Ideas@TheCentre
The economist who stole Christmas
Did you buy yourself anything for Christmas? If so, it was probably money relatively well spent: it’s your money and you know what you want better than anyone else.
But you can’t say that about buying gifts for family and friends: It might be your money, but you don’t know how the recipients would have spent it.
When you buy something, you are normally willing to pay a bit more than the asking price (of course, you never tell the shop how much more!). Economists call this difference between the two amounts ‘consumer welfare.’
What if you buy a gift that the recipient doesn’t really want, or one that he or she would not have paid even the asking price for? Well, now we’re talking a ‘consumer welfare’ deficit.
I’m not saying giving and receiving gifts doesn’t elicit any utility or happiness beyond the gifts themselves – the thrill of opening presents and seeing loved ones open theirs must be worth something. Maybe it really is ‘the thought that counts.’ But surely most Christmas giving is about going through the motions – routine, perfunctory buying for its own sake.
Christmas has become the great destroyer of consumer welfare. It is more a festival of economic vandalism than a thoughtful religious celebration. Millions of people splurge vast sums on gifts that recipients will care little for. Indeed, in a rich society like Australia, recipients’ indifference is all the more likely: if people wanted a particular item they would have already bought it themselves.
This Christmas, retailers are complaining we aren’t spending enough. Is that really such a bad thing? It may be bad for retail sector profits but it is good for society overall. All that wasted money could instead have been saved, or spent more slowly and sensibly at other times of the year.
What’s the conclusion? Ideally, eschew this perverse December custom of economic self-flagellation and agree with friends and family not to buy presents for each other, except perhaps for the little ones.
If you absolutely must give a gift, give cash, maybe cosseted in a nice ribbon.
Adam Creighton is a Research Fellow at The Centre for Independent Studies.
