Have you ever received a gift you didn’t like, or that you had no use for?
That’s a mis-gift, and economically speaking, it’s a scourge.
“University of Minnesota economist Joel Waldfogel, author of “Scroogenomics,” finds that Americans spend about $65 billion on winter holiday presents every year — and that many of those billions are simply wasted, because a lot of people don’t much like what they get. Typically the value of a gift, to the recipient, is about 20 percent lower than its cost. He describes the holiday season as “an orgy of value destruction.””
– Cass R. Sunstein at Bloomberg.com
Here’s some tips to avoid misgiving from Cass:
Beware thinking that other people will like what you like
We all do it. It’s called the egocentric bias. It’s likely you think the people in your life have similar tastes and values to yours. That’s probably true, but not as true as you think it is. Think your life will be immeasurably better with the iPad4? Can’t live without the latest Bieber CD? I doubt your spouse or friends feel exactly the same way.
Give serious consideration to gifts so they will actually be useful
Most people go for the “wow” factor when picking gifts. Something that is flashy or eye-catching in the store or out of the box won’t have much of a life in the back of the closet. This is called the focusing illusion. The giver focuses too much on the “wow” rather than the value the gift could bring to the recipient.
Don’t be overly influenced by your feelings on shopping day
This one works for grocery shopping too. You know what it’s like to grocery shop hungry, right? You come home with a cart full of impulse buys. It’s the same for gift-buying. If it’s particularly cold day, you might stock up on gloves, hats and mittens for every person on your list. But unless you live north of the Arctic Circle, the person you’re buying for might not ever use your “projection biased” gift.
Don’t be offended when people don’t love what you’ve given them
People are usually overly-optimistic. We think we’re better drivers, healthier eaters and more generous than others. It’s called optimistic bias. You’re taking a risk when you put too much stake in how much people will LOVE your gifts. Remember, the recipient will place only about 80 percent of the cost value on the gift as the giver paid.
Keep a running tally on what you’re spending to keep it in control
It’s easy to slide your plastic through the credit card machine. But it can be hard to swallow the total on your bill at the end of the month. Cumulative-cost neglect makes it hard to remember that 20 sensibly-priced gifts still add up over the holiday season.