We’ve looked at the deadweight loss of holiday gift giving.
But there is much more to the story.
When we get gifts we don’t want, the reason could be information asymmetry. Yes, it is possible that well-meaning givers could know less than they need to know. It is also possible though, that the shortfall was intentional.
Sometimes what we give has little to do with what the recipient wants. We might care most about a “wow” factor or giving more than someone else. At a holiday party, for example, we might want our gift to to look nicer than other people’s. Researchers have also documented an envy factor when givers don’t want the recipient to have something nicer than what they own, like better seats at a sporting event. Somewhat similarly, givers can use a present to signal something about themselves like good taste in wine, cleverness, or creativity. Finally, a giver might want to encourage certain behaviors like more exercising or better taste in clothing.
Our Bottom Line: Consumption Expenditures
Quantifying our gift giving, the National Retail Federation has the numbers. This year, they tell us that a person’s holiday spending in a household with income that exceeds $75,000 will be $1304. As for what we want, the NRF tells us that gift cards and then clothing top our wish lists. Meanwhile, on the expected spending side, the top ten kinds of gift cards were for restaurants and food delivery, and for actual items, it was clothing and Lego.
You can see the gift cards we can expect to receive:
Finally, as economists, we should note that when we purchase a gift, the price gets added to the GDP as a Consumption Expenditure. Close to 70 percent of the GDP–and far more than Gross Investment, Government Spending, and Net Exports–Consumption Expenditures dominate national spending.