Economics of Christmas

[cjsmith]

Anyone have the full text of Joel Waldfogel's "The Deadweight Loss of Christmas" they could let me read without breaking copyright law or something? (American Economic Review, December 1993.)

I once saw a well-written essay on the value that gets lost every holiday season. I suspect it was Waldfogel's paper. Of course, if I see Waldfogel's paper and it's full of formulae, I may start to suspect that what I read was instead an essay making Waldfogel's ideas accessible to non-economists like me.

The concept here is: I buy you a $29.95 thingy that you don't want, and you buy me a $29.95 thingy that I don't want. If someone queries us later about what we would pay for these objects ourselves, our answers total to far less than $59.90. Unless these objects are highly sentimental, equal happiness could have been achieved with less financial outlay. The essay I saw measured the extra outlay -- the "deadweight loss", it called it -- in billions of dollars per winter gift spree season. (Torn-up wrapping paper does not count toward this number. I had been misremembering that it did.)

Man, think what would happen if those billions went to buy things people wanted. Or [insert your favorite cause here]. Wow, the potential!

I know, I'm a scrooge. Sorry. Pick sentimental gifts and you needn't worry about the numbers. Anyway, I'd love to see Waldfogel's paper. If nobody's got an e-copy I'll probably go to the library, but not until I'm a lot less busy.

Comments

[platypus]

This is not the article in question, but one that discusses it (and also discusses other similar studies):

www.bgu.ac.il/~oritt/deadweight.pdf

The formulae do kick in after a few pages, but it's still interesting.

[cjsmith.livejournal.com]

Thanks! I had found that one. It's a little rough going for non-economist me, but I've gotten something out of it anyway. :-)

[hitchhiker.livejournal.com]

That's simply beautiful. I love these intersections of mathematics, economics and psychology.

[quasigeostrophy.livejournal.com]

I've always felt that way just a little about the $WinterHoliday. I like giving things, though, so I try really hard to make them special things or that I definitely know the recipient wants. Otherwise, I'm fine spending my own money on other stuff I want.

[irascignavojo.livejournal.com]

In case you come across an ecopy of Waldfogel's study, please send it along, sounds like it would interest me too.

[genderfur.livejournal.com]

I've got a post burbling in me now about cultural rituals that involve spending money. Seems like many/most cultures have some kind of festival that involves spending/using things in ways that may seem like waste. That's as far as my thoughts have gone so far.

[cjsmith.livejournal.com]

*nod* I like your term "may seem like waste". I note that this study took emotions out of the equation as much as possible, which obviously affects the results.

[cjsmith.livejournal.com]

Will do!

[cjsmith.livejournal.com]

I have also, which is why this paper made such an impression on me when I first read it. But I, too, enjoy giving things. (Another emotional bit that the study didn't cover.) And surprises are nifty. And wrapping paper, which has always seemed to me to be the most enormous waste, is also fun and pretty, and it *is* awfully hard to translate that into monetary numbers.

[cjsmith.livejournal.com]

Isn't it fun? :-) I love thinking about this stuff! Too bad I have basically zilch formal training in the domain(s) in question. Might be even more intriguing if I had that.

[quasigeostrophy.livejournal.com]

I'm not as big on wrapping paper. I do think a well-wrapped gift looks nice, but my lower opinion may be due to the fact that I don't think I do a very good job at wrapping. Often, because of this and general laziness, I'll give a gift unwrapped.

shedding the deadweight.

[edsger.livejournal.com]

*dons tinfoil hat*

After a few years of weaning, we've fully migrated this year to a different model of Xmas in my house. There is a budget. There are no gifts. Our holiday is fully populated merely with activities (and likely a trip back to the bay area, where my son was born, but hasn't been back to since). We've found this to be a much more fulfilling holiday experience. I may be materialist in many aspects, but honestly, there has to be a line somewhere.

[cjsmith.livejournal.com]

I'm not big on it myself, but I know people appreciate it and enjoy it. I appreciate and enjoy the beautiful design on the paper itself, sometimes. :-)

You would SO get along with my dad. We tease him about his wrapping style. (First he "wraps" the gift completely in newspaper, because this helps obscure the printing on the object itself. Then he wraps again in wrapping paper -- of ANY kind, anything he can get his hands on, even if it's a set of scraps that don't match at all but *together* are big enough to cover the box.) It's now become a tradition that every time the family is together with gifts under the tree, at least one present must be wrapped in mismatched scraps, Dad-style.

I like my dad. :)

Re: shedding the deadweight.

[cjsmith.livejournal.com]

My family has come close to that a couple of years. We've included activities such as a trip to wine country (the one year my folks came here to the bay area), skiing, going to see the Nutcracker, and caroling at an old folks' care center. Volunteering at a food bank has been suggested a few times and will probably make it onto the list in the next year or two.

I like togetherness-activities at least as well as gifts. Because I don't get a chance to see my folks often, together-time is precious and shopping for them well is challenging.

[hitchhiker.livejournal.com]

I love the whole concept of a non-zero-sum game too - isn't it wonderful how, merely by rearranging stuff, *value* can be created out of nothing? It's also fascinating how elegantly simple some of the experiments, both psychological and mathematical, that have been conducted in the area are. For instance, did you read about the one in which several people were each given one of two items (of roughly equal value) at random, and then offered the chance to switch - practically no one did, since (so the theory goes) people attach increased value to an object by the mere act of possessing it. The whole dollar auction experiment was beautiful too.

[cjsmith.livejournal.com]

The whole non-zero-sum aspect of it seems full of amazing potential. "Oh look, what if we did THIS?" :-)

I saw the one offering chances to switch. I missed the dollar auction one!

[hitchhiker.livejournal.com]

http://www.heretical.com/pound/dollar.html

I wonder if studying these things formally would take some of the fun out of them :)

[cjsmith.livejournal.com]

Oh my, that one is HILARIOUS. I think I'm glad I don't go to parties given by people like Shubik!

[jupiter29.livejournal.com]

(Can you tell I'm catching up on old entries??) :)

This sounds really a really interesting article. If you've ever tracked down a copy, I would certainly be interested in reading it. I've definitely felt that way about Christmas at times. That's just the nature of what happens when somebody else buys you a present, I guess. Unless it's EXACTLY what you want, there's going to be some loss.

But just to play Devil's advocate, isn't that ALWAYS the case? If you're measuring things in terms of loss, you have to think about gain as well. But based on the small discussion you posted here, there doesn't seem to be ANY potential for gain. I could go to the store and get EXACTLY what I want for $29.95 and when you asked me what I would have paid for it, the answer would be $29.95. Even if I would have happily paid three times that if I'd needed to, my answer would never be more than $29.95 because that's what it was available for, so that's what I would have paid.

However, I think the opposite is true, at times. One of the things I got for Christmas is a watch. I never wear watches, because I always know what time it is from the clock in my car or on my desk or wherever. The only time I really need one is when I'm on a business trip, sitting in meetings. And since I would use it maybe 12-15 times a year, I've held myself back from buying one a nice one. On the other hand, if I am all dressed up at a business meeting, I want to wear a pretty nice watch. And now I have one. And even though I'll still only wear it 12-15 times a year, each time I put it on, I'll think about the person who gave it to me. And since I'll likely be away from home at the time, it will mean that much more to me. I wouldn't trade that watch for one worth $500.

So maybe there's a better question to ask. Imagine you could make a list of the top 10 things you could get yourself in any given category (DVD, CD, book, clothing, etc) and there could be an infinite number of these lists. And then after the holiday, I popped up and offered to trade you the #1 item on your list for whatever so-and-so got you. If Uncle Fred got you something that wasn't even on your list, you would take the trade. That's your "loss." But if your Aunt Ethel gave you the #2 CD on your list, wouldn't you keep it rather than take the #1, just because it would mean that much more than your Aunt Ethel gave you such a good gift? That would be the "gain" and I would like to think that among the people we really care about and shop carefully for, the gain would equal or outweigh the loss.

Wow, I seriously rambled on there! (*blush*) Sorry about that!