The first review

The first full review of The Value Crisis was just published in Tapestry Magazine (King Township, Winter 2015)  Reprinting it here gives me an open forum where other readers can post comments and feedback.  Please chime in!

reviewed by Hugh Marchand

"In The Value Crisis, Andrew Welch voices the concern – and examines the causes - that many of us have but cannot articulate as well as he does: that human values everywhere are decaying at an alarming rate.  And yet, collectively, we seem helpless or resistant to doing anything about it.  Why?  He adroitly sidesteps the blame games played by competing ideologies and economic interests and suggests instead a more fundamental cause – that we are witnessing the growing dominance of number-based value systems to the detriment of age-old human value systems.  Human value systems deal with quality of life, while number-based systems value quantity, and implicit in that is the possibility (and danger) of unchecked growth.

This is an elegant thesis that is launched through a series of simple questions that any uneasy person might ask.  An example: “Why does it cost more to repair things than to replace them?”  Reviewing all the questions piques our curiosity.  We want to know what it is that underlies this list of seemingly unrelated inquiries.

The author does not disappoint us; this is no stodgy economics text book, and anyone who suffers from math phobia has nothing to fear from this book.  The language is plain and jargon-free; technical terms where needed for understanding, are reduced to simple expressions.  Given the seriousness of the present situation as the author presents it, and the implications for the future, this is a surprisingly upbeat read.

The impact of undue reliance of number-based value systems is examined in detail in topics as wide-ranging as decision-making, international banking and currency, the unregulated power of corporations, and the erosion of our democratic institutions.  Welch brings to the discussion his interests and expertise in the arts, environmental and social issues, and his solid grounding in education, business and mathematics.  Throughout the piece his linking of personal anecdotes to the study of the larger issues provides remarkable clarity to what he has to say.

His objective is also clear, as evidenced by www.TheValueCrisis.com and the associated open blog:  To inspire discussions for a new way of considering the multiple challenges facing us.

The thrust of Andrew Welch’s book is to bring awareness of the coming and seemingly inevitable catastrophe.  His call to action is realistic and not devoid of optimism:  We cannot prevent what is coming, he states, but we can “ease the transition” and he cites examples of what can be done.  His speculation that a catastrophe may sweep away many elements of number-based value systems and improve the quality of life for many, is based on plausible economic theory.  This is a thought-provoking book that you should read, act upon, and share."

Thank you for that, Hugh Marchand.  My next major initiative is to offer book club sets to book clubs and libraries.  Book clubs are the perfect forum to find readers eager to discuss these ideas.  Having an author that is willing to attend their discussion night is even better!

David Welch meets Goliath Gladwell

Another reader wrote to me, having just finished The Value Crisis:

I have just also read 'David & Goliath' by Malcolm Gladwell. You would enjoy chapter two and its description of the Inverted U. I'm not sure how this might transfer to the world of money - although the book does give one or two limited examples. See what you think.

While I was familiar with Gladwell's interesting take on David and Goliath from a TED talk, I had not yet read his book, so I went to the library to read up.  Sure enough, some interesting ideas emerged.  (I confess that this post might hint at some hefty mathematical concepts, but I'll try to keep it simple.)

To briefly summarize Gladwell's presentation of an Inverted-U Curve, he was describing how one might graph the difficulty of parenting versus the wealth of the parent (see the graph below).  While it is easy to see that parenting is hard for a poor parent and gets easier as wealth increases, the argument is that parenting is also hard for very rich parents.  (This Deseret News article explains.)  So the graph goes up (towards easier parenting) as wealth increases, but then it reaches a peak and curves back down - thus the label "Inverted-U Curve".

This curve is presented to counter our intuitive assumptions about parenting getting easier as wealth increases - it is not the straight line graph that we might expect.  He suggests that the same curve would apply if we are graphing academic achievement against class size.  In other words, more of a good thing is not always a good thing.  This is something I talk about a lot in The Value Crisis.

(I don't know where the $75,000 figure came from for the graph's peak - Gladwell is notorious for letting the science take a backseat to a good story.  I note that other research talks about general happiness leveling off when annual income reaches about $75,000.  Perhaps this is an interesting correlation or perhaps Gladwell simply borrowed the same figure for his graph.)

The interesting thing for me about Inverted-U Curves is that they suggest there is often an optimal value for things.  In most situations this point is obvious, but we more often get tripped up when the horizontal axis is measuring a number-based value system.  In the monetary number-based value system, more wealth is always worth more.  So we assume that the same valuation applies to the qualitative human circumstances such as ease of parenting.  Not so.

The optimal peak value might also represent the concept of "enough".  However, I caution the idea that such values can be empirically determined and then used as human or policy goals.  The reality for most things in life is that they manifest themselves as polarities - unsolvable problems with no single optimum solution.  An example of a polarity in the business world is teamwork versus individual effort.  Neither is the optimum approach to work.  Sometimes we do better with one, sometimes with its opposite.

Here's another Inverted-U Curve, showing the business relationship between incentives for innovation and levels of competition:

With no competition, there is no incentive to innovate.  When competition is high, the cost of innovation can be detrimental.  So a business will be most successful when the level of competition corresponds to the innovation sweet spot, right?  Not quite.  Sometimes, innovation itself is bad for business, and a maintenance of tradition is the preferred strategy.  (Innovation and Tradition are two opposite poles of a polarity.)  Using the same forces at work in the above innovation graph, we can argue that incentives for maintaining tradition will be high when the competition is low and also when the competition is fierce.  There will also be a spot directly below the innovation incentive peak, where it will be most difficult to maintain tradition.

Overall, there is no sweet spot for level of competition.  Sometimes, the level of competition will increase the incentive for innovation, sometimes it will increase the incentive for tradition, and both can be good.

Malcolm Gladwell argues that more of a good thing is not always a good thing, and that sometimes, if we apply the right value system, we will discover optimal states - the concept of "enough".  The Value Crisis argues the same thing, but also suggests that we should be aware of what situations in life are polarities, with no optimal solutions.

The bottom line is that number-based value systems - where more is always worth more (by definition) - are incompatible with the qualitative natural values that are necessary to our happiness and continued existence on this planet.  Decisions that support the maximization of number-based values (such as wealth or sales or economic growth or volume of resources extracted) will eventually go way past the optimal point.

So here's the real question:  Why do we so blindly run our lives and our world in constant pursuit of maximization on the horizontal axis instead of on the vertical one?!

SMART Goals and Anecdotal Evidence

A reader who works as a teacher wrote to me the other day:

I thought of your book once again this week, in an all day meeting of our school leadership team.  We spent the morning confirming that there is much more to educating young people than just generating marks, and that just focusing on numeric measures was the wrong way to go.  And then we spent the afternoon talking about nothing but numbers.  Stupid numbers.  Like the TDSB Director's vision to decrease the number of students needing Special Ed support by 50%.  (Maybe they just need extra vitamins.)  And stupid comparisons of unrelated data, like the achievement of one group of 14-year-olds vs the achievement of an entirely different group of 14-year-olds a year later.  Actually understanding statistics has become a curse!

The Toronto District School Board (TDSB) comment got me curious, so I looked on the web and found their Years of Action: 2013-2017 report.  This document promises 36 separate actions, resulting in 102 different outcomes - most of which have numeric measurements attached.  Wow.  102 targets that the TDSB can be directly scored on.

Such targets are often referred to as SMART goals - goals that are (S)pecific, (M)easurable, (A)cheivable, (R)elevant, and (T)imelined.  Since The Value Crisis talks about how that which cannot be measured is dismissed in this age of scientific thinking, I started to wonder whether that also means that unmeasurable goals therefore 'lack validity' in modern society.

I'm guessing there are three reasons for making a goal measurable.  The first is so that you can track progress and see if you are doing the right things.  The second is so that you will know when you have achieved your goal and can celebrate accordingly.  The third (more cynical reason) is for promises made in the public sphere, so that you can prove to others that, despite appearances, your target has been reached, according to objective measure.  (This might be where classic manipulations of statistics come into play.)

But what if your goal can't be measured so easily?  What if your aim is to be a better parent or to be happier?  The experts would say that you need some way of measuring this.  I say that's nonsense.  If you didn't need a measurement to identify the need for the goal in the first place, you don't need a measurement to know if you are experiencing success.

(I tried to come up with a new M-word for qualitative SMART goals.  So far, the best that I've come up with is "Motivational":  If you are motivated to continue what you're doing, you are likely moving towards the goal that you desired in the first place.  Please make better suggestions!)

So if you're not measuring your progress by some quantifying means, what can you use for feedback on your goal?  Well, you might go with anecdotal evidence.  <Insert dramatic organ chord.>  Anecdotal evidence!  The mere use of the term immediately raises the hackles on statisticians' necks.  Well, I'm here as the Devil's Advocate to suggest that anecdotal evidence still has plenty of value when drawing general conclusions.  On the other hand, the scientific method, when applied inappropriately, can actually the lower value of information.

I'll illustrate this with an old story (an anecdote!) of three professors traveling on a train through a foreign land.  The historian, looking out the window and seeing a black sheep grazing alone on the hillside, says: "How interesting!  The sheep of this land are black."  The statistician looks out and says: "Well, to be more correct, what we know is that in this part of the country there is one sheep that is black."  The philosopher, without looking up from his book, immediately corrects him: "Actually all we can say for certain is that in this specific area there is a sheep which is black on one side."

Had I been in the next seat, I might have added my own quip: "Excuse me, gentlemen, but I believe the only conclusion you can draw is that, looking out the window of this train, an object was observed that looked like what you know of as a sheep, whose wool (at least what you could see) appeared to be very dark in colour."  The historian's statement could clearly be misleading.  The statistician tried to make a more accurate (and thus, presumably, more valuable) statement.  However, further refinements reduced what began as a simple observation to a meaningless statement, of no practical value to anyone.  So where does anecdotal evidence cross the line from being a scientific menace to being meaningful and useful information?

As a scientist, I am fully aware of the abuse heaped upon anecdotal evidence - and rightly so, when it is used to 'prove' things that can only be proved by more rigorous analysis.  On the flip side, one might argue that almost everything we know, as individuals, comes from anecdotal evidence.  We know that last year's vacation was enjoyable or that last night's movie was boring because that was how we experienced them.  We know that flying insects with yellow-and-black-striped bodies can inflict pain, either through personal history or from the anecdotes of others.  That might not be 100% true every time, but it is certainly very useful information.  Indeed, at one time, the entire store of mankind's knowledge was anecdotal and communicated through story-telling.  You may say that it was naive and imperfect, but if I were stranded in the wilderness, I would take the knowledge of our Stone Age ancestors over that of your average physicist any day of the week.

The very things that make anecdotal evidence suspect - such as our innate propensity to focus on exceptional events (confirmation bias) can have their own value.  For example, one adult, telling a child that they are clever enough to do well in school, can alter that child's self-esteem, willingness to work hard, and ultimately improve their academic performance, even if many other adults are providing only discouragement.  (I heard about that happening once, so it must be true. ;-)  Even medical researchers have to concede the validity of the placebo effect, in which measurable outcomes can be altered by our own beliefs in anecdotal evidence.

So where am I going with all this?

Our brains are wired to make use of anecdotal evidence, and while we sometimes get it wrong, I'll wager that it is (more often than not) useful and valuable information.  A single anecdote, such as being out of breath after climbing some stairs, can suggest to us that perhaps we are out of shape and need to exercise more.  If a few more pieces of breathless anecdotal evidence confirm this, we might set a goal to improve our physical fitness.  If we start being more active because of this and find that we can now take the same set of stairs two steps at a time with ease, then we there is no need for science to measure whether or not we have improved our muscle tone or cardiac output.  It is sufficient and rewarding enough for us to feel we have succeeded in what we set out to do and be happier for the effort.

Similarly, in life, if it is our goal to be happier (and who wouldn't want that?), then we don't need measurable 'SMART' goals to tell us if we are doing the right things.  As for my teacher friend, while you might want quantifiable studies to alter policies for the entire board, that does not change the fact that in a specific classroom, for a specific child, anecdotal evidence is the best proof available that what you are doing is working, or not.  So why does number-based policy so often trump anecdotal evidence for individual circumstances?

P.S.  If classroom marks were the truest indicator of value and potential, I wouldn't be here.

Taking Action - What Now?

Early feedback on my book sometimes bemoaned the lack of concrete actions given that can be taken in response to the value crisis that is posited by the work.  There are a number of reasons for this:  I did not set out to propose solutions - my objective of presenting civilization's greatest challenges from a new perspective was daunting enough.  I needed to first discover if my approach would have resonance with others.  Moreover, I didn't have specific actions in mind.  Frankly, my idealism surpasses my formal training or practical experience in global sociological change.

All that being said, if readers did accept my paradigm, I could not simply ignore the frustrating question of "So what do about all this?"

 

Indeed, I don't think it was ignored, but my responses may not have been very clearly spelled out.  For example, one of the consistent approaches that I adopted was to present each chapter topic in the context of a personal anecdote - often the event that inspired my original thoughts in the first place.  One could certainly derive actions from some of the behaviours described that I have found useful for myself.

Also, an important element of the book is the boxed text "Key Ideas" that appear throughout the work.  Reading through the summary of these ideas, listed after the Conclusion, it is not difficult to derive some specific actions that motivated readers could take in response the the value crisis.  Let's look at what some of these might be.

1.  ACCEPT that you can never maximize a number-based value such as wealth, so that is meaningless as a goal.

As Benjamin Franklin wisely said: "Money never made a man happy yet, nor will it.  There is nothing in its nature to produce happiness.  The more a man has, the more he wants.  Instead of filling a vacuum, it makes one.  If it satisfies one want, it doubles and trebles that want another way."  Money is a tool - a means to a goal of real value.  Determine what that real objective is for you, and pursue that instead.  By doing so, you define wealth sufficiency.  Let your standard of living determine your income, not the other way around.  Reducing the amount of money that you need will achieve happiness far more easily than trying to increase your income.

2.  RECOGNIZE that true values are specific to context, culture, and individual.  They cannot be translated into a number.

Make a conscious effort to stop thinking about value in terms of numbers.  Choose quality over quantity.  Don't measure your love for others by the amount of money you spend on unneeded gifts.  Yes, the plight of low-income families in the West is such that shopping at WalMart for cheap goods from China might be a necessity.  But those big box and dollar stores are also filled with plenty of well-heeled shoppers looking for bargains and deals.  Stripping resources for goods that won't last and filling up land-fills with single-use products shows no respect for the planet we leave to our children.  Instead of asking "How can I pass up on this great price?", ask yourself "Do I really need this item?"  I do appreciate the very human joy that can come from getting a great deal - we are all wired that way.  So try barter, borrowing and gifting with your friends and neighbours.  Those are real win-win transactions.

3.  SPEND your hours in ways that produce genuine non-numeric value for yourself and for others.

This is usually done through activities that number-based thinking would consider a “waste of time”. No, you don't have to start weaving your own clothing - unless that brings you joy.  You can start by simply repairing more things, reusing more resources, volunteer more, help out your neighbour, be productive in a non-quantitative way.  Such pursuits can truly be rewarding beyond measure.

4.  AVOID usury, debt of any kind, and false wealth creation by math alone.

Contrary to modern usage, the term "usury" actually applies to any agreed transaction where wealth is transferred without a corresponding addition of value or sharing of risk.  Money should represent a transfer or storage of real (past) value.  So don't borrow money from banks.  When you get a bank loan, it does not come from the money on deposit with the bank.  Instead, the bank creates this money from nothing, based on your signature.  Money borrowed from a bank represents future wealth that does not yet exist - wealth that must be created by society from nothing, just to cover the interest.  Buying now and paying later is not just a trick for instant gratification - that debt accumulates on our planet as well as on our account.  It is a mindset that will eventually destroy the ability for the planet we live on to cough up the balance that we need for survival.

5.  KNOW that corporations are driven by our actions.  If we change, they will too.

So change your actions.  Mining and petroleum conglomerates might be wreaking environmental havoc in search of profit, but the demand and the money come from us.  If we are willing to buy motion-activated plug-in air fresheners that spray chemicals into our living space, someone will make them.

6.  REFUSE to accept economic growth as a goal or even a measure of your government’s success.

Managing the economy is the job of the marketplace and the corporations.  They are both focused on growing the economy.  The mandate of government should be to represent our unquantifiable citizen values.  We must demand that governments end their false mandate of focusing on Consumer and Investor values. Citizen values must come first, not economic growth.  The first step is to measure Genuine Wealth instead of GDP.  This is an initiative that has been started all over the world and is being promoted by the UN.  Insist that your own governments start adopting those measures.

7.  VOTE out false democracies and flawed systems such as “first-past-the-post”.

Here's a bold claim:  Representative democracies are unfair and ineffective.  You'll have to read Chapter 9 to know how I backup that assertion.  That chapter also introduces the concept of a wikiocracy - believe it or not, they are already out there.  I suggest that we all try to support alternative systems that allow for increased involvement in decision-making for anyone who chooses to get involved.  Participative democracies are slowly being established in some forward-thinking municipalities.  Make yours one of them.

8.  START your own transition now, before the system collapse does it for you.

The crisis is coming.  I can't tell you whether it will be an economic collapse or an energy shortage or an environmental disaster or all three.  But maintaining the current system is impossible.  Why wait for the rug to be pulled out from under you?  The good news is that achieving greater self-sufficiency, neighbourly interdependence, community resilience, and human value prominence can give us a higher quality of life right now.

There, that should get the some of the conversation started...!

The Stray Coin

Early in the writing of The Value Crisis, I was trying to wrap my head around different behaviours that I was observing in myself and others.  It seemed to be that some people used number-based value thinking more than others, and I tried to find a simple way to illustrate this and perhaps even test for whether or not they were "Quantifiers" or not.

I have since abandoned the idea of trying to divide people into "Quantifiers" and "Qualifiers" in preference for the Value Personae theory that I based on the work of Robert Reich.  In Supercapitalism, Reich described different mindsets that we operate under: the consumer/investor and the citizen.  In Chapter Ten, I consider these as three distinct versions of what I call our value personae, and explore how they operate in an individual and collectively at the societal level.

Still, one scenario (that didn't make it into the book) remained as a useful way to consider these different behaviours.  It went something like this: 

You’re walking down the street on a sunny day with no one else around, when you glance down at the clean sidewalk and see a shiny dime.  Do you pick it up?  If your answer would be “Yes”, would you also pick up a nickel or a penny?  If you said “No” to the dime, for what coin denomination would you stop and pick it up?  If your original find were two nickels, would that change your answer?

I posed this series of questions to a number of people, and two distinct styles of decision-making emerged.

Sometimes, their decision to stop and pick up the money depended on how much money was there.  If they said “No” to the dime, then we would move on to increasingly larger values of cash until they said “Yes”.  In such instances, each one of these people had a tipping point – a numeric value at which their answer changed from “No” to “Yes”.  Of course, there are other factors, such as multiple coins versus a single coin, for example, that might affect their tipping point.  (Someone who would pick up a dime might not bend down to retrieve ten pennies.)  Their choice might also change if they were the ones that dropped the money in the first place.  However, the key point is that these people were always making a number-based decision.  A lower face value lowered the beneficial value of the act itself, resulting in a decision to leave the cash where it was and keep walking.  If they came across a sufficiently higher face value, the value of the money and the act of picking it up both increased in direct proportion, and a different choice was made: to stop and pick it up.

While this relationship between monetary value and likelihood of picking up a coin seems simple enough, a near-equal number of friends gave very different responses – saying they would pick up any coin, regardless of the amount.  They explained that for them this was not a number-based decision at all, but was related to a personal value:  sometimes the joy of finding something for nothing, or a belief in the luck acquired by picking it up, or an aversion to waste, or an attraction to money of any amount.  The act of picking up the money had real value to them, which was not necessarily determined by the quantifiable value of the money itself.

This inquiry is not so much about dividing people as dividing behaviours in a specific situation.  Of course, if we switch the question from a coin to a bill, then it probably becomes a number-based decision every time for everyone.  However, for the original coin example, there is no question that two types of decision-making were used:  Some said they based their decision on coin value, some said they didn’t.

The first type provides an example of how a strictly numeric value scale can be incorporated into a personal value system used to make everyday choices.  There is a direct, mathematical relationship between the face value of the money lying on the sidewalk and the decision of to the passer-by to pick it up or not:  “Is it worth my effort to stop, bend over, and retrieve the coin?  Hmmm.  What is the coin worth?”  Almost unconsciously, they are placing a monetary value on the interruption to their walking, doing a quantifiable comparison, and making a math-based decision.

Being an example of those who used the second type of decision-making, my reasoning is quite different.  In fact, I also pick up screws, lock washers, anything I see which might be useful.  I hate to see perfectly good objects just tossed aside, and I enjoy being able to later head to my collection of nuts and bolts and find just what I need at that moment.  My retrieving a coin is less about adding to the value of my pocket contents and more about satisfying a need to file the coin where it belongs – with other coins!  I have also met a few people who choose not to pick up coins – not because the money is not worth it, but because they believe the money should be left for those who might need it more.  This is a different, non-numeric value being expressed.

I started my little stray coin inquiry because I was curious about the prioritization of number-based value scales in individuals.  I had already theorized that society was demonstrating an increased tendency to look at the numbers first and apply mathematical judgements to arrive at value choices, so I wondered if certain people had similar tendencies.  It seemed to me that certain acquaintances were not just better with numbers - they seemed to more readily use number-based values when thinking about things like cars, real estate, whatever.

I don't think anyone exhibits pure number-based thinking.  Picking up a quarter and picking up twenty-five pennies are never exactly the same thing; other factors come into play.  On the other hand, most businesses will accept a twenty-five cent payment in either form.  (Not that we have pennies in Canada anymore...)  This particular trait of pure number-based values being found in business entities - especially publicly-traded corporations - is thoroughly examined in Chapter 7 of The Value Crisis.

And thus, my stray coin experiment is now relegated to this blog, but it has not been abandoned entirely.  I still think it is a useful way to illustrate different styles of decision-making, and it is still a wonderful way to open up the conversation about number-based values.

So, what coins would you pick up?  And more importantly, why?

The Gift of the Economist

This post is inspired by Michael Sandel’s What Money Can’t Buy: The Moral Limits of Markets.  Let me begin by saying that Sandel teaches "Justice", Harvard University's most popular course ever, and if you watch one of his lectures (which is easy to do), you will immediately know why.

In What Money Can't Buy, Sandel provokes some important questions about how we have moved from a market economy to a market society, where anything and everything is for sale.   Today we look at "The Case Against Gifts" and "Monetizing Gifts" (pp 98-107).

The economist's case against gifts is simple: it is not a rational social practice.  Sandel (who I should point out is not promoting this idea) outlines it in this way:

From the standpoint of market reasoning, it is almost always better to give cash rather than a gift.  If you assume that people generally know their own preferences best, and that the point of giving a gift is to make your friend or loved one happy, then it's hard to beat a monetary payment. [...] Your friend or lover can either spend the cash on the item you would have bought, or (more likely) on something that brings even greater pleasure.

A great champion of this view is Joel Waldfogel, an economist at the University of Pennsylvania.  I started my review of Waldfogel's work with his 1993 article The Deadweight Loss of Christmas.  The essential message is that gifts are a poor way to maximize utility for the recipient (econo-speak for "make them happiest").  Assuming that the greatest result is achieved by purchasing exactly what the recipient would buy for themselves, anything less represents money spent that does not return full value.  He estimates that this typically ranges between a 10% to 35% drop in value.  In 2009, he presented his case in a more popularly accessible book: Scroogenomics: Why You Shouldn't Buy Presents for the Holidays.

Reading over the book's Table of Contents, I thought I might personally find his arguments very appealing.  In the interests of full disclosure, I hate Christmas gift-giving.  But if you expect Waldfogel to condemn the rampant consumerism of this multi-billion dollar holiday, you might be disappointed.  His take is still that of an economist, trying to maximize utility.  More on that in a moment.

Back to the original book, Sandel points out that a contributing factor to cash not being a popular gift is the stigma attached to simply giving money. It has a lazy, uncaring connotation.  Alas, the recent and fast-growing trend of gift card giving seems to be blurring that distinction.  The recipient knows exactly how much money was spent on the gift, but now it seems slightly more personalized - that single step from cash makes it more socially acceptable.  And if the recipient really doesn't like the retailer featured, there are websites that allow you to cash them in - at a discount that presumably reflects Waldfogel's value drop (as well as the profit margin of the middle-man).

And yet, imagine the perfect economist's world of the utility maximization through giving cash.  Christmas rolls around and I give my good friend a $100 bill, and my friend gives me a $100 bill.  So what?  And what is the message when the amounts are different?  The kiss of death for this practice, for me, is the attachment of a number to the exchange.  When the value of gift-giving is expressed and measured as a number, you introduce all of the awkward baggage that comes along with number-based values - baggage that is derived from the unique properties of numbers themselves.

Numbers are linear, consistent, and universal.   Ten is always greater than five, and always by the same amount.  If the value of a ten-dollar gift is measured by number alone, then a ten-dollar gift will always be worth twice as much as a five-dollar gift.  When the gift is cash, there can be no other value than a numeric one.  So far, Waldfogel would not only be in complete agreement - he wouldn't see the problem.

I believe the fallacy of this entire line of inquiry is in the primary objective of utility maximization.  I propose that, at its most important level, that is NOT what gift-giving is about.  The giving of a gift is a communication between two people. The message conveyed is derived from many factors, only one of which may or may not be the monetary cost of the gift.  No matter how much your girlfriend wants to lose weight but can't afford the fees of her favourite weight loss program, I don't recommend picking up the tab for her with a gift card to a weight loss clinic.  When was the last time you received a hand-made birthday card and bemoaned the fact that the giver may not have spent a dime of money on it?

I contend that when I give a gift, I am not trying to maximize utility by giving the recipient something that I know they would have spent the money on anyway, given the cash.  Think about the most 'successful' gifts you have ever received.  How many are measured by their monetary value?  Are they things you would have bought for yourself anyway?  Or are they instead powerful expressions of love and thoughtfulness based on what went into their creation or selection?  Many great gifts are 'luxuries' that the recipient might never have spent their own money on, or they might lead to discoveries of new interests and pleasures.

One of Waldfogel's areas of research was the correlation between the closeness of the relationship between giver and receiver, and the resulting value drop.  Not surprisingly, the more remote the relationship, the less likely that the value of the gift to the recipient will match the money spent.  If Aunt Gloria doesn't know you very well, her selection of the dollar-store crockery and butterfly cardigan might not be a hit on Christmas morning.  In such cases, it might be more appropriate to give the gift card or cash.  I would agree with this, because it is also a more accurate reflection of the real message behind gift: "I feel I should give you something, but I don't know you well, so I'm not going to pretend that I do."  Personally, my preference in such cases is to either give a tasteful consumable, such as the ubiquitous bottle of wine, or to not give anything at all - which to me seems more honest.

Fans of "The Big Bang" TV series may recall the episode where super-geek Sheldon Cooper goes out and purchases several gift baskets at varying prices so that when he receives a Christmas gift he can reciprocate with a matching monetary value.  When Penny from next door gives him a signed paper napkin used by Star Trek icon Leonard Nimoy, Sheldon is overwhelmed and gives her every basket in his possession - and it still isn't enough.

The old adage is that it's the thought that counts.  I hope this gives you something to think about.