The psychology of bad gifts

The Life: If you have ever received a useless gadget, a horrendous tie or some kind of bowl, you will know that when people buy Christmas presents, they can blunder badly.

The economist Joel Waldfogel describes the holiday season in America as an indulgence in value destruction. Luke MacGregor / Reuters

If you have ever received a useless gadget, a horrendous tie or some kind of bowl, you will know that when people buy Christmas presents, they can blunder badly.

Chances are high that whatever you get people this year - whether for family members, corporate contacts, or office colleagues in a "secret Santa" exchange - some of them are not going to think the gift is worth what you paid.

Joel Waldfogel, the author of Scroogenomics, finds that Americans spend about US$65 billion (Dh238.75bn) on winter holiday presents every year - and that many of those billions are wasted, because people don't like what they get. Typically the value of a gift, to the recipient, is about 20 per cent lower than its cost. He describes the holiday season as "an orgy of value destruction".

Corporate gift giving or office gift exchanges are notorious for being unappreciated.

Mis-giving is a problem for givers as well as recipients. In a survey, the average respondent was found to give 23 presents every holiday season. Gift-giving can also take an economic toll. Personal debts tend to jump after December.

Here are some tips for gift-givers, building on six behavioural findings that bear directly on holiday-season mis-giving.

Egocentric bias

If you have an exaggerated sense of how much other people are like you, you probably think their tastes are closer to yours than they actually are. Beware of thinking other people will like what you like.

Focusing illusion

When people focus on a product or an activity, or on a single feature of a situation, they tend to think that it matters a lot more than it does. For example, people in both California and Iowa have been found to think that people in California are happier than those in Iowa (which isn't so). The reason for the mistake is that people focus on the most salient difference between California and Iowa, which is the weather, even though a warmer climate doesn't much affect people's happiness. The same can be said about holiday gifts. Give serious consideration to gifts that people will actually put to daily or at least weekly use.

Projection bias

When people are hungry, they tend to order too much food. People project their current emotional state into the future and thus underestimate the magnitude of the change. On frigid days, people buy clothing that is needed in cold weather. The return rate is unusually high for cold-weather products bought in low temperatures. For gift-givers, the lesson is clear: don't be unduly influenced by how you feel on the day that you happen to be shopping.

Optimistic bias

Human beings tend to be unrealistically optimistic. Most people think they are better than the average driver. When people give presents, unrealistic optimism goes off the charts. We are often amazed that people don't love what we've selected.

Cumulative-cost neglect

People often borrow too much because they neglect the cumulative costs of individual expenditures. If you use your credit card to buy 20 sensible gifts, you might be alarmed by the total expense. When gift-givers don't keep at least a rough running tab, they may find that they have spent a lot more than they expected, or even can easily afford.

Spotlight effect

If you are like many others, you will think people are watching you far more carefully than they are. In one experiment, students were asked to go into a classroom wearing a shirt with a picture of the singer Barry Manilow on it. Those who wore the shirt greatly exaggerated the number of people who noticed the picture. Most people didn't.

For the holiday season, many of us focus too intensely on how others will react to what we get them, when it may be the mere existence of the present, rather than what it is, that most matters.

Cass Sunstein is the Felix Frankfurter professor of law at Harvard University

* Bloomberg News