X-Mas is Deadweight

Giving gifts involves the giver thinking of something that the recipient would like and then buying the gift and delivering it. Yet guessing preferences is no mean feat. Indeed, it is often done badly. Every year, ties go unworn and books unread. And even if a gift is enjoyed, it may not be what the recipient would have bought had they spent the money themselves.

Economist Joel Waldfogel sought to estimate this disparity in dollar terms, and his most conservative estimate put the average receiver's valuation at 90% of the buying price. The missing 10% is what economists call a deadweight loss. In other words, if the giver bestowed 90% of the cash value of the purchase on the recipient instead of the gift itself, the recipient could then buy what she really wanted, and be equally well-off.

By the way, wasting even one dollar in ten economy-wide would represent a 4 billion dollar loss in America at X-mas. And if you include similar miscues due to birthdays, weddings and other holidays, then the losses to society would be even more substantial.