Wednesday, December 07, 2005

The Wealth of Christmas

Economics is hard, so we shouldn't be surprised if even CF gets it wrong every once in a while.

Yesterday she posted about how Buy Nothing Day is silly and that eliminating Christmas would be irrelevant. I agree with her that BND is absurd but for a fundamentally different reason. She says that buying nothing for a day is very common. I said in an earlier post that it's actually impossible. Clearly CF does not read my blog as often as I read hers. Shame on her.

I also disagree with her on Christmas though her logic is at first sound. People have X amount of money to spend every year: eliminating Christmas won't cause people to have less money or want fewer things. But it assumes there are no benefits to crowding production. Schleifer argues that the role of implementation theory (sectors of the economy work best when they are all working together) means Christmas makes the economy more efficient. In other words by lumping our consumption and production, our efficiency is higher on average for the year than if both were smooth over the seasons.

This idea should come as no surprise to either CF or myself because we practice implementation theory as students all the time. Finals are coming up and to prepare for math, we are going through about a chapter a day. We did not study so intensely a week ago. We are crowding our production just as most students do.

If we think about it more, we can complicate it more. There are problems with Christmas. There's inefficiency with buying stuff for other people, but there's also utility asscoiated with giving and receiving. People get utility from the holiday itself while others get disutility. My gut tells me that the benefits outweigh the costs, which I think says a lot because I'm not a fan of Christmas.

But to call the holiday irrelevant based solely on an accounting identity is very incomplete.


Anonymous said...

I have to disagree. Credit card debt goes up even more this time of year. Financially people are in trouble. With the average debt already in the thousands having a huge buy-a-thon at the end of the year only makes matters worse. If people managed their debt and didn't spend outside their means, they would buy less stuff and be more reasonable as to what they want.

Eliminating Christmas will also counter the herd mentality people have. You used to count the presents we got at Christmas and compare them. (One year you pouted when I got more.) Our parents were lucky in that I didn't make a big deal about it. But other parents aren't. If one child gets an expensive gift that they would have received anyway (say a new computer for school) then the other kids feel they "deserve" something expensive too. Christmas drives want. It creates a buying frenzy and creates an excuse for special treament. How many times have you heard, "Awww come on, it's Christmas."?

How many things do you have now that you wouldn't have if they weren't given to you as Christmas presents?


David said...

Christmas does not drive want. Human behavior does. Christmas is just an excuse to buy all that stuff in one month. To assume that if not for Christmas people would stop wanting things would be silly.

Do Americans have too much debt? Perhaps. On the other hand, perhaps not; many have houses to which they can back their debt with thus the debt does not exceed their net worth. But if they do have too much debt, they are making mistakes. Removing Christmas won't solve that, either.

Maybe herd mentality is bad. But maybe it's good because of the implementation cycle. I don't think of it as herd mentality, though. It's more like reciprocal buying. I get you something, you are socially obligated to get me something. We can avoid this by agreeing to not give each other gifts (as I did with friends); Christmas is voluntary.

Anonymous said...

As excuses go, Christmas is a pretty big one. How many other excuses can boast over a month of celebration and more than a month of planning by stores. I did not say eliminating Christmas will eliminate want. I do believe it will reduce it because of the depth of the excuse. Without Xmas gifts, kids would still want toys but no more than the rest of the year. Just like the odds of those kids GETTING those toys. But at Christmas time, it turns into an obligation. Kids EXPECT to get what they want and parents feel greater pressure to give in.

Ask yourself if Little Billy would have that Power Rangers Super Deluxe Mega Playset if it wasn't Christmas. Without Christmas, December becomes just another month in terms of buying things.

I consider "too much debt" to be when your monthly financial obligations regularly exceed your monthly income (so the house and car aren't counted in this figure). Many people need outside controls for their own good. Drunk driving laws for example. Unfortunately it's hard to find the equivalent for debt, much less enforce it. Since buying things is essencial, you have to control luxuries. That's how Xmas becomes a problem. It drives the desire for more luxuries higher and some people can't ignore it.

For adults, and more mature children, it's less "reciprocal buying" and more "thought that counts". To me it's saying "I care about you enough to take the time and spend the resources and give this to you". That's why I don't like gift cards, it's too easy. I'd rather have someone take a chance on something they THINK I will like than take the simple route. At least among family. Friends can be harder to shop for and with less formality things like gift cards become acceptable.

David said...

It's still silly to think that eliminating Christmas would cause people to want less. People desire a good not because they are merely wrapped up in the season. That would require that people are inherently stupid.

There is a truth to what you're saying though: parents do feel the pressure to get what their kids want. But that's a problem of parents. If Christmas is eliminated, kids would just ask for more on their birthday. Or perhaps Easter will become a gift-giving holiday. Because celebrating Christmas is optional, and most people celebrate (hell, we celebrate it and mom's Jewish and I don't think Dad has stepped in a church since I was in Boy Scouts), there must be some reason people want to celebrate it.

People are responsible for their own actions. They might be influenced by cultural or political pressures, but they control what they spend their money on (except for taxes, of course). To blame Christmas, even a little, would to turn the irresponsible into victims.

I also find it infinitely funny that you'd "rather have someone take a chance on something they THINK I will like than take the simple route" consider you had a Christmas list this year (just like every year). Choosing from a list requires no thought on my part. With a gift card I at least have to think about which store to choose.

Perhaps I should convince Mom and Dad to return all the stuff they got you and get gift cards instead. Sure you wouldn't like them but by you're own words, you'd like them better than the stuff on your list. And if you truly believe "[m]any people need outside controls for their own good," then it seems you should have no say in the matter.

Thankfully for me, I believe I'm responsible for my own actions AND an expert at what I want in a way no other person could be. I'll tell Mom to get you whatever she wants; I'll tell her to stick to my list.