They call economics the dismal science. This article titled "An Economist Goes Christmas Shopping" helps show why.
Every holiday season, there are all kinds of gift exchanges. It's a running theme that many of them will be ill-suited for the recipient. Whether it is well-intentioned thoughts that went awry (think of the ugly sweater syndrome) or people buying gifts that they would like instead of what the receiver would lke, there is a reason why the malls are jammed after Christmas with returns. In a perfect economic world, you would not waste all of that time giving gifts that the recipients don't want so that they are either wasted or exchanged.
It does seem to be a bit too much like Scrooge to admit what this professor prints in his academic paper:
"I find that holiday gift giving destroys between one-third and one-tenth of the value of gifts,” proclaimed Joel Waldfogel, then an economics professor at Yale, in the 1993 paper. He estimated that ill-chosen gifts caused between $4 billion and $13 billion a year in economic waste; for comparison, he cited an estimate that put economic costs of the income tax at $50 billion.
This is the sort of provocation economists love: It rejects a beloved, sentimental tradition and devalues interpersonal interaction, while upholding the virtue of individual choice. After all, why should you shop for me, when I certainly know what I want better than you do? It’s no surprise that Mr. Waldfogel’s paper, “The Deadweight Loss of Christmas,” was published in The American Economic Review, one of the world’s top three economics journals.
Despite the fact that this may be true, I still like the fact that Josh Barro goes on to evaluate a gift he got from his father (an economist):
On the other hand, let’s evaluate the box of fancy chocolates he and Rachel sent me for Christmas this year.
There are three ways to evaluate this gift. The first level of analysis is that I’m on a diet and certainly would not have bought the chocolate myself, which suggests this was an example of what Mr. Waldfogel warned us about: gift mismatch leading to deadweight loss.
The second level of analysis is that I’ve already eaten half the box, which demonstrates my revealed preference for chocolate, and shows my father achieved exactly what he set out to do: He identified an item I would not have bought for myself but apparently wanted.
The third level of analysis considers the fact that I now feel I should not have eaten the chocolates, or at least not so many of them in two days. Behavioral economists call this phenomenon “hyperbolic discounting”: we overrate the value of immediate pleasures compared to delayed ones, and may do things today (like eat half a box of truffles) that we would have said yesterday we wouldn’t do and will say tomorrow that we should not have done.
My father, who is not a behavioral economist, would surely reject this last analysis and say if I ate the chocolates, that must have been the rational thing for me to do; therefore, the chocolates were a great gift.
I like the way his father thinks!
Here is the link to the full article: http://www.nytimes.com/2014/12/21/upshot/an-economist-goes-christmas-shopping.html?_r=0&abt=0002&abg=0
No comments:
Post a Comment