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December 25, 2011
David Warsh, Proprietor


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A Traveling Companion

In “The Deadweight Loss of Christmas,” economist Joel Waldfogel years ago declared war on wasteful gift giving.  The best you can hope to do with a $10 gift, he argued, is to duplicate a $10 purchase the recipient would have made for him or herself.  Chances are you’ll overspend.

He asked some undergraduates how they valued the gifts they had been given and concluded that between a tenth and a third of holiday spending is deadweight loss – that is, loss not offset by someone else’s gain.

Better to give cash, or donate to charity, he concluded, especially if you don’t know the person very well.

Of course it’s always possible that the recipient of your gift is not perfectly informed about the world – that you know something that he or she doesn’t.  In that case, your gift may create value above its price.

It’s in that hope that EP sends along an inexpensive gift – no more costly than the time it takes to hit a link.

Take a look at Flightaware – a live flight tracking site that collects data from the plane itself.  It’s free. You’ll love it.  You’ll never have to ask an airline about departure and arrival times again.

Happy holidays from EconomicPrincipals.com.

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2 Comments

  1. I think the data comes from the FAA/DOT/Government, and is not free, rather everyone pays a small amount in taxes for a large return in commercial return.

    Happy Holidays!

    Monday, December 26, 2011 at 3:18 am | Permalink

  2. Dale wrote:

    Um, the point of a reciprocal gift-giving relationship is not the value of receiving the gift per se but establishing and maintaining a social relationship. (I’ve seen this referenced in “Yanamamo: The Fierce People” (of all places), but it seems to be a commonplace among anthropologists.) So you have to compare the deadweight loss of the purchase/consumption actions against the value of the social capital created.

    Saturday, December 31, 2011 at 3:41 am | Permalink

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