The Deadweight Loss of Christmas?

Growing up, we usually told each other what we wanted for birthdays/Christmas and then got each other those things. There were a few surprises, but not too many. One year my mom broke her foot, so when we all came home from college for Christmas, we went to the mall and bought ourselves what we wanted and then came home and wrapped everything up. (I think I started wearing some of the new clothes before Christmas and she made me take them out of my closet and wrap them up on Christmas Eve.) Then we put gift tags on everything, addressed them to ourselves, and put someone else's name on the 'from' line. The surprise on Christmas morning was seeing what we had gotten everyone else. ("Hey Russ, let's see what I got you.....Cool.")

Now, I call up my family before their birthdays or Christmas and ask them what they want. Usually they are happy to tell me, I buy it for them, and then they are happy to get something they wanted. As a result of my early childhood gift-giving-training, I'm totally at a loss as to what to get people who don't tell me what they want. My sharply-honed sense of economic efficiency tells me it's silly to spend a lot of money on something the other person may not like/use/want/etc.

Economists agree with me. Some have estimated that the deadweight loss of Christmas in the U.S. economy is about $4 billion/year. (Deadweight loss is the difference between what the giver pays for the gift and the value the receiver places on it.) Unsurprisingly, the deadweight loss is largest for non-cash gifts from extended family and gifts between people of widely different ages. The loss is smallest for gifts between close family and friends.

Is all lost? Should we all agree to send each other checks and gift cards and dispense with gift-giving altogether? This article suggests a few reasons why we shouldn't abandon gift giving quite yet:

"First, recipients may not know their own preferences very well. Some of the best gifts, after all, are the unexpected items that you would never have thought of buying, but which turn out to be especially well picked. And preferences can change. So by giving a jazz CD, for example, the giver may be encouraging the recipient to enjoy something that was shunned before. This, and a desire to build skills, is presumably the hope held by the many parents who ignore their children's pleas for video games and buy them books instead.

Second, the giver may have access to items—because of travel or an employee discount, for example—that the recipient does not know existed, cannot buy, or can only buy at a higher price. Finally, there are items that a recipient would like to receive but not purchase. If someone else buys them, however, they can be enjoyed guilt-free. This might explain the high volume of chocolate that changes hands over the holidays.

If anyone is planning to buy me chocolate for Christmas, you can minimize the deadweight loss by choosing Lindt Bittersweet Fine Dark.

Good luck, holiday shoppers. Fifteen shopping days left.