Is Christmas bad for the economy? Do gifts destroy value? Are they a drag on the economy, as many economists suggest?
In ‘The economist’s guide to gift-giving’ at FT, Tim Harford collects the research of these economists who say that ‘Gifts typically destroy value. The total deadweight loss of Christmas in the US alone was $12bn.’
They say that givers pay more than the most the recipient is willing to pay for the gifted item.1 This difference in their willingness to pay is interpreted as a waste.
The same economists and authors point out all of the bad gifts. Many times, gifts aren’t even used or enjoyed by the recipient, only to end up in the attic for a few years and then sold at a yard sale or donated to the local thrift store. From the FT article:
If you give someone a jumper that doesn’t fit, a book they’ve already read or a box of chocolates when they’re on a diet, this is a waste of valuable resources. Fossil fuels have been burnt, tedious hours have been worked, trees have been felled, all to produce products that were unwanted. The same resources could have been devoted, instead, to goods that people actually do value.
This post was published at Ludwig von Mises Institute on Dec 25, 2017.