Joel’s Noel Message on Giving

Christmas is a fully anticipated event - it falls on the same day each year and we more or less know the size and scale of gift-buying frenzy into which we throw ourselves with varying degrees of enthusiasm and expertise. But that doesn’t prevent millions of us having to borrow at an APR in excess of 18% to fund Xmas purchases. Or suffering from numerous information failures when buying and receiving gifts. For many years, economist Joel Waldfogel has studied the deadweight loss of Christmas and he likens it to an orgy of value destruction even if we assign an appropriate value to the joy of giving. His new book Scroogenomics explains why you shouldn’t buy presents for the holidays and why charitable giving (mainly for adults!) through time limited gift cards could well be an effective and efficient way to spread festive cheer in future years.

I greatly enjoyed his early evening talk at the LSE last night although I suspect he had a more receptive audience at an earlier presentation to the RSA. The LSE crowd on a Thursday evening is not known for its mirth and merriment - there are too many post-graduate economists around to provide such an atmosphere. And the talk was not helped by Martin Lewis from Moneysupermarket.com reminding the audience of his web site at every available opportunity.

That said Joel’s presentation gave solid empirical evidence of the scale of spikes in seasonal demand across numerous different countries. The rise of giftcards is changing the timing of these spikes and retailers are becoming more savvy about how to exploit our growing desire for ethical and charitable giving. The evidence seems to be that total spending on holiday giving is declining as a share of national income - which suggests that seasonal present buying can be classified as a necessity with an income elasticity of demand of between zero and +1. In contrast, charitable donations have a higher income elasticity of demand and the internet (e.g. Just Giving) and the ever-widening scope of charitable gift cards is accelerating this process.

There were some interesting questions. One contrasted the almost de rigeur nature of wedding gift lists with the more randomised giving at Christmas. Another asked which was great - the deadweight cost of christmas presents or the waste associated with throwing away uneaten food. I really liked the question about why it has become default behaviour to scratch the price tag off an item that you are giving as a present. And another question asked us to consider whether handing over cash was a stigmatised form of giving - save for the cash that teenagers routinely prefer especially from elder relatives!