Does Christmas Harm the Economy?

Every year, billions of dollars get spent on Christmas presents. But, economists argue, this does not increase the overall amount of spending, it just shifts it towards something else. If you would not have bought these presents, you would have bought something else. Maybe you should have invested the money in something useful instead of buying something for your mother-in-law whom you maybe don’t even really like? As a rule of thumb, buying presents for someone else is much more inefficient than buying something for yourself. Remember the ugly sweater you got from your aunt? Generally, nobody knows your preferences as well you do. On top of that, a lot of people get their presents last minute and rather get something than try to get the best thing they could weeks in advance. Consequently, a lot of gifts are indeed returned after Christmas, producing vast economic inefficiencies. There is a 1992 paper by Joel Waldfogel that looks at it from an economic perspective and calculates the so-called Deadweight Loss of Christmas. He concludes that between a tenth and a third of the value of Christmas gifts is destroyed by gift giving. Here is an article that sums it up nicely.

Economists really are cruel sometimes… Anyway. I hope you enjoyed your holidays! 🙂

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