'Scroogenomics': Cutting back Christmas

Joel Waldfogel has meticulously quantified the spirit of Christmas, giving in to a set of numbers and percentages that may discourage even the most enthusiastic Black Friday shopper this year.

In his book "Scroogenomics," he tells you why you should think twice before your holiday shopping spree, and why it's not better to give an unwanted beaded sweater or talking fish than no present at all.

The economist and professor at the Wharton School of the University of Pennsylvania argues that the holiday season generates massive waste that is bad for the economy, despite what consumers might think.

"There is both the buyer and the seller (to consider in economic transactions)," Waldfogel said. "The seller does well with the spending, regardless of whether or not it's good for the buyer. But whether the transaction is good for the buyer is a question of satisfaction."

Waldfogel said when we make our own consumption choices, we only buy things that will give us back more satisfaction than we pay — meaning that we will only buy a $50 sweater if it is worth at least $50 to us.

Yet a distant relative or co-worker might be inclined to give us a $50 sweater that is only worth $5 to us, creating $45 of wasted money, or what economists call "dead-weight loss."

The United States population as a whole creates an annual dead-weight loss estimated at $8 billion to $20 billion, Waldfogel said.

And it isn't just an American phenomenon — Waldfogel said the numbers double when taking the whole world into account, with dead-weight loss even higher in Russia.

But when it comes down to it, Waldfogel doesn't endorse refraining from spending money on presents.

"Just don't give presents to people who will inevitably be disappointed," Waldfogel said. "I'm not against giving — I'm against sloppy giving."

For those who still believe it's the thought that counts, Waldfogel recommends giving well-thought-out gifts to close family members, children and significant others, and gift cards, charitable donations, or "naming rights" to gifts for everyone else.

If a family wants to buy bikes in July to get the most use out of them, they can give the "naming rights" to Santa in December and cut back on other presents, for example.

"We are imperfect when we buy things for ourselves, but when spending on others, we are even more imperfect," Waldfogel said.