During the holiday season, our gift giving might have less value than we expect because recipients engage in preference falsification.
In somewhat unexpected ways, our opinion of a present can depend on whether the gift wrapping is sloppy or neat.
After an economist long ago told us that gift giving adds less to economic activity than the price of the present, a pro-gift giving group disagreed.
Looking at the numbers from the National Retail Federation, we do not see the value of the unwanted gifts that might be subtracted from holiday spending.
Although you’ll see that the Amazon reviews for How to Avoid Huge Ships are hilarious, it’s still one of those unwanted gifts that creates deadweight loss.
Looking at what we buy and what we return, we can ask an economist and a psychologist for some gift-giving advice about our holiday spending.
When we receive presents that disappoint us, gift giving creates deadweight loss that diminishes the economic boost from holiday spending.
When gifts are worth less to the recipient than the giver, the economy experiences deadweight loss and an “orgy of value destruction.”
Can doing good be bad? At food banks, the holiday season brings an avalanche of food from donors when the charity could purchase the food more cheaply and use volunteer time more wisely. As a result, charitable food donations misallocate…