Monday, November 28, 2005

Deadweight Loss of Christmas

Reader JC pointed me to this fun article about the deadweight loss of Christmas (but it can be extended to gift giving in general). Gift giving is economically interesting because it would always be efficient just to give people cash -- instead we take on all this added burden of finding items, buying them, and then giving them to other people. The best gifts are indulgences that you would really like, but would never buy yourself (too extravagant!) Knowing what this item is requires you to know the gift recipient very well. Giving cash instead is an admission that you are really not very close to this person. Perhaps this is why elderly relatives give lousy gifts more often than money.


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