is quick to clarify, after being vociferously accused of Christmas-bashing when he first pointed out the "dead-weight loss" of holiday shopping more than a decade ago, it's the pointless excess, the "sloppy spending," that riles his economist sensibilities.

"It's probably wrong to pillage the planet in celebration of Christmas," he writes. "But if pillage we must, we should at least do it efficiently."

As he observes in his book, however, people have never been doing Christmas particularly efficiently. Consider this telling quote: "There are worlds of money wasted, at this time of year, in getting things that nobody wants, and nobody cares for after they are got." Harriet Beecher Stowe, American author and abolitionist, made that observation in 1850.

Before there were credit cards, there were organized Christmas Clubs, where holiday shoppers in 1909 could put away extra pennies to cover their gift-giving come December. And the "yuletide bump" in sales that modern-day retailers experience every Christmas can be tracked back to the 1930s, and even earlier in dime-store revenues - presumably during the days when a peppermint candy stick from Santa appeased the kids.

Perhaps the strongest argument against Dr. Waldfogel's theory is that those same retailers now rely on Christmas to boost sales, which in turn generate their own economic gain with jobs, for instance. But buying and selling is a transfer between two parties, and as Dr. Waldfogel points out, during the rest of the year, when people shop for themselves, both the seller and the buyer - who, in smart purchases anyway, should be getting more value back than the price they pay - are mutually benefiting. At Christmas, the seller is still raking it in, but the buyer gets less satisfaction.

Other economists have also suggested that Dr. Waldfogel's theory fails to consider the value of joy in giving and receiving. Sure, the person getting that $50 sweater might have been willing to pay only $10 for it, but what about the $40 of Christmas cheer the exchange generated? Dr. Waldfogel has his argument ready: If Aunt June had given young Fred a sweater he'd actually buy for the price she paid, wouldn't the value of the gift, holiday glow included, have been that much higher?

Of course, not everyone messes up. When his students were asked to value gifts against their own purchases, parents, spouses and siblings did pretty well. But when you go farther outside the close circle, to distant relatives and acquaintances, the waste grows. Considering that one holiday survey found that an average person buys 23 presents for 23 people, that's a lot of potential for waste.

What's more, most of the time, we're holiday shopping because we have to - not because we necessarily want to; in economic terms, Christmas is a budgeted necessity like gasoline and underwear. Over the past 50 years, even while the wealth of Western countries has increased, Christmas shopping, in relative terms, has remained fairly stable - we spend more in actual dollars but not in proportion to our overall wealth. Caught in society expectations, we are paying the holiday bill the same way we pay the cable company - or grab underwear at the department store.

So what's the solution? An obvious one is probably getting your loved ones to supply an itemized list of things they want. Cash, of course, is a guaranteed no-loss value exchange. But if cash is tacky, Dr. Fogelman says gift cards also make good economic sense. Re-gifting, he says, is more clumsy, since its requires holding on to an unwanted item until the opportunity to give it to someone else comes along (an act fraught with its own risks). "It's a form of hostage exchange. I have a drawer full of gifts that I never opened, and don't want, and I can just give them away to fulfill our obligation toward others. But to me that just points out the absurdity of the situation."

His favourite option is giving to charity - he is a fan of a gift card in the United States that allows the recipient to choose which non-profit gets the money, "to act like a rich person," he says. He proposes that gift cards should come with an expiry date, after which the unused balance would go to charity rather than just back into the retailer's pocket. But he concedes: "I am told by some shrewd people that's as likely as world peace."

But then, he's not really expecting the gifts to stop piling up under the tree any time soon, just that shoppers might be a bit wiser in their choices. On that note: If you're looking for a thought-provoking gift this holiday - one conveniently sized to fit into a stocking - there's always his book. Though even the author knows you're probably better off getting a gift card.