With Christmas just a day away, the holiday shopping season is practically wrapped up. And even with holiday retail sales expected to decline about 1 percent this year, according to the National Retail Federation, the end couldn’t come soon enough for economist Joel Waldfogel.
In his new book, Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, Waldfogel argues that giving unwanted presents is not just bad for those who receive them, it’s bad for the economy as well. In other words, Santa Clause may be coming to town, Waldfogel says, but he’s carting with him a sleigh full of waste.
Through surveys conducted over the past 15 years, Waldfogel, an economist at the University of Pennsylvania’s Wharton School of Business, has found people value the presents they receive 20 percent less than gifts they buy for themselves. Considering Americans spend an average of $65 billion each December on presents, $13 billion worth of value is essentially destroyed on holiday gifts, according to Waldfogel. In economic terms, that amounts to what is known as a “deadweight loss.”
Even worse, Waldfogel says, is that Americans are increasingly taking on more debt to purchase unwanted gifts. In the 1930s, he notes, consumers would save money in anticipation of holiday spending by opening “Christmas Club” accounts. Today he says, approximately two-thirds of holiday presents are purchased using a credit card.
To be sure, Waldfogel is not pushing for an end to holiday shopping, just smarter spending. His solution: gift cards. They’re less awkward than giving cash, yet still allow recipients to get maximum value from a present by allowing them to choose their own gift. And even if the gift card expires, as some do, its value is never destroyed because retailers keep the profit. “So it’s not lost to society, it’s just transferred over to some other party,” Waldfogel says.
Listen to more of Waldfogel’s analysis: