Some time ago, I resigned myself to the fact that economists are the wet blankets of the world. We can ruin almost any proposal and almost any situation with just a couple of analytical tools and the words unintended consequences. Rent control? It causes shortages and hurts poor people. Minimum wages? They reduce employment and hurt poor people. Laws against price gouging? They also cause shortages and hurt poor people. Interventions, regulations, and subsidies that were supposed to make housing and higher education more affordable and thereby make the world a kinder, gentler, more prosperous place? Were seeing how thats working out right now. You get the idea: the list of dreams that have been dashed upon the rocks of the principles of economics is long indeed.
Not content to ruin the dreams of a few idealists, economists turned their attention to Christmas a few years ago. Here are a few thoughts from the Dismal Science that rain on the holiday parade.
1. You Shouldnt Have. No, Really. You Shouldnt Have. The classic salvo in the literature on the economics of Christmas is Joel Waldfogels The Deadweight Loss of Christmas (pdf), which provides a bit of evidence that people would be happier if you gave them cash instead of an equally-expensive present. Yes, its the thought that counts, but how many of us have given (or gotten) gifts that have ended up in an end-of-year Goodwill donation or a Spring yard sale?
We learned this first-hand at a family holiday party that involved a white elephant gift exchange. Everyone went home happy, but one participant (an Alabama fan) opened a box of Auburn stuff, another (an Auburn fan) opened Alabama stuff, and one of the gifts I (an Alabama fan) opened was an LSU cap. Again, everything worked out in the end, but the initial distribution was incredibly inefficient.
Art Carden is a Research Fellow at the Independent Institute in Oakland, California and an Associate Professor of Economics at Samford Universitys Brock School of Business.