DEADWEIGHT LOSS: WHEN YOU WASTE YOUR MONEY ON GIFTS THE RECIPIENT DOESNT WANT Those economists - they have a term for everything. Whats your preferred solution for mitigating deadweight loss? Cash? Wish lists? None of the above? Or do you embrace deadweight loss because you really love surprises, even if the surprise isnt necessarily something youd want to keep? scr __________ Economists will inevitably talk about the deadweight loss of Christmas gift giving around the holidays. The scrooge who came up with the term, economist Joel Waldfogel, literally wrote the book on the subject. Deadweight loss is the mismatch between what a gift giver thinks a receiver wants and what the receiver actually wants. This, in Waldfogels words, is just the waste that arises from people making choices for other people. Normally I’ll only buy myself something that costs $50 if it’s worth at least $50 to me. When I go out and spend $50 on you though, because I don’t know what you like and what you need, I could spend $50 and buy something that would be worth nothing to you. Expanding this concept to the whole economy, a conservative estimate of deadweight loss is 10 percent (that is, the average gift receiver values a gift at 90 percent of its actual value). Given that Americans are expected to spend about $600 billion on holiday gifts this year, that would put the amount of deadweight loss at $60 billion... #economics of #giftgiving
Posted on: Sat, 27 Dec 2014 14:56:43 +0000
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