The Economics Of Gift Cards

by Zoë Pollock

Jason Zasky interviews economist Joel Waldfogel, on why we still buy each other gifts even if its not economically efficient to do so:

Normally we buy things for ourselves when the value exceeds the price, and in so doing, this free choice by individuals maximizes society’s benefit. But gift-giving is entirely different because someone else is choosing for you. ...When you give something that is truly awfulthat is, from the standpoint of how satisfying the recipient finds itit’s not okay for the recipient to tell you it’s awful. So there isn’t the sort of feedback that we normally rely on to promote efficiency. That’s a good thing. I think it would be bad to be rude.

But the fact that gift cards were almost non-existent 15 years ago and now account for about a third of holiday gift-giving means that in some sense [the inefficiency of gift-giving] isn’t persistent.