An interesting and provocative study was conducted by Joel Waldfogel of the University of Minnesota some 20 years ago. He wrote "The Deadweight Loss of Christmas." Waldfogel was not only discussing Christmas but noted that the ideas could apply to other holidays with gift-giving rituals. The study noted that although gift giving is generally applauded by economists since it is a way to help the macro economy, there is another side to the story. A problem with gift giving (or non-monetary rewards) is that the gift giver often does not perfectly know the preferences of the person receiving the gift. The difference between how happy he is with the gift vs what he would have bought with the same amount of cash is what economists call deadweight loss. Waldfogel studies these issues theoretically and statistically analyzing data. He found that holiday gift giving destroys between 10% and one-third of the value of the gifts.

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