If it’s any consolation, economists largely agree with you. A gloomy bunch, them. But perhaps, even if you blow the gift, the giving act itself can eclipse the blunder.
Gift giving, the loose consensus goes, is economically inefficient. You’re spending time, effort, money to try to guess what your loved one wants. At best, you’ll guess right and buy what your loved one would have bought themself. At worst, you’ll buy a sweater that will sit in the back of the closet or a useless puzzle or some horrid candlesticks.
“It is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash,” Joel Waldfogel, a University of Minnesota economist, wrote in an influential 1993 paper, “The Deadweight Loss of Christmas.” “In short, gift giving is a potential source of dead-weight loss.”
Anthony Gill, a University of Washington political science professor, taught that paper for decades in his Introduction to Political Economy course.
Waldfogel’s article spawned a popular book, “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays,” which argued that holiday shopping is an “orgy of wealth destruction.”
But Gill’s students kept pushing back. It’s the thought that counts, they’d tell him. You can’t monetize everything.
“When I first started teaching, I was the Scrooge,” Gill said. “The more I talked to students, and I couldn’t convince them that I was right, I started to make the same sort of transformation that Scrooge has in ‘A Christmas Carol.’”
If gift giving is so economically inefficient, so irrational, Gill wondered, why do we still do it? Why have we done it, in virtually every culture and society, for thousands of years?
Gift giving, he theorized, has long-term economic value that outweighs the short-term loss of that hideous ceramic item your uncle sent you. It builds relationships, networks and trust, all of which compound on themselves, helping promote more trade and activity.
This year, Gill and a colleague published a paper, “The Dynamic Efficiency of Gifting,” in the Journal of Institutional Economics, arguing the public process of gift giving is beneficial for both society and the long-term health of market economies.
Gifts aren’t given just at Christmas, they note. Gift-giving occasions are everywhere: Hanukkah, Kwanzaa, Eid al-Adha, Raksha Bandhan, potlatches, Chinese New Year, Valentine’s Day, birthdays, bridal showers, anniversaries.
When you’re invited to dinner, you bring a bottle of wine or flowers or dessert.
A children’s book, “The Hockey Sweater,” about a bad gift — a loathed Toronto Maple Leafs hockey sweater instead of a cherished Montreal Canadiens jersey — is so ingrained in Canadian culture, it was quoted on the Canadian $5 bill for several years. (The kid who gets the cursed sweater as a gift goes to church and prays for moths to eat it.)
“Gifting has been a nearly ubiquitous institution throughout history,” Gill and Michael Thomas, an economics professor at Creighton University, write. “If gifting wastes valuable resources, why does it persist?”
Giving gifts has long-term positive effects, they argue — making economies more dynamic and societies more trusting — that are more important than the cash you wasted on that fruitcake that nobody’s going to eat. It builds trust and networks and brings people closer together.
There are four aspects, intrinsic to gift giving, that further these positive effects: sacrifice, reciprocity, “publicness” and ritual.
Giving gifts is sacrificial in a way that giving cash is not.
“You’re giving up resources, buying a present, wrapping it with paper, spending the time,” Gill said.
And that sacrifice breeds reciprocity: When I give you a gift, you give me a gift.
“Reciprocity is important in human relations,” Gill and Thomas write. “It is how we learn about one another, share in the gains from trade, and build networks of trust.”
And gift-giving rituals, they write, even if they happen in our own homes, are essentially public. Businesses decorate their windows, neighbors hang lights. We know that others are participating in these acts of generosity.
“We need something to know that people are good willed,” Gill said. “So you have Christmas, Hanukkah, Valentine’s Day, Halloween as a way to say ‘hey I’m willing to give myself to other people.’ If you see everybody broadly doing that in society you say ‘I can trust a stranger.’”
And the ritual compounds the visibility. Year after year, we go to holiday parties, birthday parties, and engage in the same rituals, ones that remind us of our place within a greater whole.
“We are part of a larger network of people — most of whom we don’t know — that share a common heritage of generously giving and graciously receiving,” Gill and Thomas write. “Trust, necessary for extended markets, grows from this.”
In summation, gifts might be a waste. They might end up at Goodwill, on the curb or in the garage. But, giving is not. It builds relationships and trust. It is the triumph of the process over the product.
“When you see other people giving of themselves in these public rituals,” Gill said, “it really tells other people that society is trustworthy.”