Deadweight loss of Xmas

Merry Xmas to you all, and our apologies for not feeding the blog lately. I have been struggling to complete my Phd. and Damien kept quite busy on other things.

Now, some explanations on the title of this post. I love economics especially when it achieves disputed and funny conclusions. In that respect, J. Waldfogel's paper on the Deadweight loss of Christmas is a must-read. The paper, published in the American Economics Review in 1993, reaches the conclusion that Xmas presents are detrimental to general welfare. The underlying idea is that  in a gift-giving system, "consumption choices are made by someone other than the final consumer". As Waldfogel explains, "a potentially important microeconomic aspect of gift-giving is that gifts may be mismatched with the recipients' preferences".

Check here for more (and thks to Econoclaste for the pointer).

Comments

[KNeefs]

"references to the deadweight loss of Christmas should be understood to equally apply to Hannukah and other holidays with gift-giving rituals" :)

Hilarious.

[KNeefs]

Perchance this is a post which wasn't meant to go on and on about, but the succes of e-bay's "sell your unwanted gifts"-project actually supports the author's point :)

[Chris]

Very convincing, if the value of a gift is to be measured in terms of utility to the recipient, which is in turn then to be quantified in monetary terms. However, there are (or should be) two further benefits from any gifts:
1, the feeling of generosity that the giver enjoys from his/her act of "altrusism".
2, the renewing or strengthening of the bond between giver and recipient, ie a net increase in "social capital" for both parties.

These are actually the primary motivations for the purchasing of Christmas gifts - very few actually meet a specific functional need. If these objectives are met, and if this success can be quantified, this factor should be included in the calculations. In particular, the net increase in that fuzzy, non-monetary utility known as "Christmas cheer" is not a zero-sum game. You may find that gift-giving is not such a waste of time and money after all.