Santa is contributing to the “dead weight loss” of Christmas. He should just bring us cash
‘Twas the night before Christmas, when all through the house, not a creature was stirring, not even a mouse.
But the quiet tears of economists broke the perfect silence as they pattered down upon their desks.
They gaze up at the decorations, the tree, the pile of wrapped presents, and only see waste, waste and yet more waste.
Those presents you see, are a fiscal failure in their eyes. The value the recipient attributes to them is almost certainly lower than the actual cost of the thing itself. And oh, how unnecessary and wasteful this whole charade is.
At least this is true if you go along with the concept of the “dead weight loss” of Christmas.
This innovatively heartless view of the festive season comes from a now classic essay that came out in 1993, and was clearly penned by Krampus himself, AKA Joel Waldfogel, a Yale economics professor.
Beginning his diatribe at the concept of present giving, Waldfogel concedes that economists are likely to condone the healthy macro-economic swell all the consumption of Christmas has on the economy.
However, despite this good initial cheer, Waldfogel immediately goes on to ignore the bigger picture and focuses on the innate inefficiencies Christmas throws up.
“A potentially important micro-economic aspect of gift-giving is that gifts may be mismatched with the recipients’ preferences.
“In the standard micro-economic framework of consumer choice, the best a gift giver can do with say, $10 is to duplicate the choice that the recipient would have made. While it is possible for the giver to choose a gift which the recipient ultimately values above its price – for example, if the recipient is not perfectly informed – it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash. In short, gift giving is a potential source of deadweight loss.”
Way to spoil Christmas Grandpa!
But Waldfogel goes on (and by now hopefully most of his relatives have left the room): “I find that gifts from friends and “significant others” are most efficient, while non-cash gifts from members of the extended family are least efficient and destroy a third of their value.”
What is wonderful about the essay is that Waldfogel is undeniably correct.
On the whole, having things chosen for you by other people is a ridiculously flawed system of accumulating useful/stimulating/enjoyable objects.
But of course it’s not really about that is it.
Imagine how gloomy Christmas would be if we exchanged nothing but money. People don’t use cash any more, we’d all be swiping funds across to each other using our smartphones.
That is the sort of stuff economists’ dreams are made of.
I expect old Waldfogel, if he can find any worth in music, enjoys this Christmas Song by Tom Lehrer, which includes the lines:
God rest ye merry, merchants,
May you make the yuletide pay.
Angels we have heard on high
Tell us to go out and buy!
Economists eh? The price of everything and the value of nothing.