if i set out to spend $50 on one of you, i am at a real disadvantage. i don't know what you like. i don't know what you have come i don't know what you want. i could spend $50 end up buying something you would not be willing to pay anything for and if i did that, then i would have no satisfaction in it said the $50 producing at least $50 worth of satisfaction, the dollars may produce a lot less. .. purchase for yourself compared to items others purchased for you and the answer after doing lots of these surveys over the years for other is about 20% less. that is the stuff other's body is worth 20% less per dollar spent than the stuff i buy for myself. now this isn't just true overall. it's true for example within items. so if i compare cds i buy for myself to cds others by for me, i guess that's an old example, nobody buys them anymore, but if i compare books i buy for myself verses books others by for me and so forth, we get the same kind of results. it's not a kind of artifact looking at cranky people who happen to receive a lot of gifts verses happy people who don't. it's about the process of gift-giving. and by the way, it isn't as some -- it isn't one of those if you drive off the lot is worth less kind of things. no it is just the bad process of choosing, the wrong stuff getting chosen through gift-giving, and i might ask how does this happen? how could this possibly happen? and economic theory gives some reasonable in sight. according to economic theory, and i will try not to be to draw about this, but we take the few people are best situated to make decisions for themselves and that's because we know our own preferences. we know what we like and so forth. in fact the view we are best suited to make decisions for ourselves is the basis for a lot of economists criticism. one of the criticisms of government is the government is making resource allocation choices for us, well, different is going to buy a green sweater, we wanted the blue one, so forth, so allocation through government is very wasteful you might say. well, givers like this government also don't know what we want, they don't know the preferences comes of their choices to the cleanest. not all givers are equally poorly or well situated to make these choices. some are a lot more than others. so let me show you some pictures. so, i've done, again, a lot of surveys over the years. this is 1i did in 2001. so these bars represent what i call the deal, the ratio would you be willing to pay for it to the price. so these are the yield on gifts from different givers. i clean of all the averages about 20%. 20% less. but for some givers it is substantially less than that to read or substantially more than that, rather. givers -- and it turns out, you know, you can look across the various surveys i've done over the years but it turns out it's the extended family. i don't mean to heap criticism on grandparents, but grandparents not so much in this survey but grandparents, aunts and uncles tend to do the worst. and significant others tend to do quite well, they choose items that are quite well matched with recipients preferences. friends and parents tend to do pretty good as well. but again, it's the folks in the extended family to attend -- here's another, at different ally stuff from different years, so when from least efficient if you like to the most, aunts and uncles, cousins, friends, grandparents. this one is a little strange friends show up so poorly but then siblings, parents and spouses and significant others are at the other and doing quite well. why is this? go back to the ideas from economic theory. we know ourselves pretty well. others who are in frequent contact with us also know our preference is pretty well and what we have so they tend to do pretty well. so we want to be careful here, i don't want to blame grandma. it isn't her fault she tends to do poorly. it's because she is and less frequent contact with recipients and chooses things that they don't necessarily want. at this point some seem to be heaping criticism on holiday gift-giving. it's time to think about whether i am entirely wrong and particularly entirely wrong in the sense what about sentimental value? ken sentimental value rescue bad gift-giving? so i'm talking about a situation where the river goes out and spends $50 on a sweater but let's say the sweater is only worth $30 to you not counting sentimental value but just as a sweater the most he would be willing to pay is 30. so far that sounds like value destruction because one could have spent 50 on one's self and bought something at least worth 50 by you might say wait a minute, the giver get pleasure out of this and the giver gets $30 worth of pleasure out of giving the gift then that's for 30 plus 30 is 60 that's bigger than 50 maybe this is the value creating activities and stop complaining, mr. waldfogel. my response is if the giver also got to enjoyment out of giving the recipe and something the recipient actually liked and we could have created more value if it ever gets $30 worth of value out of giving something and the recipient got 55 worth of value than the total value would be 30 plus 55 come 85 as opposed to 60 so compared to getting something the recipe and actually wanted this choice of something the recipient doesn't want to destroy its value or at least misses the opportunity to create more satisfaction. now, it is possible the givers only get value out of getting things recipients don't want. it seems a bit like the givers sadism to me although there are i think polite ways to put it, there are situations in which what is an 11-year-old want? 10 pounds of candy corn but he wouldn't be happy getting a kid 10 pounds of candy corn. it is an unhealthy gift and so it is quite possible the giver wouldn't enjoy giving the recipient with the recipe and actually wants. but of the paternalism or citizen, very different ideas, i don't think that describes the bulk of gift-giving. there is clear evidence that is and what is going on in most gift-giving. why do i say that? i will come back to that. so i don't think sentimental value can rescue at giving as efficient. another thing i hear a lot the question with a minute, isn't holiday spending good for the economy? you know, aren't you coming out against something that is good for the economy? and there is certainly a kernel of truth or something there, but let's think about that for a minute. what is good for the economy actually mean? well, a well functioning market maximizes the surplus that both buyers and sellers receive from the transaction. what is this surplus i'm talking about? what to the sellers get? sellers get a price for their product and the price exceeds the cost of bringing the thing to market surplus of within the but it is profit and that is a good thing. we are in favor of that. profit is a good thing. not just because i'm from the working scope. on the buyers' side what do they get? wires engage in a transaction normally if the value they get exceeds the price and the surplus they get is the difference between how much it is worth to them and the price they paid. in fact that housing economists call that consumer surplus. normal spending outside of the 11 months in the year when we are not doing gift-giving, normal spending allows voluntary freeze activity to maximize the some of that surplus. so good for the economy means producing as much of the surplus as possible. well, what happens with a gift spending? with a gift spending the to spending it is still true sellers receive a price in excess of the cost they get the surplus they want. but now the buyers don't or they don't necessarily come and mike planas on average they get 20% less of the surplus for the value they would with items they had chosen for themselves. so is it good for the economy? well it is certainly good for the sellers. but the economy than consists of both sellers and buyers. it's not so much good for the consumers, the ultimate consumers of the object here and not the buyers that the recipients of the gifts. so, you sort of imagine after a gift-giving transaction the seller could say to the buyer was a good for you? mosul much. -- not so much. now it's getting a little dreary by now. so i think it is worth contemplating a little bit of the ideal gifts. and with your id is possible to do something better than what i am describing. what is an ideal gift? we'll have our own definitions of this but one way to think about an ideal gift is something that is delightful to the recipient. it's something that maybe they wouldn't have known to buy but it delivers them more satisfaction than what they would have chosen to themselves. so it's something kind of special and opens their eyes to new consumption vistas. now, one level you could ask how's that possible if you think about people as being well informed about both their preferences and opportunities. of course, in real life there are all kind of products out there. many products out there we don't know about all of them. so, it is entirely possible at least for people you know well whose preference is you know while if you know a lot about music or books or something they enjoy you might well know about something they haven't discovered yet that you could give them could actually do better for them than they would have chosen for themselves. so it is possible, you know, it's possible, it's just not on average it's not very likely. it doesn't happen very often that could happen. that's one method. another way it could happen if you think about gift-giving within the family maybe you want some fancy thing that you are a good spouse let's say you don't want to spend the money without permission, you know if your spouse gets permission to go out and buy the fancy digital camera, thank you, he said to his wife -- that permission to allow him to do something he wouldn't have been allowed to do on his own, couldn't have done it on his own, makes him better off than if he would have done it on his own. so i don't want to bash your house entirely. you might think of it as transcendent gift-giving. it's just hard and it's especially hard when you don't know much about what the recipient really wants. okay. so this gets into more numbers. how much -- how much holiday spending occurs each year? well, the national retail federation, they actually count essentially all retail sales during the month of november and december as holiday sales and so they see this 450 billion per year in the u.s.. that is a pretty big number. that implies that over about $1,500 per person, per year. i frankly think that is an unrealistically large number as if you compare it to household surveys about spending plans. that number is way bigger than that. and actually another way to think about this is if you just look at the monthly non-seasonally adjusted retail sales data, okay, look at how the bounce around one month to the next and i will show you some pictures here. it turns out that the biggest source of seasonality in the monthly retail sales data is christmas. december. look how this bounces around. this goes from january, 2007, to the end of the few months of the yr. it bounces around about $50 billion per month range and then nov tickets 381, december jumped to 430, down to 347 in january. now, i think a conservative way to estimate the magnitude of holiday spending in the u.s. is to take the difference, subject from december the average of the months our ground. if you do that, you get about 65 billion that is closer to decide the by the number of people. you get a number close to the household survey -- how much is your household planning on spending and christmas this year comes out to a number in the ball park. so having said that now, the answer from before, how much less or the gifts worth per dollar spent than the stuff you buy for yourself, per dollar spent? and if that was 20% commesso 20% times this $65 billion is a measure of the annual way the forgone satisfaction because we do it through gift-giving. so that's 13 billion a year in the u.s., 20% rather times 65 billion. so that's $13 billion a year in real life waste. now, it's interesting to compare that to other kinds of waste that get people very exercised. so the citizens against government waste, the watchdog group that looks of the federal budget and points out things wasteful and gets upset about them, they do this annual tally they call it the big board. they look to the federal budget and find projects the benefits smaller and cost and they model those wasteful and come up with 17 billion in a recent year. that's 17 billion in projects with benefits smaller than cost. but what we are seeing on average is all the spending has been a bit less than cost on average, not every instance but the whole enterprise as benefit below the cost. so if you take the national retail federation definition of spending its 450 billion that by the consumers against government redefinition would be deemed wasteful by my definition would be 65 billion. again though, i think a more honest definition of the waste is just the 13 -- just the 13. and so the question is, you know, some outreach year. this is really kind of wasteful. if you want to% by this and think about on goals and many people are outraged at on goals and all the time comes and calls notwithstanding but he's a beloved figure for children can have some outrage here not because he's evil just sloppy. okay. next question we could ask is are we alone, not in the little green men cents, elder spouse, but around the world. a u.s. phenomenon or is this a worldwide phenomenon and it is certainly my fault going into all of this was surely we americans must lead the world in kind of access of you to think about this as excessive lead the world and obesity, we lead the world in gasoline consumption, we lead the world in lots of things. urban, suburban sprawl, good cars, all the rest. so surely we lead the world and vulgar excess. but if you actually look around the world at this december's spending, show it to you for the u.s. and i guess i can show you for a few more years in the u.s. to convince you it was an anomaly of seven crothers 06, looks about the same, 05 books about the same and so forth. let's move around the world here are we alone. so here's a comparison. this is lots of countries on the same picture. again, it's all for the year 2007, first two months of 08. the u.s. appears last at the bottom right. there's a bunch of western european countries on there. well, you see this december bump? everybody in all these countries, so we are not alone. we are not alone at all. in some countries the december bomb packed with starts moving up in november. the u.k. which is next to the u.s. down there. but we see this spike in december and all these western european countries which by the way resembles the u.s. in many respects. what about eastern europe? hirsi eastern european countries for which the data is available through the oecd. the czech republic and hungary, poland, and even russia. remember russia had a century of a godless communism. the of a big december spending bump in 2007, slovakia and then again with, the united states. russia is very interesting. russia transitioned to more of a market, may not too long ago and the oecd has been keeping track of the december, the monthly data rather than back to 94. and so with this picture shows is the russians and the united states, it shows the size of the december spending relative to the month around and look at that the russians over to the u.s. in about 2005. i always think about doctor strange love, a member played by george c. scott worried about the cade gap between the russians and americans. here you have a santa claus gap. not sure if this is good or bad news but we are behind in something. let's move around the world a little bit more. the question is are we alone conjures other countries, the oecd covers brazil, mexico, south africa, all distinctive and large spending months. there are some places where you don't see it or see less of it. so here is a smattering of other countries some of which don't have it. all of these graphs have the u.s. at the and so you can see that for comparison. but israel does not have it. why is that? also american jews give gifts in december 4, it is the holidays are passover and the jewish new year and so there are seasonal spending bombs and israel, they just don't occur in december. china doesn't appear to be happening in china, sort of debate about that. in korea it doesn't happen. some christians, not many. japan has few christians but they do have a tradition of celebrating christmas. it's the material last christmas. so you do see a pretty clear decembre spending bumping japan. so it's going on around -- around the world. okay. now, the next question is the direct comparison. i've shown you here that there is this december spending bumps and all these countries but has the big spending on? we have that answer that yet so the answer to that we would like to compare the size of the spending bonds may be averaging across years, across the country so that is what i want to do next. this is across the years since the year 2000. this is the average size of the december relative to the one months are added averaging across the years since the year 2000. and what do you see -- this is a bit of a busy bar graph is starts are hungary makes it down to israel just a few percent, where is the united states? way down the list. wade on the list. there's my nice little red circle around it. held in the 1990's, the previous decade? similar phenomenon. pretty far down the list below the medium. 1980's, very similar story. 1970's, very similar story. 1960's and again, the coverage differs because the oecd's doesn't have the same data in every decade but nevertheless, we have a very solid story. the u.s. is pretty far down the list in this particular measure how big a deal is holiday spending relative to the rest of this year. okay. this, there is good news. there's good news for americans particularly americans who have self image problems about alexis. we are not alone. we're not even excessive. we are not leaders on this thing. now, there's bad news, and the bad news probably outweighs the good news. the bad news is if you think -- if you are convinced, as volume, the u.s. 13 billion was a problem, then the world wide number is much bigger. so if you tally of the holiday spending around the major economies of the world instead of 65 billion you get about 145 billion per year. and so the waste is on the order of 25 billion per year. so that's the bad news. and it probably is worse -- it probably outweighs the good news. i should say that i've done some surveys about this yield question, that is how much do people value their gift rather to the collective to their own purchase about the world and here's a quick glimpse of one of those pictures. the very worst is in laws and we have seen that in u.s. aid as well follows by aunts and uncles to grandparents followed by significant others. every survey tend to do pretty well. so there's not enormous amount of data showing you the phenomenon that operates in the u.s. also, that is the value destruction, but there is -- i have done surveys and the data are consistent so i think it is justified to say this is world wide phenomenon not just the u.s. phenomenon. so 25 billion a year. wow, that's a lot. okay. the next question we can think about, we can think about anything but one question we can think about is did our generation invent the commercial -- commercialization of christmas? you know, how does this generation's texas if or large amount of consumption, however you want to think about it, compare with the assumption of previous generations? every generation imagines that it invented sex. every generation t