This blog post is my reaction to the news broadcast “Episode 238: Making Christmas
More Joyful, And More Efficient” from the website Planet Money in the month
December of 2010.
I agree and disagree with many points in this podcast.
You cannot blame the author Joe Waldfogel of his book Scroogenomics, stating that the act of gift giving is very
inefficient. As we learn from the podcast, during the Christmas time there are
many cases of dead weight loss. This dead weight loss is similar to the rule of
economics that values are subjective. What is worth something to one person isn’t
necessarily worth the same to someone else. Gift giving on average in the US
around the Christmas season wastes $13 billion in value of these resources that
gifts are not used. This is very inefficient and is seen all the time that
people buy gifts just to give them not completely sure how the other person
will value it.
When you look at the season of Christmas, it ruins
the whole spirit that people, regardless of what they get, should be thankful
for what they have. However, you cannot blame economists for seeing this as a
problem because when one sees a problem that causes inefficiency, one wants to
correct this problem. When we learn of the podcasters experiment with the candy
bars they correct the inefficiency by letting the children trade. Here the
total wealth increases from the previous 50 average to a total wealth of 82. This
creates much more happiness in the room without the need for using any
resources. This shows efficiency because we maximized the happiness with the resources
(10 candy bars) that they had.
This podcasts displays the important of trade and
how efficient it really is. It allows no more “stuff” just more happiness
letting what some were not happy with, be happy because they got what was of
the highest value to them. As kids were interviewed about gifts they had received
for Christmas, many were displeased with the items they received because the gifts
had more value. This happened a lot to me in the past and it was not that I was
ungrateful for people thinking about me, it was just I really had no use for
some of these things others valued much higher than I did. However, it is a
good thing that many places have lenient return policies and people give the
gifts with the receipt so it may be returned, so resources do not get entirely
wasted.
Looking at it from the side of Christmas spirit,
this isn’t really what the holidays are about and I can see why many people can
get mad when one says that gift giving is inefficient. However, looking at this
from the economists side gift giving is very inefficient many times and that
people value their gifts differently so trading them for something else or
trading them back in the store to buy something else they like maximizes the
efficiency so there isn’t as much waste.
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