Seasonal Myths

Each year around Christmas time, the Dickens story of Scrooge makes the rounds. Poor Scrooge, making lots of money, paying market prices for labor, is visited by ghosts (quite scary ones to most kids), who make him see the light. He turns generous, giving funds away, cutting working hours, and so on. It is too bad that we don't celebrate the good that Scrooge did or does by creating jobs, offering work, providing opportunities for people to make better of themselves. The story is just building on the age old myth that making money and creating jobs is worse than giving the money away. Provide a man a fish and you feed him once. Teach him how to fish and you feed him forever. This is not to say that old Scrooge can not get a lot of enjoyment out of providing Tiny Tim a turkey. Gift giving can be beneficial to the giver.

Speaking of gift giving, the other myth that is being created by some economists is that the gift giving tradition of Christmas is wrong. People maximize utility by having cash, and spending on what they want, not getting a specific item from someone else -- who decides what will make you most happy. But, if so, why is this voluntary action so popular? Why has it existed for so long? I am not a utilitarian, but if I were, I would say that the utility maximization problem is leaving out an important variable -- the joy of giving and of receiving. The utility of receiving a gift from a friend or loved one exceeds the cash that was used to purchase the gift. And, the expenditure of the cash for some friend or loved one generates more utility than giving the cash to the friend or loved one.

If something exists and works voluntarily, then it must be efficient. If gift giving and receiving was not of higher value to the participants than not giving and receiving gifts, the gift giving would not exist.