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Grinch vs. Scrooge: The Cage Match
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There was an article in the December 23rd edition of the Wall Street Journal that warmed the part of my heart that earned a degree in economics, lo these many years ago. The article is titled “How Christmas Brings Out The Grinch in Economists”. The WSJ practices a particular form of scrooge-like behavior itself, in only allowing subscribers to view the article. Here are the major points (quoted directly from the article):
  • In the cold, hard analysis of the dismal science, Christmas is a highly inefficient way of connecting consumers with goods. Squeezing a big chunk of people's spending into a year-end frenzy of gift-buying generates an abundance of ill-considered presents -- millions of unwanted ties, picture frames and toe socks that, had they found the right owners, could have brought a lot more satisfaction. Economists call that foregone benefit the holiday's "deadweight loss."
  • …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 everyone bought gifts only for themselves this holiday season, the added satisfaction would be worth more than $10 billion…they valued their own purchases 18% more highly than the gifts. In-laws were among the most unsuccessful givers: Recipients tended to value their gifts about 40% less than they did their own purchases.
  • …about four in 10 Americans say they have recycled a gift at some point in their lives. About seven in 10 said they would return gifts if they knew that nobody would find out about it.
  • People derive benefits from giving that transcend the material value of the gift -- which helps explain the persistence of Christmas giving despite all the deadweight loss.
  • "Aunt Helga gave you that ugly scarf, but hey, it's Aunt Helga." Those economists – they’re a laugh a minute. And they justify my rationale for indulging in my inner Scrooge this year. Merry Christmas!

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