Joel Waldfogel, AER: The Deadweight Loss of Christmas. Much of the holiday spending is on gifts for others. Guessing of preferences of others is no mean feat; indeed, it is often done badly. Intrigued by this mismatch between wants and gifts, in 1993 Joel Waldfogel, then an economist at Yale University, sought to estimate the disparity in dollar terms. In a paper that has proved seminal in the literature on the issue, he asked students two questions at the end of a holiday season: first, estimate the total amount paid (by the givers) for all the holiday gifts you received; second, apart from the sentimental value of the items, if you did not have them, how much would you be willing to pay to get them? His results were gloomy: on average, a gift was valued by the recipient well below the price paid by the giver. The most conservative estimate put the average receiver's valuation at 90% of the buying price. The missing 10% is a deadweight loss.
Joel Waldfogel: Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays. Christmas Giving Is ‘Orgy of Value Destruction. Christmas is a waste of money because people who give presents overestimate how much recipients will enjoy their offerings. His findings use surveys of people about presents they received during a season that prompts about $65 billion of spending on gifts in the U.S. and a jump in retail sales in Europe and Japan. Giving more thoughtful presents is one solution for those close to you, and gift cards, which avoid the “stigma” of cash, are good for people you don’t know well and have an obligation to give to.
Edward L. Glaeser, NYT Economix Blog: In Defense of Holiday Gift-Giving. So as much as I admire Joel Waldfogel, I’m not joining his war against holiday gift-giving. I think humanity engages in too few costly displays of affection, not too many. I support the far more prosaic cause of making gifts easier to return or exchange. The ability to exchange provides an easy way of limiting the deadweight loss from giving, while still ensuring that the recipients have seen givers’ best stabs at matching their tastes.
Stephen J. Dubner, Steven D. Levitt, Freakonomics Blog: The Gift-Card Economy. We argue that gift cards in particular are a bad idea. Gift cards are known within the retail industry as a stored-value product: they store their value very well, and often permanently. The financial-services research firm TowerGroup estimates that of the $80 billion spent on gift cards in 2006, roughly $8 billion will never be redeemed — “a bigger impact on consumers,” Tower notes, “than the combined total of both debit- and credit-card fraud.” A survey by Marketing Workshop Inc. found that only 30 percent of recipients use a gift card within a month of receiving it, while Consumer Reports estimates that 19 percent of the people who received a gift card in 2005 never used it.
Carol Horton Tremblay; Victor J. Tremblay, AEL: Children and the economics of Christmas gift-giving. Waldfogel (1993) found a substantial amount of deadweight loss associated with Christmas gift-giving. Here it is shown that the Waldfogel study is incomplete and alternative models of consumer choice theory which better explain Christmas gift-giving are identified. Although the standard neoclassical and altruistic models predict no relationship between the population of children and per capita Christmas spending, a model is developed that includes non-pecuniary externalities and predicts that children have a positive impact on Christmas gift-giving. This prediction is supported by empirical evidence.
Greg Mankiw, Blog: The Economics of Gifts. People typically know their own preferences better than others do, so we might expect everyone to prefer cash to in-kind transfers. If your employer substituted merchandise of his choosing for your paycheck, you would likely object to the means of payment. But your reaction is very different when someone who (you hope) loves you does the same thing. One interpretation of gift giving is that it reflects asymmetric information and signaling. The act of picking out a gift, rather than giving cash, has the right characteristics to be a signal. People care most about the custom when the strength of affection is most in question. Thus, giving cash to a girlfriend or boyfriend is usually a bad move. But when college students receive a check from their parents, they are less often offended.
Alex Tabarrok, Marginal Revolution: Giving to my Wild Self: The economist in me says the best gift is cash. The rest of me rebels. … [W]e want the gift giver to buy something for us that we would not have bought for ourselves. Or more precisely, one of our selves wants this — the self that is usually restrained, squashed, and limited, the wild self, the passionate self, the romantic self.
Australian Conservation Foundation: The Hidden Cost of Christmas. While the financial cost of Christmas is commonly measured, the environmental cost of Christmas spending has not before been calculated. In this report, the Australian Conservation Foundation has used data developed by the Integrated Sustainability Analysis Team at the
University of Sydney to calculate the environmental impacts that have occurred in the production of popular Christmas gifts. Christmas is damaging the environment, says the report. Every dollar Australians spend on new clothes as gifts consumes 20 litres (four gallons) of water and requires 3.4 square metres (37 sq feet) of land in the manufacturing process, it said. Christmas 2004, Australians spent A$1.5 billion (US$1.1 billion) on clothes, which required more than half a million hectares (1.2 million acres) of land to produce.
Jennifer Steinhauer, NYT: He Delivers Christmas Trees for Rent. Scott Martin — landscape architect and tree hugger in a literal sense — was unnerved by the sight of post-Christmas trees lying about like so much discarded sausage casing. What people really ought to do, he reasoned, was rent a Christmas tree, and return it, alive, to the nursery after the season. Mr. Martin’s idea, enabled by a rotten economy that made his free time greater and his potential labor pool deeper, is now manifest in his new business delivering live, potted Christmas trees that are taken away once the toys have been unwrapped.
American Christmas Tree Association: Carbon Footprint Study Finds Artificial Christmas Trees Best for the Environment. Owning an artificial Christmas tree is healthier for the environment over a 10 year period than using real trees. The most significant contribution to global warming came from fossil fuel consumption in transportation of real Christmas trees from tree farms and lots to consumer homes.
David Lazer, Harvard: Inefficiencies of Christmas cards. Thomas Schelling, in Micromotives and Macrobehavior, notes the social inefficiencies of Christmas cards. He claims that cards are based on a system of obligations, and that once a card has been sent one year, failing to send one each subsequent years sends and active—and negative—signal. Tim Hartford, the Undercover Economist, reiterates this theme, and notes that the yearly lag for feedback (I send a card this year, and receive one in return next year) may create this trap. Instead of thinking of the card tradition as a forced system of obligations, however, suppose we look at it from a networks perspective.
Clement C. Moore, The Project Gutenberg: Twas the Night Before Christmas. A Visit from St. Nicholas. Twas the night before Christmas, when all through the house/ Not a creature was stirring, not even a mouse/ The stockings were hung by the chimney with care/ In hopes that St. Nicholas soon would be there (Pointer Economist View).
Clare Murphy, Kathryn Westcott, BBC News Online: The politics of Christmas cards. The venerable Abraham Lincoln was the first US president who saw political mileage in the Christmas message, and in the process, immortalised the figure of Santa as we know him. During the American Civil War, which pitted the slave-owning South against the government union of the North, the then president requested a political cartoonist, Thomas Nast, to illustrate Santa with the Union troops in an attempt to bolster their spirits. Mr Nast was the first to introduce a fat Santa in the now-traditional red suit and big leather belt. Seeing this jolly fellow side with the North was allegedly very demoralising for the southern forces. They lost not very long after.
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