Saturday, December 18, 2004

Christmas Curmudgens

BioMom and I are Christmas Curmudgens.

When people ask me what the Four-Year-Old needs, I say "nothing" and, in fact, she doesn't. Of course.

We have literally gotten her two gifts: a plastic tea set and some Norwegian-looking dolls from Ikea. All totalling about $15. Oh yeah, and the book Polar Express which brings the total to about $30.

HFRM1 totally spoiled the Four-Year-Old last night at our Christmas FFFN. She got to open four or five presents. When she unwrapped one to find a Gap box she exclaimed Its from the Gah-aap! coyly.

I think we've moved beyond the consumer-christmas tipping point. She no longer approaches each gift with unanticipated wonder and true appreciation. Its that version of rip open, register what it is, and move on to the next one. Alas.

On MPR the other day, they had a story on some Germans who are refusing to recognize Santa this year. I guess they have little signs with pictures of Santa with a line through it. They say that Santa is only associated with American Consumerism hence, missing the point of Christmas. They're hoping to revive the real St. Nicholas who, they claim, is a precurser to Amnesty International.

For my intro to microeconomics final yesterday, I had students analyze the following article from The Economist from December, 2001: The Deadweight Loss of Santa. The authors attempt to measure the loss associated with guessing people's preferences; something we're not very good at doing.

Every year, ties go unworn and books unread. And even if a gift is enjoyed, it may not be what the recipient would have bought had they spent the money themselves

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 what economists call a deadweight loss: a waste of resources that could be averted without making anyone worse off. In other words, if the giver gave the cash value of the purchase instead of the gift itself, the recipient could then buy what she really wants, and be better off for no extra cost.

They suggest that in America, where givers spend $40 billion on Christmas gifts, $4 billion is being lost annually in the process of gift-giving.

They claim that more efficient gifts would be cash or gift certificates. That way consumers can chose what they want, lessening the deadweight loss.

I wonder how The Four-Year-Old would feel about waking up to a tree with a few wrapped gift certificates underneath. We could just tell her that with the high prices of gas, and since the sleigh isn't yet a hybrid, Santa was attempting to carry a high value-to-weight ratio in his bag.

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