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Oh, You Shouldn't Have. And Here's Why

Wharton School economist Joel Waldfogel has built something of a reputation as a Christmas killjoy. Starting with a 1993 article in the American Economic Review ("The Deadweight Loss of Christmas"), he has been rattling the chains of Yuletide gloom.

Waldfogel says holiday spending is "a massive institution for value destruction." That's economist-speak for the fact that so many gifts—billions of dollars' worth, he contends—match up so poorly with what recipients want or would have bought for themselves. Now, in a new book, Scroogenomics (Princeton University), he puts an updated figure on the waste arising from holiday giving. "U.S. givers spent $66 billion in 2007," he writes, but the value of recipients' satisfaction is much lower. Quantified, the satisfaction gap represents "an annual deadweight loss of $12 billion." That's approaching what the federal government dissipates yearly, he says, citing the $17.2 billion in misspending estimated by Citizens Against Government Waste.

Waldfogel's estimates of the lost value in holiday giving derive from student surveys he has conducted over the years. At first he simply asked recipients to estimate the total cost of the gifts they got and the amount they would have been willing to pay for them (apart from any sentimental value). In later surveys he asked participants to estimate prices and values both for the gifts they got and for stuff they had purchased for themselves. People ascribed 18% more value per dollar spent to their own choices.

The least "efficient" gifts, Waldfogel writes, tend to be from relatives who don't see family members often enough to know their desires. ("Nobody is better than you at buying the sweater you want," he said in a phone interview.) And while giving cash is a way to preserve gift value, it's often considered inappropriate or cold.

Gift cards, which now represent up to a third of holiday spending, are stigma-free, Waldfogel notes. But 10% of their value goes unredeemed each year. His suggestion: Retailers should donate those balances to charity.

Moscow's New Cold War: Blitzing the Blizzards

Now here's an option that's not available to most budget-strapped snowbelt cities: Moscow Mayor Yuri Luzhkov plans to preserve funds, as winter descends, by having less snow fall from the sky.

With the blessing of his city council, Luzhkov has announced that in the coming months, Russia's air force will bombard snow clouds with silver iodide as they head toward Moscow. The idea is to make them release their precipitation before they reach the capital. (Cloud seeding is not unknown in Russia, where it has been used from time to time to ensure that nothing rains on parades.)

City public works officials told ITAR-Tass that the seeding, to be carried out from November to March, will cost $6 million—a sizable reduction from the $10 million a year Moscow spends on the 5,000 heavy trucks and 50,000 workers needed for snow removal. (No word on whether the city will find jobs for the unneeded workers, as Russia copes with an unemployment rate that is officially around 8% and unofficially estimated at twice that.) The air force maneuvers won't keep the capital completely flurry-free, says city government spokesman Igor Pergamenshik. "It doesn't mean Moscow will see in the New Year under green trees. There will be snow."

Time to Buy HQ?

Many investors have given up on real estate. But one group has been on the prowl for property: corporations. Fully 10% of commercial real estate transactions in 2009's first half were corporations acquiring office buildings, sometimes the very ones in which they were renters, according to market tracker Real Capital Analytics. That's up from an average of 2.3% earlier in the decade, when many businesses sold their buildings—leasing the space they needed—as property values zoomed. Among those switching from tenants to owners this year: Sotheby's, which bought back its Manhattan headquarters for $390 million; and video game developer Electronic Arts, which paid $233 million for the Redwood City (Calif.) headquarters that it had always leased. Jay Koster, president of Jones Lang LaSalle's (JLL) Capital Markets, says that with many companies sitting on cash and office-property prices at 25% to 50% below 2007 peaks, such moves make sense. If values bounce back, these buyers can sell and become tenants again, banking the gains.


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