[Daniel]
Is Christmas efficient? A wonderful column by Jonathan Chait in the New Republic sets Chris Dillow wondering.
Here is Chait’s theory about gift-giving:
There’s a reason people don’t often buy themselves fancy chocolates: most of us would rather get M & Ms and spend the rest of the money on something else. Christmas spawns industries devoted to useless goods like fruitcake and flavored popcorn.
More commonly, it forces us to pay for things we like, but whose cost exceeds their worth to us. Suppose a box of chocolates costs $15. I don’t buy chocolates for myself, because they’re worth only $5 to me. You choose not to buy $15 cologne because it’s worth only $5 to you. Swapping chocolates for cologne penalizes each of us $10.
This leads Dillow to introduce us to the economic literature, a speciality of his diverting blog.
But actually the hole in Chait’s theory is contained in his own article. He can’t get his girlfriend to share his view of gifts and eventually gives in and buys her a scarf. It turns out that the chocolates are worth $5 to him, but worth $15 to his girlfriend when given as a present. And not giving his girlfriend a present imposes a cost greater than $15.
Problem solved.
The Dish 