It’s not just Scrooge who wants Christmas abolished

21st November, 2009

Nobody has done more to damage relations between the joyous commercial festival that is Christmas and the economics profession than Joel Waldfogel. Long-term readers of this column will be well aware of Professor Waldfogel’s research paper, “The Deadweight Loss of Christmas”. Ever since it was published in 1993 it has been taken out by economic journalists and displayed like last year’s decorations. Waldfogel – a witty writer himself – has evidently decided that if everyone is going to discuss the idea, he may as well get in on the act, so has published Scroogenomics, a book that – dare I say it – looks like it would make a terrific stocking-filler.

Waldfogel’s central insight is that if I give you a £50 shirt for Christmas, and you hate the shirt, that is £50 wasted. This is the “deadweight loss” of Christmas, and Waldfogel’s original research suggested that the typical £50 gift is worth no more than £35-£43 to the lucky recipient, a deadweight loss of about 15 to 30 per cent.

When I first wrote about Waldfogel’s research I said that it was really a critique of incompetent government handouts, and that “he wasn’t really talking about Christmas at all”. He is now. Waldfogel thinks that the deadweight loss of Christmas is $25bn a year across the world, and that we are not remotely outraged enough at the senseless waste.

It’s easy to laugh at Waldfogel, but he should be taken seriously. The resources – energy, raw materials, creativity and hard labour – that go into Christmas are very real, and it’s a shame if they result in products that nobody wants. Many families incur significant and lasting debts over Christmas; Waldfogel calculates that a third of the money we borrow to spend at Christmas has not been repaid two months later. And, revealingly, Christmas spending seems to be a somewhat grudging activity. When we become twice as rich, we spend less than twice as much on Christmas. In this respect, it is like socks or petrol, and unlike caviar, sports cars or – tellingly – charitable giving.

What to do? Waldfogel admits that with some exceptions, such as gifts from older relatives to teenagers, cash is not a suitable gift. Nothing says “I don’t understand you” like a cash gift. Nor is it easy to turn one’s back on the whole ritual.

Gift cards and vouchers are no use, either. The economist Jennifer Pate Offenberg has been studying them and finds that they are often resold at a loss on Ebay, or not redeemed. This is not a deadweight loss but an unwitting donation to the gift card retailer. Most people will feel that this is little better.

Waldfogel’s own solutions are modest. He likes the idea of charitable donations instead of gifts, a concept that seems to be catching on. He thinks retailers should guarantee that unused gift card balances will be donated to charity. He is also a fan of re-labelling other purchases as Christmas gifts – so the family holiday next summer could be the husband’s gift to the wife, or “Santa’s” gift to everyone.

This is all fair enough, but I can’t help feeling that having correctly diagnosed the problem, Waldfogel has missed the real solution. All his calculations of “deadweight loss” deliberately omit the warm glow we get from giving and receiving gifts. He acknowledges this but dismisses it, pointing out that we would get the same warm glow if we chose better presents. Yes, indeed we would – but this is an angle Waldfogel seems reluctant to explore. Yet surely it is not an impossible dream. If it is the thought that counts, a first step towards a happier Christmas is to spend less, and think more.

Also published at

Pin It on Pinterest

Share This