Scroogenomics: Why you should scrap the presents and give cash at Christmas

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All I want for Christmas is… cash, because the gifts you buy me are worthless and it is harming our economy in the process.

Scroogenomics is a tough sell.

Yet Joel Waldfogel, U.S. economist, University of Minnesota professor and author of the 2009 book, 'Scroogenomics: Why you shouldn't buy presents for the holidays' has not wavered in his belief that the "orgy of wealth destruction" that takes place each Christmas needs to change.

Bah! Humbug!

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"I guess I'm kind of institutionalized now… but you know it's funny, over the years speaking about (Scroogenomics) I like to think I've gained a sense of wisdom about it all to help the discussion," Waldfogel told CNBC in a phone interview.

Scroogenomics proposes that only the recipient knows which goods would maximize their happiness. Therefore, Waldfogel argued it must be better to give someone cash as opposed to a gift as this removes the risk of dissatisfaction, guarantees the happiness of the participants involved and even leaves the economy in better shape too.

His phone rings every December with calls for explanations as to his somewhat controversial holiday theory.

Waldfogel estimated that U.S. consumers spend approximately $70 billion on holiday gifts every year and so, perhaps unsurprisingly, economists tend to agree the theory makes perfect sense.

ING Group found that almost one in four people in Europe received unwanted Christmas gifts in 2015 which goes some way to supporting the Scroogenomics way of thinking.

According to the Dutch bank's International Survey Special Report for Christmas 2016, around 81 million unwanted gifts were unwrapped on Christmas day in 2015; at an estimated value of €45 each ($48).

That's €3.7 billion which was effectively wasted on unappreciated presents last year with 10 percent of the European population even driving themselves into debt to pay for the gifts, ING's research suggests.

"Although more people are planning ahead and saving especially for Christmas, there are still some putting themselves into debt to please their family and friends, who may not even remember what they received a year later," Ian Bright, senior economist with ING, said in a note.

"There are many different ways to give at Christmas. Consumers may want to pause and think about the longer-term effect of their spending, before succumbing to pressure and purchasing expensive gifts that might go to waste," he added.

You give economics a bad name

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Whilst the economic theory is not disputed, Adam Button, economist at ForexLive, believes that culturally the concept falls apart.

"Ideas like Scroogenomics are why economists get a bad name. The idea that anyone is close to a perfectly rational economic agent is dead in financial markets and dying in universities," Button told CNBC in an email.

Button lamented the economic application of gift-giving as he suggested that the process would be much better explained by a psychologist as almost everything in the markets can be enlightened by psychology rather than mathematical formulas.

"Well, Scroogenomics is appropriately named," Kit Yarrow, consumer psychologist and author of 'Decoding the new consumer mind', told CNBC in an email.

Yarrow stressed that the essence of gift-giving focuses on the thinking behind the present as well as the time it took to find that perfect something to give to loved ones at Christmas time.

"We've been exchanging gifts since caveperson days because it can be meaningful and magical.

"Yes, there is research that suggests that picking out your own gift will ultimately make you happier – with the gift! (This) misses the point of gift exchanges. Ideally gifts are to enhance, celebrate (and) cement relationships - not just acquire goods," Yarrow added.

Warm fuzzy wisdom

Waldfogel is quick to detach himself from any claims that he has become synonymous with Charles Dickens' central character, Ebenezer Scrooge, in the 1843 novella 'A Christmas Carol'.

"It's an unfair caricature to say I want people to stop buying gifts of course… because people have warm fuzzy feelings from doing so. Stopping gift-buying is problematic because the warm fuzzies are no longer there," he argued.

In fact, Waldfogel proposed that he has come up with a solution so that consumers can practically go about getting a gift for loved ones, enjoy the 'warm fuzzies' of giving and ensure the economy does not have to pay the price in the process.

"The current gift-buying problem is not a problem with children, that's fairly easy. The problematic scenarios relate to the people you hardly know, like you might have a brother-in-law that you see once a year and that you now have to buy a gift for as its Christmas," Waldfogel said.

"What might be a much better thing to do is consider giving a gift card which doesn't have the same stigma as cash… or perhaps even a gift to charity in your brother-in-law's name. I mean… why would you get your brother-in-law a golf mug instead?!" he added.