Personal Finance

Help the Economy by Being Stingy this Holiday Season

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When I wrote a piece for CNN earlier this week about the joys of making holiday gifts instead of buying them, I didn't realize that my advice might be good for the economy as well as for your soul (and your pocketbook). In my simplistic understanding of the way the global economy works, I figured that buying stuff stimulates the economy by moving money around and raising the demand for labor.

But here's good news if you procrastinated with your holiday shopping this year: According to Wharton economist Joel Waldfogel, gift giving actually hurts the economy. NPR interviewed Waldfogel, who has a new book out called Scroogenomics: Why You Shouldn't Buy Presents for the Holidays. The germ of his argument is that gift spending "tends not to produce nearly as much satisfaction per dollar spent as regular spending." When you spend $50 on yourself, you do so because you feel like you are getting full value for the thing (otherwise you wouldn't buy it). But when you spend $50 on a gift for someone, you really don't know if the recipient is going to get $50 worth of appreciation for the gift. Waldfogel told NPR that "on average gifts generate 20 percent less satisfaction than items we buy for ourselves."

Waldfogel suggests that instead of giving gifts you should consider giving gift cards as a way to optimize recipient satisfaction. That seems like good advice to me.

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

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  • http://www.credit-advisors.com wes

    This article is true that if you want to help the economy and make the most of your spending, perhaps gift giving isn’t the best option. Christmas time is always a difficult time with those struggling with debt. However, with careful budgeting you can find ways to pay down your debt and still have a fulfilling Christmas. There is a great deal of information on lowering your debt, planning a budget, credit counseling, and much more at http://www.credit-advisors.com

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