We all receive them – those presents that do not quite match our Christmas expectations – the socks from Grandma or the out-of-date chocolates. According to Joel Waldfogel, a neo-classical economist, Christmas giving is economically inefficient. This inefficiency arises because the gift giving is done by someone other than the final consumer and so the present might not satisfy the recipient’s preferences. Waldfogel estimates that giving ‘destroys’ between 10% and 30% of the value of a gift.  His measurement of satisfaction uses economic terms and echoes the works of F W Taylor and Adam Smith, who saw humans as rational beings motivated by self-interest, that can be satisfied by monetary payment. This may explain the increasing requests for gift vouchers or well, just money, when it comes to writing those ‘must-have’ lists for the festive season.

However, in his article in The Conversation, Kevin Albertson maintains that when measuring the value of gifts Waldfogel fails to consider how much value is added, even to a simple pair of socks, by the fondness with which the gift is given. Albertson draws on the work of Abraham Maslow and his Hierarchy of Needs, who believed that human beings have internal needs and motivations, which are not satisfied solely by self-interest, but also by higher goals, such as self-actualisation. In other words, on Christmas day, although we may not desire the socks we receive, or respect their economic value, we can understand that the gift was given with affection, which provides additional satisfaction. Albertson also points to behavioural economists who show that tolerating, even encouraging, greed is likely to lead to an increase in amoral behaviour while generous people who are more likely to be happy. Financial self-interest, may be a motivator in the field of business, but if we promote a solely mercenary focus in human interactions, such as present giving, we risk crowding out higher and more satisfying motivations.

Happy Christmas. Enjoy the receiving, but also the giving!