What’s the best Xmas gift?

According to Behavioral Economists (you know, the guys who say we’re predictably irrational), the answer is cash money.

Not just generic money … cash money.

Excerpted from: The Behavioral Economist’s Guide to Buying Presents

What is the single best possible gift? Cash money.

Money is the soundest gift for one simple reason: It guarantees that the recipient gets exactly what they want.

In 1993, economist Joel Waldfogel published a study with a title that only the Grinch could love: “The Deadweight Loss of Christmas.”

Deadweight loss is the term economists use to describe the gap between what we spend on something and what it’s actually worth.

Because people rarely know exactly what their friends and loved ones want, Waldfogel decided to ask a simple, slightly uncomfortable question: How much value do we waste every year by picking the wrong holiday gifts?

He concluded that gift giving “destroys” between a tenth and a third of the value in what we buy.

In other words, if you spend $100 on that Santa-red cardigan at Macy’s, chances are whoever gets it will only value your gift between $70 and $90.

Some groups had a better gift radar than others.

Grandparents, aunts and uncles had the worst sense of what to buy.

Friends and significant others had the best.

But ultimately, cash was just more efficient.

So if you’re feeling uncertainty, don’t guess.

Do everyone a favor and go with greenbacks.

If you want to seem a tad more thoughtful, make it a gift card.

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