EconoMonitor

The Kapali Carsi

The economics of Christmas gifts

I love Christmas. I really do. I recently realized that I have not celebrated Christmas since moving back to Turkey from the United States in 2005, and I decided, on a whim, to spend Christmas in London, where I am writing this column on Christmas Day. But there is one Christmas tradition that seems awfully wrong to me: The custom of gift-giving.
Here is the intro. to my Hurriyet Daily News (HDN) column from Dec. 26. I go on to explain why I am not a big fan of gift-giving. No, it is not because I am a scrooge:) Anyway, you can read the whole thing at the HDN website. And if you are wondering why I am posting this almost a week late: I managed to spill water on my laptop last Friday and could get hold of a replacement laptop only a couple of days ago.
For a change, I have a few additional comments to make. To start with, I am perfectly aware that many of my readers, as well as those (even the economists) on this email list, will accuse me of not “getting it”. Giving presents is about relationships, family, trust, and that price is not equal to value. Yep, I accept all those, and in fact, let me share a piece that puts all of these arguments in an economics context.
But I was referring to only the economic impact of gift-giving at Christmas, as emphasized by the title of the column.  As for that, the actual dead weight loss (DWL) of Christmas may actually be higher in the U.K. than estimated by Waldfogel for the U.S.- more than one quarter of the value of the gifts, as evidenced by the high return rates of Christmas gifts
And here is an interesting quote from an article about the same topic in the Atlantic: “In the latest Wall Street Journal forecasting survey, more than two of three economists opined that if Christmas ceased to exist as a holiday, consumers would either spend more on themselves or spread their gift purchases more evenly across other events such as birthdays. That, in the view of some academics, would put more goods into the hands of people who truly value them and improve social welfare as a result:” If you want more arguments on why Christmas does not make sense from an economics point of view, I have a Forbes article for you. I should say I do not agree with all the points there. For example, I explain in my column that Christmas’ role in the economy is debatable- although I would side with the Keynesians, especially when demand is depressed. And finally, an Inomics blog post lists several arguments both pro and anti Christmas…
You should note that not all economists refuse to buy presents, as Josh Barro explains, from a recent NYT column, using his father (Harvard professor Robert Barro, who will probably win the Nobel Prize in the next few years) as an example. In fact, even Joel Walfogel, the author of the paper I refer to in the column, admits to buying presents. So I guess it is the same with economists as with priests: Do as I say, don’t do as I do!:) Joking aside, it is a bit more complicated than that: As Waldfogel notes to Barro Jr., presents may work if you know the person you are buying presents for well.
Last but not the least, if you don’t find the economist argument convincing, or if you still would like to get presents for the reasons I mentioned above, Barcin Yinanc, my op-ed editor at HDN, has a great suggestion: A newspaper or magazine subscription. She argues that you would contribute to pluralism and democracy in Turkey. Given the shambling Turkish democracy and the bad state the Turkish press is in, thanks to Supreme Leader President Prime MinisterRecep Tayyip Erdogan, I agree with her- except that you have to choose carefully: If you buy a subscription to a paper owned by Erdogan’s cronies, you would actually impeding Turkish democracy:( Anyway, Barcin’s other suggestion, a donation to an NGO, is a good idea as well, but it carries the same warning/disclaimer, given the many NGOs that just act as a trumpet of government policies:(. BTW, the reason these ideas are so good because they have positive externalities. Democracy is public good, which would benefit (almost) everyone…
That’s all folks…

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