Spending Less on Gifts This Year? Congratulations

The research is clear: Americans are becoming less generous over the holidays. Not to sound too much like a Scrooge, but this is not necessarily a bad thing.

In 1999, Americans said they planned to spend $1,300 (converting to 2020 dollars) on holiday gift giving. In 2020, that amount was about $800. These numbers are based on Gallup data, but retail sales figures show a broadly similar pattern. From 1935 through 2000, gift-giving tended to rise with disposable income. Since 2000, gift-giving has fallen as national disposable income has risen.

In economics lingo, gifts have become an “inferior” good: Their quantity falls as income rises. Other examples of inferior goods include instant noodles or low-quality beans. Now — speaking strictly as an economist, of course — maybe Christmas sweaters and fruitcake should be added to the list.

These social changes are all the more puzzling with the continuing rise of online shopping. It is easier to buy and send people presents than it used to be, at least if you are so inclined.

One hypothesis is that Americans are simply getting less generous. Yet charitable giving is robust, so that’s probably not right.

An alternative possibility is that Americans are too rich for gifts to make sense. It’s not only that billionaires are hard to buy for; the rest of us are, too. You might think your friends already have most of the important things they need, so how can you buy them something meaningful at the margin? This logic doesn’t hold for all Americans, but perhaps the higher earners account for a big enough share of the gift-giving total that it exerts a downward pull on the numbers.