Bah humbug

By Eric Crampton 16/12/2014 2

I led the affirmative charge at the GEN debate on the following proposition: “This house believes that the Christmas Extravaganza is a waste of time and money.” We didn’t get to pick our sides, but I didn’t mind partnering up with Patrick Nolan from the Productivity Commission.

As Bronwyn Croxson from Ministry of Health was leading the charge for the opposition, I attempted a pre-emption of her most likely argument. Even though her side wound up taking more votes at the end, I’m pretty happy with my mind-reading. But I did not expect that she would give gifts of chocolate almonds to the audience to sway the votes. Well played, Bronwyn. Anne-Marie Brook from Treasury was second for the opposition.

Had I had a chance to provide a closing statement before the vote, it would have been this:

I agree entirely with the opposing team on the value that can come from gifts. If you believe, as I do, that people can manage to do good things for each other without the quasi-coercive Christmas to force the issue, then you should vote for the motion. If you’re a pessimist about human nature and think the only way that these will be provided is by forcing it through Christmas, and that the gains from that outweigh all the losses I’ve talked about, you should vote for the opposition. 

Had I been more confident in my mind-reading, I’d have had it at the end of my opening statement. I should have been more confident. Bronwyn made exactly the move I’d have made in her place, as I expected.

Here’s the notes I’d made for myself for the debate. I varied from them as always, but here they are anyway.

The Christmas Extravaganza is a waste of time and money.
 What a waste of a season.
 Christmas has a lot of faults. Economists have known for at least two decades that the most prominent part of Christmas – the gift exchange – has some serious problems. But that’s just the start of it. Aside from the wastefulness of the gift-exchange, which I’ll touch on in a bit more depth and which Patrick will go through a bit more thoroughly, we also have substantial problems arising from bunching and clustering of holidays, to the detriment of both work and vacations.

 Because the wastefulness of the Christmas gift exchange is so very well established, I thought I might try to make the best case I can against it. Again, Patrick will hit it in a bit more depth with more recent data, but the standard argument runs as follows. The person best placed to decide how to spend his money is the person himself. Consequently, it would be remarkable if any gift-giver could provide a gift that the recipient would value more than cash. Cash can be transformed into anything the recipient really wanted. Bad gifts, not so much. And surveys show that gift recipients put less value on the gift than its cost.

 If I had been given the other side of this argument, what would I have said? I’ve always been a bit of a Christmas-sceptic; this has given me a chance to check my intuitions.

 So here’s the best argument I can give in favour of Christmas gift-giving. I’m not trying to set up a strawman here; I’m sure the other side will have come up with better arguments for Christmas. But here’s the only argument I currently think stands against the “Inefficient gifts” critique.


Even if survey measures show that recipients put less value on the gift than the gift cost the giver, the fact that millions of people around the world choose to come together to give each other gifts at Christmas is prima facie evidence of that the whole process provides some kind of value to givers and receivers. Otherwise, why would they be doing it? The big point that the gift-inefficiency argument misses is that the giver gets enjoyment from giving the gift. The receiver’s enjoyment is only part of it: there’s a selfish aspect to giving too. It doesn’t have to be asselfish as the time that Homer Simpson gave Marge a bowling ball that he expected her to let him use, but there can be selfish joy in seeing somebody else enjoy something you’ve given them. The twentieth century’s greatest economist, Gordon Tullock, noted the super-efficiency of charity.* If you give a dollar to charity, you must get at least a dollar’s worth of enjoyment out of the gift – or you wouldn’t have given it. The receiver also gets a dollar’s value out of it because it’s a dollar. So the anti-Christmas economists say that the recipient might only get 70 cents out of it rather than a dollar: you still likely have well over a dollar’s value, all up. So what’s the problem? 

There are a couple of rather substantial problems with that argument though, and they both stem from the fact that Christmas isn’t really entirely voluntary. Sure, there’s no law forcing you to participate, but not all coercive social arrangements are enforced by law. We can show this pretty easily by counterexample. Imagine going home, after this debate, and telling your partner,

“You know what? Those economists, they convinced me of something really important today. We shouldn’t give each other presents this year. You and I both know that we’d do a better job spending the money on ourselves, so instead of sending oblique hints to each other about what sorts of gifts might be appreciated, let’s just call the whole thing off.” 

If you think that’ll work, you might want to get the number for a marriage counsellor before you try it. Unless your partner’s also an economist, it’s not likely to go over really well. Even harder could be suggesting doing away with expansive gift-giving with the extended family. If two-person bargaining can be difficult, adding in more people doesn’t do a lot to make it easier. Whether or not you believe the case against Christmas, even broaching the subject with your family is dangerous. It could be taken as a signal of disloyalty, or even that you might not love them as much as they’d thought.

 And, the stakes are high. Divorce filings are most common right after Christmas. The owner of one website for divorcees says “I see a huge increase in pageviews and searches the day after Christmas. People start looking for information before the New Year starts, but they can’t do much until the attorneys are back in the office.”

 Ultimately, I think the whole gift-exchange process is best thought of as a costly signalling exercise where failure to signal is very costly. In a better world, we could show our loved ones how well we understand them and how much we love them by providing thoughtful gifts and gestures whenever we encounter a good potential one. Christmas forces the issue not only for those who haven’t provided such a signal, and perhaps should, but also for everyone else. And if you blew your one great thoughtful-gift idea earlier in the year, well, Christmas could be painful. In that kind of world, for a lot of gift-givers, we shouldn’t be worrying about having missed their joy of giving in the Calculus of Christmas, we should instead be worried about having forgotten to add in the brain-wracking expense of trying to come up with a gift that will meet the threshold – and cash sure isn’t allowed.

 And if you find the right gift at the wrong time, do you buy and hope you don’t lose it before Christmas? Even if you can find it again at Christmastime for wrapping, the recipient still could have enjoyed it for months before Christmas if you could have just given a thoughtful gift at the time that you found it. But you couldn’t, because you’d then still have to figure out something for Christmas, and serendipity might not strike twice. 

But wait, there’s more! Even a giftless Christmas is destructive because of the whole “silly season” effect. The month before Christmas is a mad office rush of getting all the projects done before all the critical people disappear – AT THE SAME TIME – and holiday parties that bite into the time needed for the project-finishing rush. Loud brass bands on Lambton Quay make you wish for the agnostic’s missile from the Monty Python sketch. Outside the office, when you’ve little option but to take holidays between Christmas and New Year’s, everybody else is taking theirs at the same time – even if the weather is terrible and they’d have preferred holidaying in February. And so we have wrecked the economics of a lot of holiday destinations: huge peak load issues where smoothing over a broader season could work better. The roads are a nightmare. Everywhere’s booked up, inducing ever-earlier pre-booking of venues in an arms race. And nobody’s holiday is as enjoyable as it could be. Are the coordination gains from having a day or two off for extended family things really substantial enough to merit all this?

 The superior alternative? A Festivus for the Rest Of Us. One day. One pole. No tinsel.

My slides ended with Frank Costanza’s words of wisdom:

I really should have given our Festivus stories as example of that you can really do all this without the Christmas part.

Update: David Friedman, in comments, points to his prior work on the superefficiency of charity. As Tullock only told us in lecture, and I’ve not seen published work by him on it, I will assume that he was channelling David and that credit should go to David.


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