Even for an economist, it is the act of giving that matters, writes Tim Harford
Merry Christmas!
And Merry Christmas to you.
I was expecting a bit of “bah, humbug” from an economist, to be quite honest.
I am not sure why that is. Economics is all about the allocation of resources, and so is Christmas. Is it any wonder that economists give such excellent Christmas advice?
Have you been drinking?
Just a small sherry. But I’m quite serious. Economists are totally with the programme at Christmas. For instance, you know this infuriating problem of the Christmas decorations going up in November?
We’ve all noticed that.
Obviously that has something to do with making money, and I had assumed it was a zero-sum game between stores, each worried that its rivals might grab a slice of Christmas shopping before it had its own decorations up. In fact there’s more to it than that: the economist Emek Basker has discovered that the longer the Christmas season lasts, the more people will spend – about a fiver a day.
How did she figure that out?
In the US, the Christmas season can be as short as 26 or as long as 32 days, depending on Thanksgiving. Compare the date of Thanksgiving with data on Christmas spending, and there you have it.
Well, that’s not really advice, it’s more an explanation of why Christmas is so exhausting.
True enough. But there is good advice to be had, in particular about the perennial problem of what sort of Christmas presents to buy.
This isn’t that “deadweight loss of Christmas” thing again, is it?
Yes it is – all thanks to the economist Joel Waldfogel, who conducted surveys of the Christmas and Hanukkah gifts his students had received, and discovered that the gifts were poorly chosen.
And the conclusion is, give cash instead. Very Christmassy.
I don’t think that’s the right conclusion at all, although it beats the usual cop-out, which is to give vouchers. These are a truly dreadful idea. Quite apart from the seasonal risk of being an unsecured creditor to the latest high-street bankruptcy, these vouchers very frequently end up thrown in a desk drawer and expire unused. Jennifer Pate Offenburg, yet another economist, tracked the resale value of gift cards on eBay. Unsurprisingly they trade at a discount that tells a sad tale of Christmas waste. And the most wasteful cards – the ones that trade at a discount of 20 per cent or 25 per cent – are the most apparently romantic ones, for jewellery or lingerie. Gift cards for Home Depot and Starbucks fare better.
You’re not helping.
Of course I am helping. The message is clear: don’t give gift vouchers, because they manage to be both sterile and inefficient at the same time. But you should also be realistic about your gift-giving prowess. If you don’t know the recipient terribly well then you are unlikely to do a good job. Waldfogel finds that gifts from boyfriends and girlfriends tend to be well chosen. It’s the gift from grandma that tends to be hopeless – and that’s because grandma doesn’t see you very much. And whose fault is that, eh? Grandparents should give cash. It’s entirely appropriate under the circumstances.
But hardly in line with the Christmas spirit.
I don’t think it’s particularly out of line with the Christmas spirit, either. And we economists are totally in tune with many people’s anti-consumerist queasiness about Christmas. If you buy a present and the present is unwanted, those are real resources that have been wasted – energy, hard work, time and materials. That’s best avoided. (And incidentally, Christmas consumerism is not a new phenomenon – relative to the size of the economy it has been remarkably constant for the past hundred years or so.)
But you are missing the entire point of these gifts – their sentimental value.
Fine. Let’s talk about sentimental value. Do you think the joy of giving and receiving is correlated with the sum of money that is spent?
Of course not. What a crass suggestion.
I agree with you. But then the conclusion is clear: your gifts should be as inexpensive as possible, because the waste from poorly chosen gifts is far smaller if the gift itself is small. But the sentimental value can be just as large – especially if the gift itself is chosen with the specific aim of reminding friends and family of that emotional bond. In short, it is not the gift but the act of giving that matters. The Ghost of Christmas Present would surely concur. God bless us, every one!
Also published at ft.com.
Correction: Emek Basker is a “she”, contrary to an earlier version of this article. Apologies, and thanks to commenter SU below.