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An economist’s Christmas: Is gift-giving wasteful?

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During a season such as Christmas, where hyper-consumerism and hyper-generosity converge in strange and mysterious ways, it’s a question worth asking: How much of our gift-giving is inefficient and wasteful?

For some, it’s a buzz-kill question worthy of Ebenezer Scrooge. For an economist, however, it’s a prod that pushes us to create more value and better align our hearts and hands with human needs.

In a new video at Marginal Revolution, economists Tyler Cowen and Alex Tabarrock explore this at length, asking how we might maximize the value of gift-giving:

For Cowen and Tabarrock, gift-giving typically suffers from knowledge and incentive problems. “When people buy something for themselves, value is created, because the buyer values the good more than it costs the seller to produce,” Tabarrock explains. “But when people give gifts that aren’t wanted, the recipient values the gifts at less than the cost. Gift-giving: it can be kind of a negative trade.”

Cowen proceeds to note that gift-giving often “works” just fine, such as when a gift is appreciated and valued (accompanied, no doubt, by lower search costs). He also notes that gifts can be given for “paternalistic reasons” (giving a child mittens or clothes), where the eventual utility is by no means a “waste” (wants and wishes aside).

Their ultimate conclusion: giving cash directly is the most efficient gift you can give.

It’s an argument well worth digesting, with diligent qualifiers throughout. But in the middle, Cowen offers a brief aside on “value” that gets at what I think is the trickier bit: “Gifts can also signal our intentions and our values, even when the gift is imperfect.”

I have my reservations about the perceived “wastefulness” of gift-giving (or it being a bad thing), but the argument does challenge us toward those other questions. In a society and season that’s increasingly driven by hedonism and blind consumerism, what sits at the center of our gift-giving? As we hustle and bustle to check off our various shopping lists and make sure we have a gift for every family member, co-worker, and friend, how prone are we to the whims of advertising, consumer anxiety, or good, old-fashioned traditions?

As Christians, how might we acknowledge the real issues and problems of surface-level utility and efficiency while also remembering that gift-giving is about so much more than transactional exchange? When do we bypass that calculus, remembering that, as Cowen quietly alludes, even “imperfect” gifts can have tremendous impact, sometimes because they are given wastefully, extravagantly, and gratuitously?

gift-christmasThe answer is simple, but mysterious. Slow down. Keep your focus on neighbor-love and gratitude in the service of God, not man. Be wise and prudent, but don’t be haunted by illusions of scarcity. Remember that all is gift. Ours is a vision of abundance, and it’s driven by a love that meets real human needs, social, spiritual, material, and otherwise. Let the Spirit empower and lead and let the joy of the Lord flow from our hearts into the lives of our neighbors and across civilization.

If we do that, stubborn old economic “efficiency” might just take care of itself.

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Joseph Sunde is an associate editor and writer for the Acton Institute. His work has appeared in venues such as The Federalist, First Things, The Christian Post, The Stream, Intellectual Takeout, Foundation for Economic Education, Patheos, LifeSiteNews, The City, Charisma News, The Green Room, Juicy Ecumenism, Ethika Politika, Made to Flourish, and the Center for Faith and Work. Joseph resides in Minneapolis, Minnesota with his wife and four children.

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