I knew, and was heavily influenced by a fascinating AER paper by Joel Waldfogel from 1993, aptly titled “The Deadweight Loss of Christmas.”
Economists often praise holiday spending for its positive macroeconomic effects. However, gift-giving’s critical microeconomic facet lies in the recipient making different choices than the giver. Essentially, gifts risk being mismatched with recipients’ preferences, potentially causing a deadweight loss. Waldfogel’s paper, deriving data from Yale undergraduates’ surveys, estimates holiday gift-giving destroys 10% to 33% of gifts’ value. While these students might not represent the entire U.S. populace, their gifts’ nature likely does. Annually, holiday expenditures hit $40 billion, implying a substantial deadweight loss, rivaling income taxation’s inefficiency. The paper also explores cash gifts versus in-kind gifts, determining friends and “significant others” give the most valued gifts.
However, just a week shy of my birthday, my roommate defied these findings, presenting me with Ariana Grande’s ‘Thank U, Next’ phonograph record album.
Ecstatic, I nearly screamed for a full minute. This album is now the centerpiece of my dorm’s decor, destined to remain a cherished item indefinitely. It proves that with genuine friendship and thoughtful consideration, gifts can indeed match their recipients’ values perfectly. Btw, she’s rich, reminiscent of the lyrics from ‘7 Rings’:
I’d rather spoil all my friend with my riches.
And our conversation goes:
Maoer: I hope you like it. (Certainly!) That’s why I asked you like a week ago if you are still a fan of Ariana Grande cause you know all the recent dramas…
Me: Yeah of course! Despite the divorce and cheating shits. In this album there’s a song titled break up with your girlfriend, I’m bored, so at least she practices what she preaches…
Maoer: OK perfect.
Me: Hey now that I’ve got all my best friends, I’ve got my favourite singer’s best album, my college bucket list is just left with… like two more academic papers published and I’m all done. So next year is it possible that you gift me two AER papers?
Maoer: African Economic Review? Deal! Your wish is my command. Can’t wait.