Putting the Economics Back in Christmas
I applaud the online magazine Slate for its recurring series on "the dismal science," as they call it. Don't get me wrong, I just about always disagree with the columns. Even so, the articles get me thinking, and that's what's important. So the reader must understand that it is in this festive, jovial spirit that I proceed to devastate a recent Slate article, "The Sovereign versus the Idiot." It is a stocking stuffed full of fallacies and plenty a non sequitur for all the family to enjoy.
The author wants to discuss whether it is "efficient" to give presents, rather than allowing individuals to make their own purchases. To that end, he conducted numerous surveys and asked people to guess how much others spent on presents, versus how much the recipients would have to be paid to give up the gift. The idea is to compare the price of the gift with its value to the recipient.
There are so many problems with this it's hard to know where to begin. FULL ARTICLE
Comments (2)
If one puts enough thought, time and effort into the selection of a gift, then the person to whom the gift is presented may find it to be of a value far greater than its actual purchase price.
Merry Christmas
Published: December 26, 2006 2:16 PM
Giving gives the gift giver satisfaction. By definition that must mean the giver values the satisfaction of giving away the gift more than the gift itself. The gift is more valuable in the hands of the recipient of the gift.
Therefore, it's totally inaccurate to claim one fifth of the value of gift is "flushed down the toilet". Giving gifts is an aspect of free trade, which by definition is creating value, even if one were to claim it creates 20% less value than spending for oneself. It's still creating value; it isn't destroying value, it isn't flushing value down the toilet. But even that nevertheless ignores the fact that the gift giver is increasing his satisfaction by giving, which is by definition greater than the satisfaction he would have if he didn't give away the gift, and instead kept it for himself.
So what's the lesson? When exchange occurs in a free market it creates wealth. Even receiving an extra orange sweater doesn't make one worse off. And getting a new game console system like the screaming kid in the BMW commercial can make a recipient and the giver much better off. That's why people give gifts. It would have made more sense for the study to claim 100% value loss from giving. The study, failing to examing the action, focused on the wrong party of the exchange of the gift, the recipient and not the giver. But that's par for the confused course for most mainstream economic analysis.
At a miniumum the study shows gift giving increasing satisfaction more than 100% of the gift price of the giver and around 80% of the gift price for the receiver. That's at least a greater than net 80% increase in satisfaction as opposed to the 20% decline in satsfaction the study concludes. Satisfaction isn't inherent in goods any more than value. Satisfaction is external to the actor(s), in this case both giver and recipient.
Published: December 26, 2006 6:00 PM