Before making your list and checking it twice this holiday season, you might want to check in with Joel Waldfogel. Having researched holiday gift giving for nearly 15 years, the Carlson School's Frederick R. Kappel Chair in Applied Economics has discovered that we vaporize approximately $25 billion in economic value annually (about $14 billion in the U.S.) with our seasonal shopping selections.

Over the years Waldfogel, author of the critically acclaimed book, "Scroogenomics: Why You Shouldn't Buy Presents for the Holidays," has conducted surveys asking people about the items they received as gifts. For each of the items he has asked how much do you think the giver paid, what would you have been willing to pay to get that item, and what's the relationship between you and the giver? He's also asked about items the recipient would purchase for himself or herself.

Based on thousands of observations, his research has shown that, on average, people value the items they receive as gifts about 20 percent less (per dollar spent) than the items they buy for themselves.

"Normally when I spend $50 on myself, I'll only buy something if it's worth at least $50 to me. So normally, spending creates a reasonable amount of satisfaction," says Waldfogel. "The problem with gift giving, no matter how well-intentioned, is if you spend $50 on me and you don't know what I like and you don't know exactly what I already have, you could spend $50 and get something that's worth nothing to me."

Despite the lost satisfaction from holiday gift giving, Waldfogel doesn't advocate that it be abandoned. Instead he suggests taking a closer look at whom we buy gifts for.
"Not all gift givers are really poor at choosing gifts," says Waldfogel. "People who are in frequent contact with gift recipient do quite well. Parents do very well for their children and people do well buying for their friends and significant others. It's the people who are in infrequent contact with their recipients who are really at risk of destroying a lot of value."

An alternative to buying gifts for those you don't know as well is give them gift cards.

"Gift cards are wonderful in the sense that they give the recipient control over what to buy. They allow recipients to choose which item at the store he or she wants, but they do have this one significant problem."

That problem is that about 10 percent of all gift card value never gets redeemed. According to Waldfogel, of the $80 billion spent each year on gift cards ($30 billion at the holidays) an estimated $8 billion goes unredeemed and is realized as income by retailers or, in some states, is returned to the government treasury.

To prevent that from happening Waldfogel advises consumers to use gift cards quickly but wisely by storing all gift cards in the same location, keeping track of card balances, and/or looking for gift cards that send email reminders of the remaining balances.

Making a charitable donation in the name of someone on your gift list is another option to buying a gift.

"Holiday gift giving, as it turns out, is a necessity. In the taxonomy of necessities it's pretty close to gasoline more so that caviar," says Walfogel.

As for charitable giving, it turns out it's more of a luxury.

"You'd think transferring resources to very need people would be something that you wouldn't want to scale back on when your income goes down," says Waldfogel. "Ironically, in poor times charitable giving really takes a hit."

Research from Indiana University found charitable giving by individuals in the U.S. fell almost 6 percent in real terms between 2007 and 2009, a decline of about $10 billion. Where did that generosity go? To Waldfogel, the answer was obvious. After averaging $60-$65 billion per year in 2007 and 2008, holiday gift giving increased $10 billion in 2009, reaching $72 billion.