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Scroogenomics
Book

Scroogenomics

Why You Shouldn't Buy Presents for the Holidays

Joel Waldfogel
Princeton UP, 2009
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Editorial Rating

9

Qualities

  • Innovative

Recommendation

People are conditioned to think that holiday spending is good for the economy. Even fiscal analysts read seasonal retail spending as an indicator of good or bad times. However, University of Pennsylvania professor Joel Waldfogel takes an economist’s look at gift giving and pronounces it wasteful. Every time you receive a gift that’s not what you want, the item loses value. For example, you wouldn’t pay more than $10 for the ugly orange teapot Aunt Bea bought you for $50. What’s the solution? Cash, of course, but giving cash is often seen as being in bad taste. How about gift cards? A little bit better, theorizes Waldfogel, but people don’t always redeem gift cards, which generates waste as well. getAbstract recommends this grumpy professor’s analysis of Christmas spending, which manages to be simultaneously fun and serious. Those with an interest in economics or a passion for looking at revered institutions from a fresh perspective will enjoy this little text. And, it makes a great stocking stuffer.

Summary

Scroogenomics Think back to the last holiday season. Did you like all the presents you received? If you’re like most people, you received many gifts that you never would have bought for yourself. From an economist’s point of view, gift giving does a poor job of matching an item with the appropriate recipient. This mismatch translates into millions, or even billions, of dollars of lost value. If gift recipients would willingly pay only 25 cents per dollar of the retail price of a gift – had they bought it for themselves – that item has lost 75% of its value as a gift.

People believe that spending more is good for the economy. Every year news reports compare this year’s holiday spending to last year’s, implying that more is better. Spending generates more employment for workers, more income for suppliers and higher returns for vendors – all pluses. Moreover, many business sectors rely heavily on Christmas spending. December sales account for more than a fifth of annual receipts for jewelry stores, and a seventh for clothing, sporting goods and bookstores. But is a lot of inefficient spending really good for the economy?

When people purchase a ...

About the Author

Joel Waldfogel chairs Business and Public Policy at the Wharton School of Business, University of Pennsylvania. He wrote The Tyranny of the Market and the article that sparked this book, The Deadweight Loss of Christmas.

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