youthmoney

Ask someone how much a present they’ve been given is worth. They tend to give it a lower value than the price the giver actually paid. Some years ago a US economist got interested in this, and did some quick research.

The yuletide economics of Joel Waldfogel show that when you give someone a present, about a sixth is wiped off its value. That’s because the value the recipient places on it isn’t as high as the amount you paid for it. Waldfogel called it the deadweight loss of Christmas.

The research ignores sentimental value – which some would say is the whole point of present-giving. This has led some people to conclude that economists are miserable so-and-so’s who don’t deserve presents.

This is may be true. But Waldfogel certainly knows that sentiment is important in present-giving. Setting it aside means that he was just trying to measure precisely what plenty of people have noticed – there’s a gap between the satisfaction we get from presents we buy for ourselves, as against those bought for us by others.

Waldfogel calculates that gap at 18 per cent – which is pretty large. It suggests we are not very good at identifying what someone else really wants, what they really value.

Why is that? Are some people better at choosing presents than others? Do young people think a lot of money is wasted on gifts? Do they ever look at their presents and say, I’d rather have had the money? Why don’t more people give tokens or cash- what is the downside?

There are no easy routes through the minefield of present-giving. Exploring it, and working out some answers, is a vital life-skill. It also feels like pretty advanced financial and emotional literacy – useful in a world where few people score highly.