The Deadweight Loss Of Christmas

Economics is such a marvellous subject: it can explain anything, including the perils of buying Christmas gifts.  Back in 1993 an economist calculated that there was about a 10% discrepancy between what givers spent on Christmas gifts and how much the recipient valued the gift.

So, for example, if a giver spent $20 on a gift, the recipient only valued it at $18 - that is the amount he would sell it for.

Put another way, if the giver had given $20 cash, the recipient could have bought what he wanted and would have gained more value from doing so.  He would have done this without making anyone worse off.  So, there is a deadweight loss to society of giving Christmas presents. The variance also depends on the age difference between the giver and recipient and the relationship they have with each other.  This is to do with the giver having to best-guess the recipient's preferences.

Brilliant.

Of course, this does not take into account the fact that the actual act of giving also adds value to the product.  So, for example a girl who receives an engagement ring would value it more than the jeweller : the value of the gift is a function of price, motive and circumstances.

In other words, economists have deducted after many, many hours of academic study the following: it's the thought that counts.

Painful. Elaboration. Of. The. Obvious.

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