This weekend's edition of the Wall Street Journal explored an interesting question: is Christmas good for the economy? The answer, according to most economists is a resounding no. They argue that the frenzy of gift-giving creates a huge amount of unwanted gifts and that if people simply bought stuff for themselves, we would all be a lot happier. According to a survey, more than two thirds of economists believe that if Christmas were abolished as a holiday, consumers would spend more on themselves. Wharton professor Joel Waldfogel suggests that "We'd be able to eke out more satisfaction from the amount of spending" if people bought stuff for themselves instead of relatives.

But what these academics may be forgetting is that much of the benefit of holiday giving is sentimental rather than material: receiving a box of chocolate that your doctor won't let you eat from your grandchildren is a lot more satisfying than purchasing the candy of your choice. Economists John List and Jason Shogren set up an auction where they offered students cash for their Christmas gifts. They asked students to place a value on the gift in two parts: first the material value and then the sentimental value. The study found that, on average, sentimental value accounted for around half of the total.

So what lessons can we take from these studies? If gift-giving is generally a poor way to allocate resources but we derive benefit from the sentimental value, maybe it really is "the thought that counts." And that's what I told my mother after she opened the bottle of knock-off Elizabeth Taylor perfume that I got her at the dollar store.