Our latest Freakonomics Radio on Marketplace podcast is called “Have a Very Homo Economicus Christmas.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.)
This year, we have one simple mission: ask economists how they go about shopping for the holidays.
You’ll hear from Steve Levitt; Alex Tabarrok (who wants gifts directed to his “wild self”); Justin Wolfers (who has written before on Christmas efficiency); and Joel Waldfogel (here’s his famous “Deadweight Loss of Christmas” paper; he’s also the author of Scroogenomics).
Wolfers tries to ease our holiday stress by pointing to “the spotlight effect”:
You tend to think that you’re in the spotlight and everyone’s looking at you. Applying that to Christmas, it’s like you think that everyone’s looking at the gift you’re about to give and it’s super important. And so you put a lot more weight on it, and maybe you spend a little bit too much. The truth is you’re not that interesting. The person who’s about to get the present is going to get dozens of others and they’ll probably forget what you’re going to give them.
If you need even more help, you might want to check out Cass Sunstein’s “Holiday Shopping Tips From Behavioral Economists.”
Happy Everything, everybody.
Kai RYSSDAL: Time now for “Freakonomics Radio”. It is that moment every couple of weeks where we talk to Stephen Dubner, the coauthor of the books and the blog of the same name. It is, yes, yes, it is the hidden side of everything. Dubner, how are you?
Stephen J. DUBNER: I’m great Kai, happy holidays.
RYSSDAL: And to you, and to you sir.
DUBNER: Thank you much. I come today with some practical advice for the gift-giving season.
RYSSDAL: Oh good.
DUBNER: Because, you know, who better to help with your shopping strategy than, wait for it, a bunch of economists?
RYSSDAL: Oh, dude, you need to get out more, man.
DUBNER: Now, you might think that an economist would simply encourage everybody to buy absolutely as much stuff as they can, since that might create jobs for somebody somewhere.
RYSSDAL: Yep, yep.
DUBNER: But in fact, many economists see gift giving as terribly inefficient. They say it generates a lot of what’s called “deadweight loss,” which means that you place much less value on the socks or the electronic gadget that I give you than it actually costs in real dollars that I paid for. So that’s the loss…
RYSSDAL: Or that my mother-in-law gives me. Oh wait, did I say that on the radio?
RYSSDAL: She’s a very nice lady. Might I say though that that is especially Scrooge-like of you and them? Right? Come on.
DUBNER: It is indeed. It is indeed. In fact, Joel Waldfogel who is an economist at the University of Minnesota wrote this book you may know about called Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays. Here is how Joel Waldfogel approaches the gift game.
WALDFOGEL: Well, one thing that I like to do in gift giving in the family is to give myself things. What I should really say is to get permission to buy myself something special. If I want to go buy a fancy camera or something, which would be the ideal gift for me but, of course, no one else is going to buy it correctly, I could just ask my wife for permission. And if she gives permission then there, I have a wonderful gift.
DUBNER: So that’s what you might call the selfish Santa approach. Okay, plus, which nobody could buy it correctly for me.
RYSSDAL: That’s right, I love that.
DUBNER: Now that may not strike you as being particularly generous. It sure beats however what another economist once tried for his wife’s birthday. Here’s Alex Tabarrok.
TABARROK: I made the mistake of getting my wife a Blu-ray DVD player -- a really high-end Blu-ray DVD player -- for her birthday. This, of course, was something I actually wanted. So on my birthday, she got me a dress.
RYSSDAL: I love that. That’s actually awesome.
DUBNER: It was quite well done. Now there are other gift-giving strategies to consider. The economist, Justin Wolfers, takes what I like to call the anti-narcissist approach.
WOLFERS: There’s this thing called the spotlight effect. You tend to think that you’re in the spotlight and everyone’s looking at you. Applying that to Christmas, it’s like you think that everyone’s looking at the gift you’re about to give and it’s super important. And so you put a lot more weight on it, and maybe you spend a little bit too much. The truth is you’re not that interesting. The person who’s about to get the present is going to get dozens of others and they’ll probably forget what you’re going to give them.
DUBNER: I hate to break it to you you’re just not that interesting. In other words, don’t overthink it and don’t over spend. All right, that’s the message there.
RYSSDAL: What about your favorite economist, Mr. Levitt?
DUBNER: So Steve Levitt, I asked him about gift giving. I have to say, he came back with a really lovely and heartfelt response about what it really means to give someone a gift.
LEVITT: The very best gifts not only show someone that you know about them and care about them. But they actually demonstrate that you know more about them than they know about themselves.
RYSSDAL: You know…I mean, A) that’s really nice.
DUBNER: Melts your heart.
RYSSDAL: But it is so un-Levitt-like. Right? I mean, he’s a nice guy, but…
DUBNER: He contains multitudes as Walt Whitman might have said. So Kai, let me say this, with that spirit in mind, and to demonstrate how much I actually care about you, Kai Ryssdal, I’ve sent you a couple gifts. You find them there? They’re on your…
RYSSDAL: I see them sitting here. I should tell you I didn’t get you anything.
DUBNER: It’s all right, there’s still time. So you’ve got one with green wrapping paper and one with red. Go ahead and open up the red one first, just for kicks.
RYSSDAL: All right, the red one first. Okay, I’m just going to shake it for a second. And I’m a little disappointed because I know it’s not beer.
DUBNER: Not beer, right. And if it is beer and you shook it, you’ve got a problem.
RYSSDAL: Compression stockings. Compression leg sleeves.
DUBNER: Right, you’re a runner.
RYSSDAL: I am, and occasionally I get shin splints, yes.
DUBNER: Thought you might like some purple, I think of it as Kai Ryssdal lavender when I look at that color now.
RYSSDAL: Yeah, yeah, those things they go from the knee down to the ankle and they hold you all together down there.
DUBNER: But honestly Kai, I have to say, you don’t sound all that happy.
RYSSDAL: Well you know.
DUBNER: So go ahead and open up the green one then. Go ahead.
RYSSDAL: Okay, this isn’t beer either, dude.
DUBNER: Not beer.
RYSSDAL: No you sent me…No, did you really send me money? I can’t keep this.
DUBNER: I sent you…
RYSSDAL: This is a hundred dollars.
DUBNER: That’s a hundo for you. Come on, it’s “Marketplace” baby. I’m showing you the love by showing you the money. Now, don’t spend it all in one place. Happy holidays Kai Ryssdal. Do I know you or what?
RYSSDAL: I feel bad. I didn’t get you anything.
DUBNER: You’ll feel better when you buy. You’ll feel better when you start to spend it.
RYSSDAL: All right, Stephen Dubner, he’s back in a couple of weeks. “Freakonomics” is the gig. This is awesome, a hundred dollars.
DUBNER: See. You see how happy you are?
RYSSDAL: Am I going to have to mail this back to you now, is that the deal?
DUBNER: I don’t ask questions about the cash payments that we send out to dictators and radio hosts I’ve learned.
KAI: All right. See ya.