Monday, December 27, 2010

Christmas: A Post Mortem

I really should have posted (read and absorbed) this article before Christmas, really before Christmas shopping, but its fun to consider it after the holidays as well. Its all about the economics of Christmas, a holiday that has widely been assumed to be a boon to our economy. Well, hate to break it to you, it turns out that its not.

"It suggests that in America, where givers spend $40 billion on Christmas gifts, $4 billion is being lost annually in the process of gift-giving. Add in birthdays, weddings and non-Christian occasions, and the figure would balloon."

The reason is simple. The amount of money the buyer spends on a gift is often greater than the amount that gift is worth to the receiver. This is especially true when there's a big age disparity between the receiver and the giver, and/or when they are not closely connected. This disparity in worth makes both the giver and the receiver poorer.

I'm sure you can relate, I know I can. I have received gifts that I did not really want, or didn't really want that badly. Of course and probably more often, I've given gifts that weren't really enjoyed by the recipient. And in these cases, we are all poorer. The giver spent money on something reducing her wealth. The receiver received something she didn't want. Lose/lose.

There are cases when this works out and the article lists some of them.

If the giver knows a lot more about something than the receiver and the receiver has an interest in it. My sister bought me a subscription to the New Yorker some years back and basically changed (after reading issue after incredibly written issue) my politics. My wife just renewed that subscription this year, saying "I'm so glad we have the New Yorker again in our house" - proving that this gift was just as much for her as it was for me. My sister already enjoyed this magazine, knew I would probably enjoy it as well, but knew I probably wouldn't take the step to purchase it - I was richer as a result.

The giver of the gift basically gives the recipient permission to consume something they probably would not have allowed themselves to consume otherwise, but still they desire it. Say, chocolate? Or some other indulgence - I gave my wife a massage one year which she thoroughly enjoyed but would never buy for herself.

Gifts that have incredibly high sentimental value qualify. My sister-in-law Suzie compiled the weekly e-mails my wife sends out to family and friends complete with pictures and a summary of the week (The Turley Family Newsletter) and published them in a book. It was incredibly generous - this kind of thing is not cheap - but it's a priceless to us. Yes, we came out of the holidays very rich.

Gift cards and/or money should be given if you truly cannot meet the qualifications above. I think overall, we did a pretty good job making our kids happy, and we actually received a lot of happiness from the gifts we received. We did get gift cards and our kids got money from the right relatives. Otherwise, the gifts qualified as thoughtful and appreciated.

So, maybe collectively, we can all do our part to reduce the over $4 billion loss to our economy each year by making Christmas economically more efficient.

By the way, Amazon is innovating around this economic principle, but is taking some heat for it. We'll see how that plays out.

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