Creative Destruction

December 27, 2006

The Calculus of Christmas

Filed under: Content-lite,Economics,Popular Culture — Brutus @ 2:26 pm

Is gift giving primarily a demonstration of warm, fuzzy sentiment for family and others, or is it primarily an economic activity? To judge from the aftermath of Christmas, it’s far more calculated than it is emotional. Most of us are familiar with news reports at the onset of the Christmas season, which trumpet the increase or decrease in spending on the weekend following Thanksgiving over the previous year or years as though that were valuable news. Perhaps the media can be forgiven such a misplaced focus, since there is no way to report a change in public sentiment or mood. Similarly, perhaps the childhood obsession with reporting to friends the Christmas haul is forgivable. I know I did that when I was younger.

Less forgivable is the coldly impersonal discussion of Christmas gift-buying habits such as this one by James Surowiecki in The New Yorker. His utterly charmless analysis concludes that gift cards may be a better choice than a “real” gift at least partly because the cost of a real gift to the giver is often greater than what the recipient would have paid for it — a phenomenon called “deadweight loss.” This is related to the emotional cost of a poorly chosen gift, which almost everyone has experienced on one side of the exchange or another. Although Surowiecki (who is apparently out of touch with the Christmas spirit or the spirit of giving) doesn’t mention children, parents of a typical two-year-old are likely to be familiar with the child’s simple, unbounded elation ripping through wrapping paper and opening boxes, overlooking or oblivious to the gift object inside. It’s hard not to take pleasure in such simple joy, though adults are oblivious if no two-year-old is on hand. Surowiecki’s argument, if Christmas is analyzed purely as economics, also suggests that there is a better return on investment (ROI) for less expensive gifts as compared to more expensive gifts, eliminating the “waste” of deadweight loss. An even better solution is the gift card, which ensures that there is no unwanted gift, since the recipient makes his/her own choices. Taken to its logical conclusion, we will soon all be giving gift cards to each other, which are in effect interest-free loans to merchants, rather than piles of cash. At the end of each Christmas season, we will then be able to calculate our profit/loss based on the value of gift cards purchased and received. Merchants will love it, because in addition to cash cards never redeemed, consumers generally add something over the amount of the gift card to obtain the card’s full value — a phenomenon called “uplift spending.” Kinda makes me all warm and fuzzy inside.



  1. The news reports about Christmas sales are aimed at gauging the strength of the economy, I think, not the moral sentiments of the American people.

    I’ve gotten and given gift cards. For a certain subset of people, they’re an ideal present. I know that my friend Mark likes books, but I really have no idea what book he would like or what he already has; what better gift, then, than a Barnes and Noble card? It preserves the sentimentality of the relationship much more than just handing him a wad of money would.

    On the other hand, perhaps I am simply a barbarian, but I find myself appreciating gifts of cash very much, and without any loss of sentiment. Send it to me via PayPal for maximum emotional efficiency. 🙂

    Comment by Robert — December 27, 2006 @ 5:24 pm | Reply

  2. For me, I have left behind the hype of Christmas materialism and returned to its original meaning which is the sharing of the gifts of good wishes, love and happiness, not forgetting the most important gift of peace for the world.

    Each Christmas we have the tradition of a large family get- together (around 20 or more and also several children). The chance to all come to have fun, to meet each other and share family feelings of good wishes is very healing and sets the family up for whatever the next year holds.

    We do not share many gifts, except some for the little children because the family is growing so large. What everyone loves is the warm glow of family love and good homemade food. This is real Christmas. All that anyone really wants is true peace, love and happiness. Material unwanted presents are a poor substitute for that.

    Comment by Helen — January 21, 2007 @ 2:35 pm | Reply

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