20% of Adults Got Lousy Gifts This Christmas—Good News?

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We have a late entry for Best Serious Lede of 2011: "49 million people admit to getting stuck with an awful holiday gift."

The source is a new Consumer Reports poll, which found that, of these 49 million lousy-gift recipients, nearly 40% of them donated their bad present, re-gifted it, returned it, or tried to sell it.

Eighteen percent donated it to charity; 15 percent re-gifted it to an unsuspecting family member, friend, or coworker; 11 percent returned the item to the retailer for a refund or merchandise credit, the same percentage that elected to toss the gift in the trash. Six percent tried to resell their lousy gifts.

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The economic term for these lousy gifts is "deadweight loss," and there's a long literature of what we at The Atlantic have called Santanomics -- the economics of the holiday season. Now, gifts aren't strictly financial transactions. They're supposed to communicate love, understanding, and a special connection between giver and recipient. But all too often, what they really communicate is something more like: "You really thought I would wear something in this color?!"

In his classic paper The Deadweight Loss of Christmas, Joel Waldfogel wrote that "the best a gift-giver can do with, say, $10, is to duplicate the choice the recipient would have made." But many gifts don't perfectly duplicate that choice. Instead, 20 percent of adults get stuck with lousy presents, according to the 2011 Consumer Reports poll.

An epidemic of embarrassingly bad presents might be detrimental to family bonding (unless, as in my family, you cannot imagine a holiday scenario that doesn't involve every family member mocking, and being mocked by, every other family member, all of the time). For the economy's sake, however, the impact is mixed. Billions of dollars in deadweight loss isn't good for an economy in normal times. But this scourge of lousy gifts can have a stimulative effect for struggling charities (20 percent of lousy gifts are donated) or even for struggling stores. Forty percent of lousy gifts are stored out of view, unused, making room for more purchases that a great gift would have obviated.

Imagine, for example, that you want a sweater for Christmas. Your grandmother gives you a grotesque orange monstrosity. You don't throw it out. You hide it somewhere your grandmother won't find it, like a precarious corner of the attic, and buy yourself a respectable cardigan from J. Crew. Did grandma's orange eyesore stimulate an additional purchase? You might say it did.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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