Happy Yule and any other winter holiday that you might celebrate (e.g., my mother's birthday)!
I'm going to be conducting an empirical test to see if the world will continue to spin on its axis if this is my last post of 2006. But here is one last gem from the WSJ (How Christmas Brings Out the Grinch in Economists - $):
Given the fanfare and billions of dollars in spending it generates, you might think Christmas is the best thing to happen to the economy all year. But some economists say we would be better off without it.
In the cold, hard analysis of the dismal science, Christmas is a highly inefficient way of connecting consumers with goods. Squeezing a big chunk of people's spending into a year-end frenzy of gift-buying generates an abundance of ill-considered presents -- millions of unwanted ties, picture frames and toe socks that, had they found the right owners, could have brought a lot more satisfaction.
Economists call that foregone benefit the holiday's "deadweight loss."
This is the same deadweight loss that arises from taxes, subsidies, etc.
Still, if people's spending were better targeted, the benefits could be significant. Prof. Waldfogel estimates that if everyone bought gifts only for themselves this holiday season, the added satisfaction would be worth more than $10 billion. He derives the number from a study in which he asked college students to place a value on things they bought on their own and on the gifts they received for Christmas. On average, they valued their own purchases 18% more highly than the gifts.
It takes environmental economists to understand the broader implications of gift-giving:
Indeed, economists increasingly are looking for ways to broaden their concepts of social welfare to incorporate people's feelings. In the case of Christmas, some have made attempts to estimate gifts' sentimental value, a factor Prof. Waldfogel explicitly ignored.
In one study, economists John List and Jason Shogren created an auction in which they offered students money for their Christmas presents, asking them to split their price into material and sentimental value. The result: On average, sentimental value accounted for about half the total. That more than offsets Mr. Waldfogel's estimate of deadweight loss, suggesting that Christmas gift-giving might not be such a bad thing when all factors are taken into account.
"People get a whole heck of a lot of value out of doing something for others and other people doing something for them," says Mr. Shogren, a professor at the University of Wyoming who specializes in putting a value on such things as biodiversity and human life. "Aunt Helga gave you that ugly scarf, but hey, it's Aunt Helga."
