Holiday gift-giving is usually a source of joy. But on the NYT Economix blog yesterday there was a piece that considers the flip side. A new book by Wharton economist Joel Waldfogel called Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, lays out an argument that gift-giving is full of economic loss. Essentially, the argument goes that since the decision-making on what to buy as a gift is a step removed from the user, the matching of needs/wants and objects is inefficient, and therefore wasteful. (Waldfogel has some empirical data to reinforce his claim which you can read more of here. Perhaps he also has a bunch of relatives with particularly bad taste…?) It’s fair to say that you rarely receive as a gift the things you’d buy yourself, but does that necessarily mean that holiday giving is a deadweight loss?

In the Times piece Harvard economics professor Edward L. Glaeser offers a counterpoint. He suggests that the act of giving imbues objects with value beyond the material or utility of the item; presents become valuable as signals of affection. The object given may not be exactly what the giftee desires, but the fact that the giver took the time and effort to select it makes the receiver feel loved. In Glaeser’s view, the diminished use value is more than compensated for by an increased emotional value.

Economics has much more trouble with emotional value than with use value. Emotional value is messy and mercurial. It changes not just from person to person but from day to day and from mood to mood. A spoon is basically as good at its job today as it will be tomorrow. Not so with a trendy gadget, a piece of jewelry, or a prom dress. Emotional value is the reason you can feel both vexed and enchanted when you unwrap a hand-knit sweater from Aunt Gladys on Christmas morning. The object is both utterly worthless and totally priceless. It’s also why unwrapping a gift certificate is enjoyable, yet vacuous. It offers the freedom to satisfy your true desire, in a package that shows that someone didn’t spend much time thinking about you. Bummer. In essence, both Waldfogel and Glaeser are right in their ways. Gifts often do entail a deadweight loss — we often receive things we have utterly no use for — and yet they are also indispensable components of social interaction. A gift that feeds only the soul is still valuable. And for the rare gift that manages to be both a signal of affection and a perfect match for the recipient’s needs — perhaps that quantity and durability of value compensates for many other gifts that fall a little flat.

Waldfogel’s solution is to stop the practice of gift-giving altogether. But gifting would be nearly impossible to give up. Not only is the behavior deeply entrenched across cultures, but there’s also some research suggesting the behavior is hardwired into our human nature. Glaeser suggests we make it easier for gifts to be exchanged and returned. I’d offer another suggestion: giving more gifts with handmade, personal components. By investing more of your time and effort in the gift, you increase the item’s emotional value. At the same time, you may find you spend less money on things that would be mismatched to the recipient or undervalued. This year, one of my favorite Christmas gifts was just this kind of gift: two beautiful framed prints of my best friend Annie and me as kids. (As you can see, we were basically inseparable.)

Though other gifts I received this year may be more exciting or more needed or more exactly matched to my wishlist, none is more special. And long after all the pleasure and satisfaction has been wrung out of my other gifts, these will still be on my wall, making me smile.

Image (top): handmade gift tags by Sarah, and available on Etsy, (in case you happen to be a little late with some of your own holiday gifties!)