A little while ago I wrote about Joel Waldfogel’s Scroogenomics; his short tome on the inefficiencies of gift-giving. I found the book’s existence and marketing ironic yet agreed with the whole notion that the activities of Christmas involve large amounts of waste relative to any joy. Interestingly, some economists have pushed back on the whole notion. The latest is John Kay in the Financial Times.
In the absence of such pervasive uncertainty about value, most trade in financial markets would not take place. Uncertainty generates most of the profits, and the problems, that we see in these markets. If there were really rational expectations, there would be no oohs and aahs on Christmas morning. Since parents and their children would be using the same model of the world, they could never surprise each other. But they constantly do. The anticipation children feel in the run up to Christmas is a key part of the excitement for them and their parents. Anticipation provides pleasure even if the outcome is disappointing.
And similarly Ed Glaeser:
Few are forced to give gifts. Even if the recipient doesn’t value that “singing fish” all that much, presumably the giver preferred bequeathing the present to keeping the cash. Why would an economist, who would never question private decisions to buy BMWs or bananas, have the confidence to see error in private decisions to give Christmas gifts?
But each, it seems to me, makes a classic non-economist error on confusion the whole with the margin. Waldfogel does not deny all gifts are wasted but has evidence that on average they are. But even if you don’t buy that, think of the margin: the gifts to distant relatives you hardly know and that are just part of the chore of Christmas. That is where the real inefficiency lies. Waldfogel is really arguing that the expansiveness of Christmas is limited and not that you should stop giving gifts to children whose happiness (or otherwise) you can watch.
Update: Then again, it might just be economists. From the WSJ,
Ms. Stevenson and Justin Wolfers, also of the Wharton School, gave a friend $150 to hire movers instead of helping him themselves. Harvard University economist David Laibson pays to have a driver pick up his sister from the airport rather than driving himself.