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.” (more…)