George Will discusses Joel Waldfogel's recently published book, Scroogenomics: Why You Shouldn't Buy Presents for the Holidays. This is based on his earlier article, "The Deadweight Los of Christmas." (PDF)
I joke in class that each Christmas my kids wake up to $20 bills taped all over the Christmas tree. The students greet this story with looks of bewilderment and appall. Certainly their reaction is based partly on my exhibiting disdain for this most sacred of traditions and symbol of contrived generosity. But it's also, I believe, a reaction to how they would have felt had their parents done the same to them. (NB: I don't really do this to my kids.)
Waldfogel notes (from his 1992 paper):
To develop a feel for the significance of the deadweight loss of Christmas, one may compare it with an estimate of the deadweight loss of taxation. Edgar K. Browning (1976) estimates the total static welfare cost of income tax to be about $50 billion dollars (inflated to 1992 dollars using the CPI)(MS: About $77 billion in 2009 dollars). Thus, the annual deadweight loss of holiday gift-giving is between a tenth and a third of the annual static welfare losses associated with income taxes.
But extracting income from me involuntarily is not always like Christmas gift giving. (And my wife would probably divorce me if I truly felt that it was.)
Too often we give gifts that include things we want or always wanted and not necessarily what the recipient wants. In other words, we're really gifting ourselves and using the recipient as the dupe for what really pleasures us. ("Look honey, I bought you a teddy.") The further removed someone is from my inner circle, the more likely this is to happen, at least for me. But there is great pleasure in me seeking out information about what my wife, kids, and maybe some closer relatives desire for Christmas and then surprising them with at least some of the items they desire (assuming they don't know exactly which of the things they asked for they are in the process of unwrapping).
There are therefore costs and benefits associated with gift giving that are not readily measurable, or at least monetized. The cost of seeking out what exactly the recipient wants is an additional cost of gift-giving, and the emotional pleasure of seeing the recipient happy and excited (genuine excitement and happiness, not the social graces of false appreciation noted by Will) by their new acquisition is the additional benefit. These items, too, must be included in the metrics of gift giving and they are too subjective to assess.
Kids are genuinely excited about almost anything they receive (though their true value from the gift measured by its eventual use may end up being rather small) because they would otherwise not have obtained the toy or game or whatever on their own. Adults, on the other hand, who could and would normally purchase what they really wanted on their own, tend to be less genuinely excited about a gift. I therefore tend to give gifts to younger kids and either cash or planned gifts (i.e., they tell me exactly what to purchase) to adults and older kids.
Will also points out the fallacy of the macroeconomic advantages from Christmas gift giving.
At least the Christmas stimulus strengthens the economy, right? Wrong, says Waldfogel. If all spending justified itself, we would pay people to dig holes and then refill them -- or build bridges to unpopulated Alaskan islands. Spending is good if the purchaser, or the recipient of a gift, values the commodity more than he does the money it costs. Otherwise, there is a subtraction from society's store of value.
This thinking is largely the product of failing to realize that the sole purpose of production is consumption. Job creation is not a virtue of government planning. It's also why fiscal stimulus spending and moronic ruses like the "Cash-4-Clunkers" program actually destroy wealth, not create it - they make us poorer, not wealthier.
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