Did the Three Kings Bear Gift Receipts?

That $4 difference is attributable to the psychological value of a gift. The recipient experienced a thrill when he or she received the mug, which became the apple of their eye. Those who were offered a chance to buy a mug experienced no such thrill.

This shows that gift giving has the potential to generate tremendous positive value. If you select a gift that can arouse a sentimental response, then the recipient will value the gift far beyond its cost.

In 1998, economists John List of the University of Chicago and Jason Shogren of the University of Wyoming wrote "The Deadweight Loss of Christmas: Comment" in the American Economic Review, a continuation of Waldfogel's research. Their experiment was designed to identify the value that students at the University of Central Florida placed on gifts they received. The economists found, as did Waldfogel, that when students were asked to hypothetically value their gifts, the gifts appeared to be losers. But List and Shogren went beyond the speculation and allowed the students to auction off the items to other students. They found that students were much more attached to their gifts when confronted with the possibility of having to sell them. Students exposed their gifts to auction only if the minimum price they would receive was about 27 percent higher than the true cost of the gift. If that psychological value is applied to all gifts in the United States, then the net gain each year from holiday gift giving is about $123 billion.

That gain, of course, is not available if your gift is money. A dollar will always have a psychological value of a dollar. But a specific gift can deliver so much more.

This research leads to two observations. First, you shouldn't fret too much about the likely success of your gifts. College students are a noticeably unsentimental lot. If they become emotionally attached to mugs from the college bookstore, given to them in an experimental setting, imagine how much value a wife may attach to a gift from a beloved spouse, regardless of its exact nature. You may even get away with perfume.

Second, the latest psychological research is good news for Caspar and Balthazar. The frankincense and myrrh probably generated a textbook sentimental response in Mary and Joseph, as these substances were traditionally associated with kings. The arrival of the wise men may have been the first human sign to the parents that the outside world would recognize that their son was special.

Like the mug-loving college students, Mary and Joseph must have been enormously attached to their presents. According to legend, the poor carpenter and his wife never sold the valuable gifts, despite the family's financial needs. To this day, a case that purportedly contains the gifts of the magi is on display at a monastery in Greece. If the gifts truly were preserved for all time, it is probably because the human response to Christmas gifts has changed little since that first night.

khassett@aei.org

Kevin Hassett is director of economic policy studies at the American Enterprise Institute.