The Deadweight Loss Of Chistmas

December 24, 2003 11:49 AM

Some economists debatewhy we can and if we should give gifts for Christmas. Because a gift is likely to be valued less by the recipient than for the giver, Christmas has been considered by some to be a "deadweight loss" equivalent to tearing up banknotes. To get around this, other economists propose that the value of the gift for the recipient comes from the process of finding a rare gift. On the other hand, perhaps this is one case where we should rethink the basic rationality assumption that economic decisions can be explained by models that maximize individual wealth.
posted by KirkJobSluder (24 comments total)

Quite seriously, this is why I am delighted that gift certificates/stored value cards were invented.

Because it goes both ways. I have such obscure and specific tastes that all but the people who know me best are sure to get me stuff I neither want nor need. And I generally feel that, no matter how I've struggled to find the perfect thing, the risk of making an expensive blunder is high.

The obvious ways around this - giving cash, asking beforehand for a specific gift assignment - feel even drier to me, even less special. Maybe it's a dodge to lock one into spending money at (say) Borders, but it at least feels like a gift.
posted by adamgreenfield at 12:06 PM on December 24, 2003

Economists must be poor gift givers.
posted by Keyser Soze at 12:10 PM on December 24, 2003

What if I make gifts of random stuff lying around my house, which I find quite useless and got for free?

Further, what if the recipient really likes my junk? (!)
posted by troutfishing at 12:28 PM on December 24, 2003

As someone who has studied economics, it seems like they're missing something fundamentally obvious. I have always thought that a large portion of the value of a gift was to the giver, in the form of satisfaction/joy from a charitable act. So both the giver and recipient derive welfare from the gift and the act of giving.

In the course of their inquiries, researchers have discovered that women are much more involved in gift giving than men.

To me that just indicates that a woman is more likely to derive personal benefit from the act of giving than a man is.
posted by saintsguy at 12:39 PM on December 24, 2003

the basic rationality assumption that economic decisions can be explained by models that maximize individual wealth

Actually, the basic rationality assumption is that individuals maximize utility, not wealth.
posted by Quinn at 12:41 PM on December 24, 2003

What about externalities? A gift contributes to the party mood.
And, yeah, why is not the host ordering the food from McDonalds?
posted by MzB at 12:55 PM on December 24, 2003

Does this mean you got crappy Christmas present?? ;)
posted by Civa at 1:47 PM on December 24, 2003

This is finest example I've ever seen of why Economis is called 'The Dismal Science'.

But, you know, if an American economist were to even hint at the possibility that a 5-10% annual increase in Christmas-period purchases was NOT good for the economy, he'd be branded a Terrorist and dumped in Saddam's spider hole until Groundhog Day 2009...
posted by wendell at 1:47 PM on December 24, 2003

> the basic rationality assumption is that individuals maximize utility, not wealth.

But "utility" in all its possible forms can be so hard to quantify, and wealth is so easy. So all those PHd candidates who have to build quantitative models say OK, as a first approximation we'll just assume wealth = utility and proceed from there. Then for the rest of their careers they just tinker with their equations and never revisit their assumptions.

That's how we get to the notion that a tree has no value except stumpage.


> if an American economist were to even hint at the possibility that
> a 5-10% annual increase in Christmas-period purchases was NOT good
> for the economy, he'd be branded a Terrorist and dumped in Saddam's
> spider hole until Groundhog Day 2009...

There are actually a few of us right-wing Puritans who feel exactly thus, and the Walmart brownshirts haven't come to get us yet. Tomorrow is another day...
posted by jfuller at 2:06 PM on December 24, 2003

So all those PHd candidates who have to build quantitative models say OK, as a first approximation we'll just assume wealth = utility and proceed from there.

No they don't. I'm curious as to which papers you are talking about. Just about every model I saw in graduate school began with utility maximization. I don't ever recall hearing lets assume wealth=utility. Under utility maximization it is possible to add altruism, a labor/leisure tradeoff in order to model the labor market, risk/return tradeoffs in asset pricing, and other features.
posted by Quinn at 2:52 PM on December 24, 2003

I find Christmas a stressful time of year, especially when I feel obligated to buy a bunch of stuff people don't need for relatives I barely know. I even find getting gifts to be stressful since I'm a picky pain in the ass.

It's amazingly hard to not buy gifts for Christmas. I called all of the relatives this year and explained that because I was going back to being a full-time student that I wasn't shopping for Christmas this year, and I requested that they not buy me stuff either since there was nothing I needed. They all basically ignored me and sent me presents anyway, which made me feel a bit bad.
posted by answergrape at 2:55 PM on December 24, 2003

wendell, nice gift, thank you!
posted by MzB at 3:35 PM on December 24, 2003

I understand exactly what you're saying answergrape - my partner and I are trying to sway our respective families into giving and expecting more relaxed gifts. Our gift to just about everyone we know has been putting on a BBQ party on Christmas Eve, and giving everyone plates of munchies we've made (rum balls, shortbread, white christmas, you know the deal). This is the 2nd year we've done this, and people actually really appreciate it. We still get some standard presents in return, most most people know all we expect from them is to bring some drinks and a salad along to the party. Wouldn't the retail sector have fifty fits if this kind of deal caught on?
posted by Jimbob at 4:30 PM on December 24, 2003

if an American economist were to even hint at the possibility that a 5-10% annual increase in Christmas-period purchases was NOT good for the economy, he'd be branded a Terrorist and dumped in Saddam's spider hole until Groundhog Day 2009...

I once heard on the radio that it takes the average person two months to "financially recover from Christmas", which might offset that puchase increase benefit somewhat.

Wouldn't the retail sector have fifty fits if this kind of deal caught on?

I figure somewhere there's a marketing exec slamming his head against the wall over me. I make almost all my presents. For instance, my oldest brother and his wife are getting pencil portraits of their four children, done from the kids' most recent school pictures. (I did buy the plain, inexpensive frames.) My nieces and nephew are getting clothes made from yarn and fabric I had sitting around. An economist can't begin to analyse that exchange.
posted by orange swan at 4:55 PM on December 24, 2003

Isn't the entire problem here much more basic: that is, what exactly is a "gift"?

If a gift has strings attached, "consideration" as it is called in business law, then it is no gift. Consideration may be tangible or intangible, it may be the expectation of receiving something back or in return; or, importantly, a "gift", given repeatedly, *may* become a legal entitlement--the giver may be required to continue giving.

Even emotional satisfaction or recognition may constitute consideration.

So, with these criteria, and with a gift to give, what do you do with it, ideally?

* You cannot demand performance in exchange for the gift. You just have to let the receiver do with it as he or she chooses: to use it wisely or well, or foolishly, or even to ignorantly discard it.

* You cannot expect any recognition as the giver--the gift must be anonymous, avoiding the sometimes awful emotional baggage that takes the joy away from a gift.

* You cannot even choose the recipient, because you will impact them in the future about the gift: if they like it, you will want credit; if they despise it, you will feel hurt; and either of these feelings will change your relationship with the receiver.

So, in the final analysis, true "gifts" are only very rarely given. So instead call what happens on Xmas morning "swaps", "trades", "passive-aggressiveness", "projection (in the psychiatric sense)", and "expectations".

If you are going to feel guilty, feel guilty about calling whatever it is, "gifts".
posted by kablam at 9:08 PM on December 24, 2003

Happy holidays and best wishes, kablam!
posted by electro at 9:49 PM on December 24, 2003

And same to anyone else foolish enough to follow this thread....
posted by electro at 9:50 PM on December 24, 2003

These economists need to read The Gift by the anthropologist and sociologist Marcel Mauss. The basic point is that truly altruistic gift-giving doesn't exist. All gift exchange is based in relationships of norms and mutual obligations that bind both the giver and receiver. For example, a gift-giver typically wants the recipient to show the proper amount of "appreciation" commensurate with the expense and time involved in obtaining the gift. Re-gifting, showing insufficient enthusiasm, or failing to use the gift as the giver intended constitutes a major social faux pas, as many Seinfeld episodes have shown.

Another way of looking at it is that you have a group of two or more people. Each member of the group understands that the other members don't really want a Christmas present. On the other hand, each member fears that, if he doesn't give the other members Christmas presents, he will be singled out as a selfish and ungrateful person.
posted by jonp72 at 10:59 PM on December 24, 2003

Kablam --

Gift-giving is necessarily non-anonymous, as it's supposed to reflect a general sense of appreciation not directly tied to any specific compensatory situation, past or future. There is fuzziness of this definition only in terms of the specificity of the compensation; a christmas bonus remains, to some degree, a gift (in this case, the aspect of the bonus being optional transcends the fact that it's payment for past services and expected future loyalty).

Critically, you don't get to redefine the word because you're uncomfortable with its collision with legal consideration. The concept predates the law, and as it shows up in every culture across the globe, appears to be human universal.

What people _say_ about gifts, of course, is something different. People say what they say because they're (accurately) communicating they're not bribing the ones they love to like them more. (We all just had a big discussion about the nature of love; the definition of it being When someone else's happiness is critical to your own being the most valuable result.) It's all a really strange field, somewhere between conspicuous consumption and simple attention delivery (thus the value placed on meaningless but difficult to find / difficult to identify gifts).

And I think economists have underestimated the value of the thought that counts. You can't buy friends and family, or the added years of life their care provides. They can plug that into their equations and hit calc :-)
posted by effugas at 9:13 AM on December 25, 2003

To me, this represents a challenge. Can you (all) imagine a situation, or actually create a situation, where you can give a "gift", under my strict criteria?
Giving something with an inherent value to someone you don't know, not even seeing them take it or have it, not knowing what they did with it, and with no expectation of any return at all?
Some of you might find this an agonizingly painful thing to do, especially if you treat it with serious concern, not just as a whim.
posted by kablam at 12:17 PM on December 25, 2003

Kablam, I can imagine a few situations like that: Putting money in a donation jar on a checkout counter for the family that has just lost their house to a fire, or contributing food to a food drive for the hungry. These are sort of "safe" forms of your gift-giving because in both cases, it would be extremely strange for the recipients to do something other than what the giver intended with the gifts. Also, these examples don't normally involve a large investment in someone else's well being.

But if the gift was sufficiently valuable that I felt poorer after giving it, and if the gift was in a form that it was possible to misuse, then I would want to know that the recipient had used it correctly, which would be hard to do.
posted by the big lizard at 12:37 AM on December 26, 2003

logos, meet eros. (highly recommended book) it's not a pipe dream. it may even be the future.

fwiw, i don't consider xmas offerings "gifts." i think of them as "presents." in my lexicon, gifts are not recompensated, as presents (usually) are. not sure about "official" definitions, however, but i'd tend to side with kablam (even though i'm unclear why a gift is required to be anonymous - b/c the satisfaction of reception invalidates the gift? dunno ...).

i'd think it's quite easy to meet kablam's challenge, however. just leave a $20 bill (or a cookie) taped to a mailbox and run away ...

apologies for the b-man plug, but i can't not mention this great documentary (unfortunately a rather unimpressive site). it's very hard to find, but if you have the opportunity, it's worth a look.
posted by mrgrimm at 10:12 AM on December 26, 2003

*cockney falsetto*

"God bless us! Every one!"
posted by ZachsMind at 12:24 PM on December 26, 2003

funny, one thing they ignored is one of the most comment compliments you hear people make about gifts - that it's exactly the sort of thing you'd have never gotten for yourself but are really glad to have now. The best gifts are things you either hadn't come across or known about before, or that you wouldn't indulge in on your own.

The whole fantasy of pure altruism is such a weird goal. It's self-defeating, really, because the whole exchange of a gift is meant to make everyone happy - you're happy you have a gift, and your friend is happy you're happy, and you're happy your friend is happy - etc - it's meant to cause continuous reverberations of happy. That the giver would feel no satisfaction in the transaction means less satisfaction for the recipient who may feel guilt at having been given something. In a way, pure altruism is basically selfish, because only the giver gets that tiny internal kernel of happiness at being so pure, but the recipient can't join in. Except if it prompts the recipient to be such a giver (tape money to a mailbox) in the future, I guess, but if we're too cognizant of that aspect we lose the altruism and it simply becomes another way to make the world better, which is ultimately to our benefit.
posted by mdn at 7:25 AM on December 27, 2003