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 thinks it invented the imagination of christmas, but did it? and so we can look at this monthly non-seasonally adjusted retail sales data going back. security's going back to 1990. kind of looks to me like an ekg for an increasingly irritating cartoon character. increasing irritation is just the growth in the gdp over the years, the growth in the economy, whereas the spikes, the

heart beats, whatever they are, our december. it's just there every year. here it is for the 80's, kind of story. here it is for the 70's, same kind of story. we can keep going. i can show you this back to the 30's. this is just a summary of all that. the two lines on this picture are december, the december excess over november is the blue line. the dotted red line is the decembre access over january. and these lines bounce around a bit because the economy bounces rounded year to year that they are easily stable of the back to 1935. so it doesn't look like our generation invented this. this is one where you can plan the greatest generation or some other generation, which ever generation you like. now, prior to 1935 the way the data existed and frankly the way the retail sector existed, there were mail order houses and dimond stores like woolworth did a success even early so i got my

hands on this kind of interesting debate on the dinosaurs, some years 1919. basically woolworth, that's the big one at that time. look at that. suite of january, february and so forth, then we hit december and an enormous spike in the 10-cent store sales figures, then of course it plummets back down. it's very familiar picture. if you do that same kind of thing over the entire 20s, i'm sorry i'm probably convincing you of something you are already convinced of but certainly that spike exists through the twenties, so no question about that this existed of the way back to 1919, probably your earlier but did they die get a little harder to come by. now, so it has been there the whole time. but we could ask how has it changed over time as a share of the economy? cow has already spending? and actually, holiday spending, this if you think about this retail sales spike in december relative to the months around it, it is a smaller share of the economy now when it was in the

30's. and over the last whatever 70 years or so gdp has grown enormously. if you want to merkel this time of year the gdp by the factor of five in real terms of three generations that is pretty miraculous. the gdp has gone up by a factor five, that is gross domestic product. how much we produce in terms of goods and services in the u.s.. whereas, the spending has only gone up by a factor of three. so actually, as a fact of the economy, as the holiday, december sales as a share of the economy fluctuates year to year but is a clear downward trend. now, if you think about this for a second, we have gotten richer but we are spending proportionately less on christmas. that tells something about the kind of good christmas is and i will talk more about this soon but it's not a luxury, this is the hand, it is a necessity. okay. let's talk about that now. so, we need to stay very brief economic lecture here. you probably thought you are already having won but just a

quick introduction to some concepts. you know, we have these goods, spam, chicken and caviar, sort of very stereotypical examples. and you can see it's christmas, likes ban should be called interior good, chicken, normal good or caviar which is a luxury good. so how do we define those goods? i think fairly intuitively, but the formal way we define those goods is we ask how does the share of expenditures, some think of like a household, how does that share of a household expenditure on that good fairy as the household gets richer or operational rising across the households to the richer households spend a higher and health and higher share if it's a higher share of the richer households a luxury. if it is a lower amount that the rich households it is an inferior good. it's a haulier amount but lower share it's a necessity like chicken. so in that taxonomy what is christmas? it's certainly on its face it sounds like christmas would be a luxury and i've already given you the hint to the contrary.

it sounds like fancy stuff and nice wrapping and so forth. it sounds like a luxury. but actually, if you look at the data over time and how our spending on this has changed, as our incomes have changed, and you can do this many different categories of expenditure. and here's a comparison. so, we to think about these, this borchardt is behind those doors is what we call elasticity of expenditure with respect to income, but think about it as if it is bigger than one is a luxury and if it's less than one its necessity. if it were literally negative would be inferior. none of them are inferior so look across this from the luxurious luxury goods down to the necessities. the most mundane necessities clothing, shoes, food, surprising we all have to eat sweets makes sense we think that those necessities. and there is already spending. right between gasoline and food. so it's not the most glamorous of the luxury goods. this activity we call holiday

spending actually behaves the way economic necessity joel, which is consistent with i think a reasonable view of it. it's really more of an obligation. we have an obligation to engage in this but as we have gotten much richer we haven't spent more on end. we've discharged the obligation of a little more money but more share of spending, of expenditure. okay. over the years we've had big changes in the way we finance christmas. you know, christmas has become actually highly leveraged activity, to use a business term about borrowing. you know, in the old days what people did, you know, they saw christmas coming at the end of the year and they knew they had to save, so the saved. sometimes they saved what we call with christmas clubs. these were funny bank accounts where, and funny because they paid very low interest. but they were meant to help people who had little foresight to have money at the time the holidays world around. so i do have -- i found the

death of these christmas club accounts from the 1930's. there is this really wonderful sawtooth pattern here to read these are quarterly data, and what it shows you is the beginning of the year is very low. the first trough over there 18 million. then through the year it rises up to 36, 59, then at the top there's 80 million. and then the deposits, they all come out to buy christmas gifts and the process starts over. so this was sitting in advance of the holidays. the money comes out to fund the holiday expenditures and a very large fraction of politics spending occurred through this kind of mechanism. of course that's not how we do it anymore. you could imagine. the newfangled approach to the holiday spending is the credit card. just a quick look at revolving credit over the past 30 or 40 years. we are now almost at a trillion dollars in revolving credit. revolving credit is the credit card stuff as opposed to

borrowing to buy a car or house, it is money that revolves. that's a lot. that's almost $3,000 per person in the economy. what happens to this revolving credit around christmas is to see that clearly you have to focus on the one year at a time. secure is one year at a time. the monthly levels of credit card debt around christmas in 2007. so what you see is there's this kind of underlying trend. there's this underlying trend but relative to this underlying trend this things like supper at christmas. and remember, we saw what happened to their retail sales around christmas. the specter of enormously in december and can we back down in january. so one question we could asquith data like this, we think about how much of that trend line is the debt in december, how much is it still above the trend line in january, how much is it still of the trend line in february and how does that compare to how big the holiday spending was in

december? so, here's a little picture of that. this is literally for december. it's a comparison of how far above the deck is in september relative to the spending in december, and this tells you that about at this point about two-thirds by 2000 that is, about two-thirds of christmas is being put on the credit card in that year 2000. whereas it was about 40% in 1960. that's not really debt because after all you can put it on the card and pay off and it would still show this week. we only want to think about it as debt if you are still -- you are still above debt in trend when spending is really low 15% to about 1980. then it goes way up. and by recent years we are up around 50 per cent. about 50% of christmas is still not paid off in january. what about february? while, seem pattern but lower numbers. by the end of february about 20% is still not paid off. so we have changed the way that

we refinance christmas. now, the discussions of debt, is it good or bad, this is a very contentious issue. after all, having credit means you have the ability to take a vantage of things your present self can't afford but future self can. gives more opportunities, more options, must be good. maybe. on the other hand though i think he would be embarrassed to tell something to your mother than maybe it's not entirely good. so, not so sure about how good this development has been. it's interesting a few years ago a lot of retailers kind of phased out there lee way programs and christmas clubs because it seemed no longer to be necessary but the recession that is it basically since i wrote the book we've seen these layaway and christmas clubs coming back as a way to help people and also they are in some ways undesirable financial instruments because they pay lower interest or no interest in some cases, and on the other

hand helpful for people who like self discipline and foresight. so i don't know. not sure whether it is a good thing or a bad thing. all right. i want to talk a little bit about gift cards. so, go back to the basic problem here. the basic problem here that someone else was choosing your stuff. and gift cards, which have become really popular, now they are perhaps one-third of all holiday gift-giving. they allow the recipient actually to choose what item he or she wants to consume and so the great news and theory. and they actually are visible in the data so what do gift cards to? you buy a gift card and also you spend the money for a giver spend the money in december the retailer doesn't get the revenue in december. they have to put it in escrow of some sort. the retailer gets to recognize revenue and government statistics show the revenue arriving when the gift card is redeemed which is typically january common on december. and so if kit carts were having a big effect in the economy what we ought to see is the job of

from december to january should be shrinking. and well, sure enough it is shrinking over time. in particular since cards hit the scene ten or 15 years ago that period is exactly when we see this drop-off happening kind of in a big way. it's even more pronounced if you look at particular retailer particular kind of stores, the general merchandise or department stores, it's even bigger there. you see this big drop off. so sure enough gift cards are changing the timing -- changing the timing of holiday spending. one criticism that i think is a legitimate criticism to raise, why am i complaining about all this holiday gift-giving? after all, this is voluntary behavior. this is voluntary behavior by gift givers. and moreover, it's been going on for a very long time. so, it must be efficient. it must be optimal. how can anything that persists in happens voluntarily, how can

it possibly be bad. to that i guess you can first ask the question is it really voluntary? it's true it is not against the law and if you want to sort of stiff mom and not give her a gift, not against the wall. you can show up at the big event with the thing for anybody. it's not against the wall. you won't get thrown in jail. but what you get from the stairs from people? argue free to do that? you can answer that question for yourself. but the point of asking that question is if you are not really free to do that, then the fact that people choose to give gifts in the face of the social pressure doesn't mean they are really doing so voluntarily or that there really is a good thing. if they are doing it under a social obligation that we can't infer from the fact they do it that is necessarily good. okay? what about the persistence? how could something that i claim is so inefficient how could have persisted for so many years? i guess i think about that this way. you know, suppose you get a bad gift and, you know, you make --

use michael and try to make a convincing smile. do you complain? do you say i hate this thing, don't ever give me something like this again? of course not. you are all well bred. you shouldn't see something like that and i don't want to be misunderstood suggesting you should. but the fact you're not allowed to see that means that there's really no incentive if you want to think about incentives, things economists worry about, there's no incentive for the effort to change his or her behavior. they are not getting feedback that would help them think it and do better next year. it's pretty easy to understand how to persist because we are all well bred, polite people. so we are kind of stocks, kind of stuck with the inefficiency as far as the eye can see. all right, now is sort time for the sort of guilt inducing part of the show. and it's all this waste there is good cause in the world that go begging. one way to think about this, and this isn't by itself evidence of

good cause, this is gilts inducing picture of the income distributions of this is koppel lawrence curve but the world income distribution may be surprising or not, it is really on equal. the bottom 80% of the world's population has 20% of the world's income. and to put it in a different way, the top 20% has 80% of the world's income. there are a lot of poor people in the world. why does it matter for anything? one view is it doesn't matter for anything. but if you think people value having stuff but as they have more and more stuff it is incremental benefit to them declines continue might think that shifting some of the stuff around would be a good thing. of course that sounds like socialism. wholley karl marx that man. i'm not advocating socialism but we see a whole lot of sharing that occurs voluntarily. one of the forms of sharing we see voluntarily, and this is kind of fascinating, if you look

at u.s. household expenditure date of one of the categories that you can see, and it's called consumer expenditure survey is charitable giving. you can see all kind of these categories of expenditures, cash contributions to the second one to charity, education, this is a picture showing again those elasticities of expenditure with respect to income. so we have the clear luxury activities of goods at the left, and then the necessities and over here on the right. for a single food and housing and over here on the right is necessities and that makes sense. but all the way on the left we have pensions, so that saving for the future. we have cash contributions to charity, and we have education and entertainment and so forth and stuff in the middle. but the point i wanted to emphasize here is that cash contributions to charity or a clear luxury activity. so that says that the fact people do that voluntarily and then it even shows up as a luxury good in the data means well, it seems like the kind of

think people would want to do more of the had more money. that is what luxury means. if you kind of want to interpret the data that way. so there is, cash contributions. now that gives us a little bit of a hand. when we think about what could we do better now that i've done the gills and using part let's think about what we might be able to do better as a society. whoops i'm missing my last -- so, what should we do? notwithstanding the subtitle of the book, you know, why you shouldn't buy presidents for the holidays, i actually think that you should go ahead and keep giving presents to kids and other people you know well. why? you know what they like and are not likely to disappoint them terribly so you've you want to express your affection for them and knowledge about them, i think it is not a terribly efficient thing to do and the data shows that. but for others the situations in which you have an obligation to give a gift but haven't little idea what the recipient wants what can you do? one solution oregon this is not so much me as what we see happening in the world, gift

cards. they've grown from nothing 15 years ago to maybe one-third of giving now. they show what has the most desired gift from gift recipients if you look at surveys. so in a way they are like a way to launder money. we can't give cash, that's tacky. but we are allowed to give a gift cards so gift cards are a way to allow the recipient to choose which items the particular store he or she is going to consume. so that is a option, although i have to say there is a little bit of a problem with card's. i have one misgiving about them, there's been on reduction problem. 10% of card balances are never redeemed. what happens to that money? well, eventually the retailer is allowed to, the accounting does recognize or they are allowed to recognize that revenues wiggins up being 90% as a gift to your friend and 10% the shareholders of the retailer. now they are people, too, so that's nice. it's probably not the giver had in mind, so my soap box

suggestion about gift cards is wouldn't it be nice if retailers were to issue gift cards that after two years the unspent balance is stifel to it to charity? mabey not all the gift cards but what this that is a guilt inducing thing. get a gift, go ahead, you can have something nice for you can save some dying seal or whatever. but still, i think there would be a nice option. other options or thing i think kind of a solution would be charity gift cards. think back to the slide if it's still up there, charities and activity people like to do. it's a luxury activity. so if i were to give you a gift card that allows you to give to charity, so for example the charity navigation organization has this thing called the good card network for good if i give you of the cards you can go to the website and jews literally a million charities and get to give the money to one of those charities. so i am allowing you to act like a rich guy to engage in this looks reactivity of giving to charity. we are not destroying any value.

you can all feel good about it paid so that feels like a nice solution. better than buying a portable object nobody wanted. but for the more, money gifts to charity, charitable recipients are not going to save the money paid they still have to spend it. so it's still going to be good for the economy in the traditional sense of producing spending and gdp. so those are my ideas how we might change the $25 billion a year and value destruction, and i guess i just wish you all a happy and efficiently season. [applause] questions? >> you get to use the mic. yeah. >> a number of -- and by being recorded? can you hear me? >> i can hear you. >> and number of methodological problems occurred to me during,

listening to the presentation. the first one is your show a bunch of spikes in december and point out that there's a lot more seals and things like this, but of course we know this is happening in a universe where december is a completely different month from june. it's the time of the year when the days are the shortest, it's darker, maybe people are -- we are much more so than generations before, we are all on this calendar system where everybody is aware of what everybody else is doing. for example, my brother is getting married in september because he wants the tax benefit so he's going to have a surge in his marriage in december only because there is a tax law. how about a chinese person who gives a gift? we know the people in china are making everything we use, so of course they ought to have a gift-giving season when they are done making all this stuff in about november they pay off everybody a bonus and then if you got a bonus to go out and spend money. so one problem with looking at it this way is we are ignoring the fact that there's this calendar and that we are all now

on this synchronized calendar world wide. so one thing that occurred to me that would be interesting to export is all about comparing northern and southern hemisphere? in the southern hemisphere december is the longest day of the year. so that will allow you to tweak this a little and see is this and as you pointed out in israel they don't seem to have this phenomenon is this a christian phenomenon? so it took only wipes out the fact that it's the shortest day in the year. it really has to do with the christian calendar, which is the same in the southern hemisphere. so exactly the same phenomenon is going there is kind of a hint that this has nothing to do with the sun or something, okay? another problem would be the tax laws. i don't know exactly how we can account for that, but it is pretty clear people are finishing the year and lots of things are happening because the way we view the calendar. it's your last desperate chance to have a good year whether you are trying to sell or or trying to look better or have more sales at the end of the year. it's also the time new products

are introduced. i used to work for a toy company to it they are thinking in april about december. so this isn't just any old time. it isn't just a gift-giving season. they are now in concrete you have to introduce your products, new products at the end of this year because it is the gift-giving seasons and you've got this bump, you know, more because of that than anything else. so that's a problem. another thing i noticed you didn't analyzes what about the fact that there is all this effort to have indexes, to help people make the choices. for example if you buy things on amazon, which i do what, you can go out there now with facebook and everything like this and find out a lot about people that you want to give gifts to come and you could give them really appropriate gifts. not only that, but they can list exactly what they are looking for, that they are looking for a portable tv set or something like this. you could hit the mark a lot more. so maybe the problem is partially it will solve itself as more and more people listing with their interests are and

things like this on the internet. people, even these grandparents with a little let vice 80 at the store can buy a more appropriate gift. in another problem i see is when i buy something on amazon, when i buy a computer i get about, i get a 60% price because i know how to shop for a computer because i'm interested in computers. if my grandmother were to buy me this computer she would pay list. so it's not just the 10% you notice that she might pay 40% more for the exact same computer because she doesn't buy it on amazon sushi is the wrong person to make that purchase for me. if we are worried about efficiency. so that would be another methodological thing is that maybe there is a bigger savings if people simply knew where to buy this stuff and the fact that people are disappointed. another thing i noticed that was different from other studies is you are an economics professor so as you just did this thing straight forward. you ask people here is a gift, are you happy with it, how would you rate this? is that really the way people's

preferences and satisfaction as rated by sociologists? no. or psychologists. they tell them they are doing a study on raincoats, okay, or something, and a sneak in. the real question as they are never asked the question except when the data is analyzed they say these people didn't know what we were trying to find out but now we analyze the data and find out they are either happy or not happy so you just let people read these gifts, okay, where as you probably should have conducted the thing in a way if people were about to say were the happier with the gift they got from their mother-in-law because she finally bought it the sweater that they could wear? maybe they had more satisfaction from that. so there is something on subtle about the analysis of dissatisfaction people get. another thing that i see in the study is people that buy me a gift cards i find that a very cold kafta. it's true i get the money but the people that go out and buy a sweater because they think that they can pick and i scholar for me or something or somebody who knows i'm interested in

something like music and they say i'm going to get him something that stretches his interest in music. he never listens to opera but he likes music and going to get an obra record. the people that get the gift card leaf the the thing choices i always have whereas the person that goes out and get me something personal like this ought to try japanese food, the like to cook american food by getting him a japanese -- need he will like sushi or something like that. so the person who doesn't get the appropriate gift might be adding value in a certain way or enriching the society. so if we did this thing efficiently, and everybody just got a gift cards it would be a financial transaction and it wouldn't have the same sentiment. i also noticed one other thing which is it is true that long ago if he were an economist for julius caesar you would see the same spike because the had the sale at the end of the year. it was a time when people were bored or worried the sleeves were getting restless or something and so they would have this wonderful thing they

probably also wasted 10% three it had nothing to with christianity or gift-giving. in fact we did that in america. they gave this leaves gifts at christmas time because there wasn't enough to work to keep them busy and they were afraid they would get restless so it was a common american practice to have and when this leaves got up after the party that was here they often had gotten drunk and things like this so it was a tremendous economic waste but everybody was happier. this leaves got something to look forward to and the master could this leaves bct tastemac there's plenty to chew on there. that's great. quickly the north versus the south, please come up to the mic for the next question. not you, i think somebody else should get a chance to beat north versus south indeed brazil and south africa. i agree it is a great idea. >> but you have to break it up. >> i did. in brazil we have a spike, south africa, north america is like so i agree. the tax laws. you made a point of the policies

in december. whitey think they are introduced in december? that is exactly right. i think the recommended systems are wonderful and potentially promising. it's a huge area of research. look like the pandora and so forth. maybe someday it will be possible. and there also are wish lists, less subtle thing so i agree that is a fascinating thing to think about people on the psychologist, psychologists it is true they ask questions and devious ways. they are allowed to lobby in their experiments. but what i did, you know, use the same methodology for the gift and the own good, so whatever why is it is equally for the gift and the of goods, so i argument would be it's weird but on the other hand i can different set out because it's the same methodology for growth. i to the point i'm not too worried. gift cards you don't like to read a lot of people don't like them. i think actually the only appropriate when you have no idea. if you do know someone and what they like you can do better to get if my wife gave me a gift cards i would be a little distressed. we should talk more. [laughter]

and on a saturnalia i want to be clear. i'm not saying christianity causes this. it happens that christmas is a holiday celebrated in the predominantly christian countries but it's nothing about christianity person. the fact israel doesn't have it in december doesn't mean they don't have it. they have in april and september. i take the points. thank you. >> thank you for the presentation tonight. as an executive director of a newly emerging nonprofit charity i found this particularly intriguing slide, the comment of giving as a luxury activity. my question with that would be particularly with your comment of your opinion of the balance on a gift card perhaps being on used after the two-year period be donated to a charity. i would like to ask your suggestions with regard to that and an extension of that. one of the concerns we have with our nonprofit, whose target

audience is the homeless population and medically underserved is we want to access prepared cooked food from airing a food establishments. and conferences, symposia, that type of thing. we would like to determine the best way that we can encourage the contributions of those wasted resources outside of the social and economic pressures that could be applied internally beyond that, how if you might think it advisable to perhaps apply external pressures on these perhaps hotel chains, other organizations who might influence the hotel chains. just to give you an example if i may. i was at a recent medical conference and there was tremendous wastage, and i was

looking to just take a few items with my colleagues who normally don't have a chance to beat a decent meal. and there was this sponsor, a pharmaceutical company, object loudly to my moving some items out of the room to another area of the hotel with the understanding of this was considered to be inappropriate -- socially inappropriate. so any comment that you could have as to how we could further recycle and retrieve items for charity. >> let me do the dangers economist thing which is to first say i have no idea and then to go on and say something any way, which is are there ways for these firms, hotels, but never to publicly take credit for doing stuff like this? the days come if there were a way not so much social pressure to do it but social pressure to disclose whether you have done it, i wonder if that might -- it's sort of voluntary but it's not doing it at the end of a gun but it's giving it as a way to

claim credit. i don't know. maybe we should talk about this. it's really did obviously because it's about sloppy consumption and it's the need so it's very really did. i see that connection. >> and the other question i had regarding that because due to distribution and hunter is one of the major charities of the world. by vastly and efficiently utilize in the resources there now, the need to expend cash is on necessary to some extent and the cash can be better utilized for other purchases. so as not to say the cash wouldn't be donated. of course it would destroy the good will that many grocery chains have seen what you like to feed this project, this type of thing, the pr and good will they develop as participating in partnering with other community organizations and community charities. but any particular comment with that. because our principle is we feel

we need to redevelop philosophy. and some basic practices. any suggestions would be appreciated. >> we should talk offline. thank you. >> so i have a question. i know you've been criticized a lot for sort of overestimating the the deadweight loss' i think you may underestimate the loss in some ways because that type in your wearing, it may have been a $20 i come and you might have been willing to pay in your calculation $24 as opposed to someone else and if someone else what it for you it might have been only worth $16 to you. you're calculating the difference between 16 and 20 as opposed to 16 and 24. are you ignoring the loss consumer surplus people would have gotten by biting stuff for themselves as opposed to just the difference between the price and value to them? >> is this because of systematic difference in the guess of the price between stuff i buy for myself versus stuff others bye

for me? >> no, because someone spends $20 on you and you get $16 of value, whereas if you bought it yourself he would have gotten $24 of value. or some -- you got something more than 20 how you started out with this -- consumer surplus from buying it. >> right. i still don't get it. [laughter] we will talk later. i'm sorry. if that set thank you for your questions and interesting comments. thank you. [applause] >> joel waldfogel is business and public policy chair at the university of pennsylvania wharton school of business. he's the author of the tyranny

of the market. for more, visit wharton.upenn.edu. senators are continuing the debate of the health care bill through the weekend. our regular booktv schedules will be pre-empted during these rare senate sessions. with booktv programs resuming after the date. ploch the senate debate on health care live gavel-to-gavel here on c-span2. the only network with the 48 unedited and commercial free. to read the senate bill and the house version, plus watch the elon demand, go on line to c-span's healthcare hub.

john hope bryant, founder and ceo of operation hope, the nation's first nonprofit social investment banking organization presents his five laws of plus based leadership. andrew young school of policy studies in atlanta hosts this to our long talk. [applause] >> will come our topic today is leadership. it close to all of our heart, something we talk about a lot and try to teach and practice and we have a great panel to discuss this. john is a great friend of the andrew young school and is here. welcome back. and andrew young, this is his house. and mr. george, welcome to the