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Uncle Orson Reviews Everything
December 13, 2009

First appeared in print in The Rhinoceros Times, Greensboro, NC.

Scroogenomics and Gift-Giving

So this year, M&Ms tried a second time to do a mint version of their classic candy-coated chocolates, and this time they got it right. The mint isn't quite so intense -- apparently they learned that taste tests always reward absurdly strong flavor plus sweetness, whereas in the real world, people actually want milder flavors and a little less sweetness.


I think Scotch Tape is giving up on their ultra-clear gift wrap tape. Which is a shame -- it's a great product, which I like a lot better than their regular "magic tape." (And not just because I don't believe in magic -- it's because it doesn't hold as well as the gift wrap stuff.)

When their crystal clear gift-wrap tape first came to my notice, it was available in rolls you could use in a regular tape dispenser, as well as in the much smaller disposable dispensers.

They also had precut lengths of tape in dispensers that you could strap to your wrist, so you always had the tape where you could find it, and didn't have to fuss with cutting it to length.

This year all I've seen are the disposable dispensers. The other two forms seem to have been discontinued. Maybe somewhere the other options are lurking, but I kind of doubt it.

It's your fault, you know. I tell you about the really good new products, and if you ignore me and don't buy any of it, the stores will stop carrying it and the manufacturer will stop making it and then what will I do?

Why don't you ever think of me and buy what I like so the stores will keep carrying it? Why do you think I write this column? For you? No offense, but you're just not holding up your end.


Scroogeonomics, by Joel Waldfogel, is a tiny book with a provocative premise: The subtitle is "Why You Shouldn't Buy Presents for the Holidays."

Now, that's a strange idea. For years I had understood that for many retail businesses, the Christmas present-buying season was the difference between profit and loss for the year.

Waldfogel doesn't deny that -- in fact, he revels in it. Because his point is that the money we spend on Christmas presents is a waste compared with everybody using their own money to buy things for themselves.

That's because we do such an imperfect job of buying other people things they value -- things they would have bought for themselves.

He did some surveys asking young adult gift recipients what they got from friends, siblings, parents, grandparents, and how much they would have paid for the identical item if they had had to spend their own money on it.

Unsurprisingly, there were at least a few gifts that the recipient would have spent nothing on. On average, gifts were valued at 87% of the actual cost. Therefore, in Waldfogel's view, 13% of the money was essentially flushed down the toilet.

And this is only when you assume that people would spend their money on something they valued at 100% of the cost. Often, people buy things for themselves that they would willingly have spent more for -- so that when you buy for yourself, you might get perceived value of, say, 110% of the money you spent.

So the difference between Christmas gifts and buying things for yourself is a net loss of value that might be more than 20% of the amount actually spent.

Extrapolating this finding across the whole nation's holiday gift-buying, he sees this as a dead loss to the economy of $8-20 billion of value.

If something seems wrong to you about all this, you're correct. There's a certain kind of economist to whom monetary value is value. To such economists -- and Waldfogel is one (though sometimes he seems to be rather tongue-in-cheek about the whole thing) -- people act as if money were their only measure, their only motivation -- or should be!

Cost-and-value motivation is what he considers to be "rational" decision-making.

Here's the first thing wrong with his methodology: He tells the gift recipients in his survey to make their valuations "not counting sentimental value of the gift."

Waldfogel is right that because sentimental value cannot be expressed in dollars, it can't play a role in a scientific study. Sentimental value can often vastly outweigh monetary value, and just because it can't be accurately assessed in a scientific survey doesn't mean it isn't real and doesn't count.

Second, Waldfogel uses college students as his subjects. But anybody who has ever bought gifts for young single people who are going to college knows that they are the single hardest group to purchase gifts for.

At least high school students live at home, where adults can get some idea of their tastes. And because high school students are usually quite poor (their income comes from parental generosity or low-paying part-time work), they are far more likely to be grateful for anything that comes their way.

College students are (usually) reveling in being away from home. Even if they're poor, their assessment of value comes from college culture and not from the values absorbed at home.

Later -- when they're holding down a job and supporting a family -- their values shift again. Gradually, though, as their children grow up, their primary role becomes gift giver, not gift recipient.

So Waldfogel surveyed precisely the group that is least likely to receive gifts they value.

A third flaw is that often the gift recipient is a poor judge of value. How often as you were growing up did somebody -- particularly your parents -- give you a gift you didn't want, but which you discovered afterward you valued a great deal more than you ever thought you would.

That isn't confined to youth, either. My wife has often given me gifts that at the time I wouldn't have spent very much for, but which, as I used the gifts, I came to appreciate very much.

One of my children is so daring that she has even given me books of fiction for Christmas gifts. Nobody does this because it's insane. I review books. I buy so many books for myself that Amazon.com has my name on a plaque in their main office and when I started shopping a lot less at Borders, a line on a chart on the wall in their boardroom took a nose-dive.

So if you buy me a book, you have to do so knowing that I either already own it or I saw it but didn't want to buy it for myself. By Waldfogel's measure, that means the gift constitutes destroyed value. But each time I read the book, I do so in part for the sake of the book, and in part because this is a book my daughter values. Every time, I have been glad on both counts, because she has excellent taste and I enjoy reading a book that I know she has read and enjoyed.

Another example: A few years ago, our son gave us a DVD set of all the existing episodes of Firefly. I had never heard of the TV series, usually detested television sci-fi, and therefore had no particular eagerness to watch it, despite his raves.

The next Christmas he brought his family home to Greensboro and found Firefly still in its shrinkwrap in its alphabetical place on our shelf. I don't know that he was offended that we hadn't valued his gift; it was more that he was exasperated with our stupidity for turning up our noses at the finest thing on television.

So we watched an episode. And he was absolutely right about the series, I watched every episode, and then I watched them all again.

On Waldfogel's survey, for one solid year my obvious valuation of Firefly would have been zero.

I kept it that year for its sentimental value alone.

But when I finally accepted the gift fully, by using it, my valuation shifted to many times the actual price of the DVD set. My son knew me and he knew the show; I only knew me, so my ignorance skewed the value.

Thus, as far as I'm concerned, Waldfogel's big "finding" is <ahem> valueless:

1. If you ignore sentimental value, your findings about gift-giving are going to be wrong no matter what you do. Money isn't everything -- it's just the only thing economists can measure.

2. If you only survey college students, you're going to find a much-higher-than-normal failure rate, since they are the group least-known by those who give gifts to them, and most likely to disdain gifts that come from people outside their peer group.

3. The recipient doesn't always know at once what the value of a gift will be over time.

Does this mean I'm urging you not to read this book?

Not at all! I enjoyed every page of it! Just because his big "finding" is hopelessly skewed doesn't mean that his data isn't fascinating.

I loved his close analysis of which groups are most successful in gift-giving. It won't surprise you much to learn that gifts from siblings, cousins, and friends have the highest perceived value to the college-student recipients, while gifts from aunts, uncles, and grandparents tend to be the least successful in terms of perceived value.

But a moment's thought will tell you that this is not always true -- it's just true for college-age kids.

I'm an uncle many times over. I don't buy gifts for most of my nieces and nephews -- just the ones that live (or used to live) in Greensboro so that I got to know them reasonably well as they grew up.

When they were young, it was relatively easy to shop for them. I could ask their parents what they might want. I could run ideas past them. Their parents knew!

I believe my gift-giving to nephews and nieces who lived at home was very near one hundred percent successful.

But when they went to college, everything evaporated. Not only did I not see them and talk to them any more, neither did their parents. None of us had a clue. And the ones who were married and gone? It was hopeless.

So Waldfogel's finding about grandparent and aunt-and-uncle gift-giving applies only to college students and older. With younger nieces and nephews, it takes only a modicum of effort to find out a gift they'll appreciate.

Still, it's actually encouraging that parents of college students are often quite successful at gift giving.

Plus, there's the issue of relative wealth. Waldfogel finds that nationwide (not just in his survey of college students), poor people spend a higher percentage of their income on Christmas gifts than rich people do, and that there is almost no "trickle down" -- that is Christmas gift-buying does not transfer any wealth at all from the rich to the poor.

But what did he expect? In giving gifts between adults, there is an expectation of reciprocity. Unless you already have some kind of caretaker or patron-client relationship (i.e., elderly parents, employees, servicepeople) or have already discussed and dealt with the income differential between you, it would be thoughtless and burdensome to give someone a gift of such value that they could not hope to reciprocate.

So of course there's no transfer of wealth in gift exchanges between adults.

But when you give gifts to younger people, especially young people in your own family, then there's a massive transfer of wealth, since by definition minors are almost always completely dependent and desperately poor, dependent on the charity of infinitely wealthier adults for every bite of food they eat, for clothing, for shelter.

Which brings us to the matter of giving money or gift certificates.

Waldfogel points out something that I never really thought of. You can give money or gift certificates to someone younger than you, but it would be puzzling or even offensive for your children or nieces and nephews to give you money or a gift certificate!

College students love cash and usually like gift certificates, at least on the monetary scale Waldfogel uses, because they get pretty much 100 percent value.

Yet, weirdly enough, even college students had to admit that money and gift certificates are, in a way, unsatisfying as gifts. That is, they're glad to have the cash or the purchasing power, but when it comes to the sentimental value (aha! That had to come up again), cash and certificates are seriously lacking.

The unspoken meaning is: They didn't care enough to give me a gift -- they didn't face the problem of choosing what to give me, they gave me money instead and then forgot about it.

Waldfogel doesn't mention it, but I think there are exceptions to those feelings about gift certificates.

For instance, the book/cd/dvd problem. I don't have a catalog of all the DVDs, CDs, and books you already own. Yet I know you love movies/music/books. For some people, I know their interests and their buying habits well enough to be pretty sure that I can pick a book they'll like. That is, if the book is very, very new, so I know they haven't seen it, and they usually buy paperbacks, then I can be pretty sure I can give them a hardcover of an excellent book of the kind they like.

Most of the time, though, it's just too chancy. So a gift certificate to Borders or Barnes & Noble (or some other specialty store) does two things:

1. It says, I want to buy you a book, but there's no way I can pick a book that will please you, that you don't already have.

2. I'm going to give you an excellent excuse to go to the bookstore/cd store/DVD store, which I already know you will enjoy.

There are other similar cases. You're shopping for an eleven-year-old girl who loves to dress up and accessorize. You can pick out a bit of costume jewelry for her -- but if you include with it a gift certificate to a shop that specializes in very inexpensive but classy jewelry, the recipient really gets two gifts:

1. The jewelry, and

2. A trip to the jewelry store with buying power, making her, an oppressed eleven-year-old, free. (All eleven-year-olds are oppressed, because they're old enough to understand what buying power is, and not old enough to actually have it very often.)

That's why it's not awful to give a handyman a gift certificate to Lowe's or Home Depot, or to give a golfer a gift certificate to his favorite course, or to give a gourmand a gift certificate to a restaurant you know he loves -- or that you want him to try.

In each of these cases, the selection of the gift certificate says that you know the person well enough to know where they'll enjoy going, but that you wouldn't presume to know what they'd choose at the particular store.

The analogy I like to think of is taking someone out to dinner. It's your treat -- even if they can afford to pay for it themselves. But you still let them choose what to order from the menu.

So gift certificates are not to be ruled out. I think the key is that the certificate still shows that there is thought and knowledge behind the gift.

Because what Waldfogel, as an economist, cannot begin to address is the social anthropology of gift-giving.

It is such an anti-capitalist thing to do -- a harking back to an entirely different, pre-Adam-Smith system of asserting your own place in the community and recognizing that of others.

Admittedly, in our capitalist, free-market social order, money confers enormous prestige. We treat people with far greater deference if they display the outer trappings of wealth; and if we find out that someone who does not seem wealthy is, in fact, quite rich, we actually defer to them all the more because they are so wealthy they feel no need to display their wealth!

Fame -- and not even good fame -- confers a different kind of prestige, but no less real. I know who you are, we silently say to the celebrity, and so does everyone else.

So the power that comes from money and the knownness that comes from fame are both powerful coins to spend in our society.

But Christmas gift-giving slaps that whole system in the face. Britney Spears and Barbra Streisand are not going to give you any gifts this Christmas. Your parents and siblings and friends might.

Gifts can say so many things that have nothing to do with money.

1. You are a person I feel close enough to that I am presenting you with this item of value.

2. We are close enough that we exchange items of value every year -- and have done so for a long time. We are old friends or close relatives, this long history of gift exchange affirms.

3. This particular item I'm giving you shows that I know you. You are not a stranger in this world -- you are known and valued. You have a place.

4. I care more about you than I care about spending this money (or time) on myself.

5. Here is something I made myself. It's the best I can do, and I'm giving it to you.

6. I noticed that this is something you might need. That means I'm paying attention to you and I care about your needs.

7. I haven't seen you in a long time, but I made the effort to find out what gift might please you from those who do see and talk to you more often.

8. Even though I couldn't find out what you wanted or needed or liked, I still value you and we have a close enough relationship (with me in the role of "older relative" or "patron") that I am simply giving you money. Remember, when you spend it, that I am someone you can turn to in need ... at least up to a point.

As you look at the social anthropology of America, the network of gift-giving serves a vital social function, especially in our fragmented, nomadic society. We often don't know our neighbors; we can so easily lose our sense of place, of belonging.

So gift-giving among friends and among family members is a way of stroking each other from a distance and across time. In the old Roman patronage system, a wealthy man's clients would perform services for him and he would provide them with gifts (very much like the mafia).

But there was often a requirement that the client wait upon the patron daily -- the patron was surrounded by his clients, his entourage, which gave an open, public expression to his worth. This matter of giving a powerful figure his worthship -- or, as the word transformed, his worship -- was a vital signal in the ordering of society.

That's what worshiping is: waiting in attendance on a person of power to show your allegiance to him. You make yourself part of his worthship. As you and his other clients raise his value, he in turn raises your value because of your link to such a powerful figure!

We don't use the client system in America (except in Hollywood and a few other specialized settings). But the need for worthship, for valuation by others, persists.

Every gift we give is, in fact, an act of giving worth to the other person. The gift's cash value compared to what the person would buy for himself is pretty much a ridiculous issue. It is the fact of the gift that matters most.

The gift is commensurate with your means. It is not a tax. It is not the value of the item you give that matters, it is the value that the giving of it attaches to the recipient that matters.

Sorry for getting all anthropological on you, but these are the kinds of things that ordinary, money-centered economics always misses. We don't spend such a significant part of our year and our income on gift giving because we hope that we might gain as much value as we give; nor do we do it because of the cash value of the gift (at least not directly).

That's why it's so shocking when someone you barely know gives you a gift. The first thought is always: What does he want? Because gift-giving is an intimate act. We only give gifts to people who have a blood or legal connection with us, or to people whose friendship has already been affirmed.

When you're in high school or college, and you're poor, you wouldn't dream of giving your friends big expensive gifts (the way parents or other older relatives can do) -- they would feel it as a burden or an assertion of too close a relationship.

Instead, young people give each other gifts that are more tokens than items of cash value: a CD-R of favorite music tracks; a book you have already read; a silly homemade card; a surreptitious washing of their car that is parked on the street, with a note; cookies you baked yourself.

But what about the person who, quite literally, has everything he wants or needs? What can you give him?

That's where we need to remember what Waldfogel deliberately sets aside: it is the token, not the expense, that measures the gift.

The friend who is an excellent baker and gives us a tray of her fantastic rolls or a loaf of her delicious bread has given us an excellent gift. The giver has assessed her own talents and knows that her rolls or her pies or her bread are a very good gift, better than anything money can buy. And she has given us the product of her time: She has served us, yes, but more important, she has said, "You are worth my time and work."

Parents know this is especially true in the relationship between parents and children. Relatively costly gifts flow down from the adults who have money to the children who have none. But what flows up? How can the child reciprocate?

That is when the wise, well-raised child learns that personal service, carefully made art or writing, a newly composed song -- even if they are not done at a professional level -- will have enormous value to a parent, far beyond any cash value that could be assigned to it.

Would I buy that little poem you gave me if it had been written by a stranger? Certainly not. But it was written for me. It is a valuable token of my worthship in your eyes. In the reciprocity of gift-giving, it carries as much weight as the trade requires.

I have only touched the surface of the vast network of gift-giving, the reasons for it and the functions of it.

Nor have I told you more than a fraction of what matters in Scroogenomics. The book is little and cheap, but it's hard to think of any adult who wouldn't be fascinated by it. Even when I disagree with Waldfogel, I'm glad I read what he had to say, I'm glad he helped me to think about what we're doing at Christmastime.

The book is ten bucks. I would have paid a lot more for it! I guess that makes Waldfogel a very effective gift giver ... by his own measure and by mine.

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