Friday, December 09, 2005

Is Santa a Deadweight Loss?

Are all those Christmas gifts a waste of resources?

Between gift-giving and regifting, the value of fruitcake, the utility of egg nog, and gifts from the extended family, an economist tries to figure it all out.

A paper* by Joel Waldfogel asked students two questions at the end of the holiday season: first, estimate the total amount paid (by the givers) for all the holiday gifts you received; second, apart from the sentimental value of the items, if you did not have them, how much would you be willing to pay to get them?

The results were gloomy: on average, a gift was valued by the recipient well below the price paid by the giver.

*“The Deadweight Loss of Christmas”. American Economic Review, December 1993, vol 83, no 5.