Stop blaming Grandma for cruddy Christmas presents

A LITTLE over 15 years ago I began carping about the wastefulness of Christmas giving. I was not concerned about how much we spend — now around $65 billion per year in the U.S. — but rather its sloppiness.

In contrast to our usual purchases, which we make when we expect more than a dollar in satisfaction per dollar we spend, gift purchases typically generate far less satisfaction, per dollar spent, than choices we make for ourselves. Givers don't know what recipients want and hence often buy things that recipients don't want, don't need, and actually value below what they cost.

Over the years I've done many surveys on people's gifts and things they had purchased for themselves, and I've learned that we value items we receive as gifts at 20 percent less, per dollar spent, than the items we purchase for ourselves. These poor gift choices turn holiday spending into an orgy of value destruction. In the U.S. alone, ill-chosen Christmas gifts banish about $13 billion per year to economic oblivion. Worldwide, the number is twice as large.

As givers, the worst offenders turn out to be the extended family members. While friends and siblings and even parents do pretty well choosing things for us, grandparents, aunts and uncles, and in-laws do not. They insist on buying us candles, ill-fitting sweaters, cuff links and other things we don't like so much. For more than a decade, reports on my research have generated chuckles at Grandma's expense. But I'm feeling a little guilty about this because it's really not Grandma's fault.

A basic tenet of economic theory is consumer sovereignty, the notion that we are best suited to make our own choices. Despite alarming evidence that people make bad choices — think obesity, Madoff investors, subprime borrowers — it remains true that we are best situated to choose which sweater or CD we actually want. If the goal is to find things that we like, relying on gift givers is about as effective as going shopping after drinking a quart of eggnog or sustaining a nasty head injury. Not surprisingly, the less information people have about our needs and wants, the worse they do at making our choices.

In some of my surveys, I've asked about frequency of contact between givers and recipients. This turns out to be important. Givers in daily or weekly contact know more about their recipients. Consequently, they fare much better as givers, and their gifts produce about 15 percent more satisfaction per dollar spent.

And which givers are, at best, in monthly or yearly contact with their recipients? I'll give you a hint. It's not friends or siblings or significant others or even parents. It's aunts, uncles, and — you guessed it — Grandma.

The reason Grandma does a poor job isn't because she's dumb. She has seen a thing or two. Like World War II, Jefferson Airplane, and your mom's or dad's diaper rash. The reason Grandma gives you lousy gifts is that she doesn't see or hear from you often enough to know what you like. And it's not that she's been dodging your phone calls or claiming to be too busy.

So with Christmas around the corner, give Grandma a call or, better still, pay her a visit. First off, it's the right thing to do. But if that argument doesn't motivate you, keep in mind that she's going to buy you something anyway. It could be a candle, it could be a kaleidoscope, or it could be an iPod Touch. If only you let her know you a bit better.