Is Christmas Inefficient?

Authored by Jeffrey Tucker via The Mises Institute,

After hundreds of years of attacks on Christmas, economists have finally gotten into the act.

Yale University’s Joel Waldfogel, writing in the American Economic Review, condemns what he calls “The Deadweight Loss of Christmas.” Once you cut through the calculus and graphs, his conclusion is clear: though Christmas generates a $50 billion gift-giving industry, a tenth to a third of that is sheer loss. Why? Because the recipient doesn’t always get what he wants. Given the chance, the recipient would have purchased something else.

All of this follows directly from his underlying theory. In neoclassical economics, the consumer is best off when he chooses, within his means, the highest-rank good or service on his “utility” scale. If he can afford a steak, and he has to settle for a hot dog because the restaurant is out of t-bone, he experiences dead-weight loss. It’s even worse if he has to pay the price of steak and gets a wiener instead.

So it is with gifts. They generate a net loss, this theory says, unless the recipient would have otherwise purchased, with his own cash, precisely what he unwraps. Of course, this is rarely the case. To provide empirical meat to his theory, Professor Waldfogel interviewed students. The students received an average of $438 in gifts, for which these kids reported they would have paid only $313 if they had done the shopping themselves. The gap narrows when the gift is from a friend, and widens when it’s from the family.

Imagine Mr. Waldfogel attending your next Christmas gathering. Aunt Janie gives her nephews soap-on-a-rope, and they all praise her for her generosity and thoughtfulness. The economist then prods the youngsters to ‘fess up that soap-on-a-rope isn’t so great after all, and with the $9.95, they would have bought the newest Spice Girls tape. He declares the gathering a waste and encourages the party to break up in the interest of everyone’s economic welfare.

Professor Waldfogel proposes that we could eliminate these losses, which could be as high as $13 billion per year, by giving money instead of gifts, and letting the recipient spend it as he chooses. But then why not take matters one step further? What is the point of all this shuffling around of cash in the first place? According to neoclassical theory, it would be far better if everyone just clung to his own bank account and spent his own money as he saw fit. Indeed, we’d all be better off economically if Christmas were merely abolished—heck, maybe the Congress should do it—until such time as we all have perfect knowledge of each other’s preferences and are willing to act on them.

Far from being one man’s opinion, this thesis is becoming a classic “extra credit” question on microeconomics tests. Waldfogel is only distinguished for having formalized the model and tested it against his own students’ experience. The conclusion allows economists to presume they are smarter than the mass of the buying public, which persists in the irrational habit of buying things for each other instead of sending money or, even better, just spending it on themselves.

So, what’s wrong with the theory? Plenty. It equates personal utility with dollars spent, the classic conflation of value and price. In fact, a gift is a special kind of good with its own value. For example, we value the soap from the Aunt precisely because of its tie-in with familial affection. Even if the recipient would never have bought it, his personal utility is enhanced by the knowledge that his extended family is thinking about him and cares enough to give.

The source matters. If soap were given by a classmate who complains that you are odoriferously challenged, the “gift” is an insult in disguise. It has negative value. “Rich gifts wax poor when the givers prove unkind,” writes Shakespeare, who seemed to have a more complete view of economics than Professor Waldfogel. Neither is the person who receives a gift purchased under duress likely to be grateful. People on long-term welfare, for example, tend to think of taxpayers as suckers.

A comment later published in the same journal picked up on this. The authors (one from Harvard, one from the University of Miami) also did an empirical test. They used a different method (asking students about prices of specific gifts, not whole bundles), a larger sample of students (209 instead of 78), and asked more detailed questions. The results were the opposite of Waldfogel’s. The authors showed that more than half valued the gift above its retail price, suggesting that Christmas giving actually represents a gain in social welfare.

Moreover, these authors found that gifts asked for were less valued than gifts that were not. This fits with experience: we’re pleased to get what we want, but especially appreciative when we like something we had not expected. Indeed, good gift shoppers think about this ahead of time. They buy someone a tie he would never buy for himself. They buy items the receiver might be too modest or frugal to purchase himself, even if he had the resources.

Some items are just gifts and nothing more: fancy soaps, paisley boxer shorts, blankets with school logos, coffee cups printed with witty slogans, and the like. That’s why there can be such things as “gift shops” as distinguished from regular stores. Gifts have a different value because they are altogether different goods. They embody not only themselves but also their meaning. Imagine if someone came to dinner, and instead of bringing a bottle of wine, gave you $15 and told you to spend it on anything you wanted. It’s just not the same.

For his part, Waldfogel responds by accusing the authors of biasing their results. The very nature of their survey questions encouraged students to report “sentimental value” instead of pure “material value.” Going back to the drawing board, and correcting for this and other supposed errors, Waldfogel surveyed another group of students—455 this time—and still found a dead-weight loss, less than before, but a substantial one nonetheless. Christmas is inefficient: that’s his story and he’s sticking to it.

Of course there is no way to decouple one kind of value from another kind of value, since all economic value is ultimately subjective. Surveys can’t reveal what people value; only action in the marketplace does that. What’s deeply odd about this wrangling is that everyone seems to agree that only the value to the recipient should matter. That leaves out the really crucial point of gift giving: that it benefits the giver as well as the receiver.

People feel good in being generous, especially towards family and friends. Giving is an act of charity and liberality, virtues people practice because they’re good for the soul. And even if they aren’t, economists should follow the rule of “demonstrated preference”: if a person gives a gift, it is because he preferred giving the gift to keeping his own money. The action is “utility enhancing” on its own terms. Why? Because it, as opposed to something else, took place. Value is revealed in the preferences people demonstrate voluntarily. A well-chosen gift also reveals something about ourselves: we care enough to make our affections known in a personal way.

Again, the problem of the welfare state presents itself. In its form of “charity,” people do not give voluntarily. So resistant are people to dumping billions of dollars on millions of freeloaders, that the government has to threaten them with fines and jail terms (that’s what taxation is) to get them to fork over this “gift.” No one demonstrates a preference for the welfare state (voting doesn’t count since people are not using their own resources to purchase the services for which they vote). This degree of redistribution has to be imposed. Taxation, in contrast to Christmas, is a clear example of a utility-reducing activity.

But economists of the neoclassical school have rarely bothered with such distinctions. Their theories leave little room for reflection on property rights, individual choice, and the distinction between market exchange and forced redistribution. For them, a mathematically determined standard of efficiency is the only test that matters. Not even an absurd conclusion—for instance, that giving gifts is inefficient—causes them to rethink their core theory.

Economists are hardly alone in this. Skeptics and opponents of the market economy have long had a beef with the idea of giving and charity, especially as it occurs at Christmas.

Perhaps the socialists have long understood something about Christmas that others, even advocates of the market, have overlooked. In the institution of the gift, we find a strong rationale for the establishment and protection of private property and the capitalist economy. In order to give, we must first produce, acquire, own.

G.K. Chesterton, a great defender of Christmas against English Puritans who regarded it as corrupt and pagan, observed that collective ownership would mean the end of voluntary giving. Moreover, he clarified, “giving is not the same as sharing: giving is the opposite of sharing. Sharing is based on the idea that there is no property, or at least no personal property. But giving a thing to another man is as much based on personal property as keeping it to yourself.”

And contrary to the complaints of materialism at Christmas, meaningful gifts can be as elaborate as gold, frankincense, and myrrh, or as humble as two fish and five loaves.

It’s no wonder, then, that history’s dreariest socialists have denounced Christmas. The economic core of its gift giving centers on private property, while its ethical core belies the claim that private property institutionalizes greed.

“There is the greatest pleasure in doing a kindness or service to friends or guests or companions,” wrote Aristotle in The Politics, “which can only be rendered when a man has private property. These advantages are lost by excessive unification of the state…. No one, when men have all things in common, will any longer set an example of liberality or do any liberal action; for liberality consists in the use which is made of property.”

As for intellectuals—economists no less—who have failed to understand this simple truth, it’s staggering to think of the dead-weight loss their ideas have imposed on society.

Forbes Says Self-Reliant Homesteaders Are "Delusional" And "Mooching" Off "Civil Society"

Authored by Daisy Luther via The Organic Prepper blog,

It’s always interesting reading when someone smug and sanctimonious writes a clueless diatribe about another group of people being smug and sanctimonious. So when I saw that an economist for Moody’s and Forbes had written an op-ed calling self-reliant homesteaders “delusional,” I knew I’d be in for some misinformed hilarity.

The article, entitled, “Dear Homesteaders, Self-Reliance Is a Delusion” was published a couple of days ago on the Forbes website. You’ll be forewarned that the article won’t be deep in the first paragraph, when the author presents his claim to knowledge about self-reliant living comes from the fact that he is “a big fan of shows about doomsday preppers, homesteaders, survivalists, generally people who live off the grid.”

And the well-informed opinion of this arbiter of self-reliance?

…there’s a central delusion in these shows that is never far from my mind when I’m watching these shows: off the grid people are not self-reliant, but instead are mooching off of the civil society, government, and safety net the rest of us contribute to…

The people in these shows often describe a very romantic vision of the lives they have chosen the ethos underlying it. They describe themselves as fully self-reliant, and criticize the rest of society as being dependent and lacking in this self-reliance. It is morally superior, the story goes, to provide for yourself, take care of your own needs, and often, be prepared to survive if society collapses.

First, let me segue a little bit and tell you about the author. According to his bio on Economy.com:

Adam Ozimek is an associate director and senior economist in the West Chester office of Moody’s Analytics. Adam covers state and regional economies, as well U.S. labor markets and demographics. Prior to joining Moody’s Analytics, Adam was Senior Economist and Director of Research for Econsult Solutions, an economics consulting company. He received his Ph.D. in economics from Temple University and his bachelor’s degree in economics from West Chester University.

So based on this, I’m going to guess that homesteading and off-grid living aren’t his jam. I mean, he might head down to the Westtown Amish Market there in Pennsylvania, but I’d be willing to place money on that being his closest brush with any real, live, self-reliant homesteaders.

His ill-conceived argument seems to be mostly focused on health care. He is baffled about what will happen if a homesteader becomes ill or gets injured.

” On Live Free Or Die, a man in his mid sixties named Colbert lives in the Georgia swamps alone….I always wonder what will happen if he slips and falls, and can no longer provide for himself. He’ll likely end up receiving hospital treatment paid for with Medicare, and perhaps end up in an assisted living center paid for by Medicare as well.”

Or…

“Another example from Live Free or Die is Tony and Amelia,  a couple who live on a simple, off-the-grid homestead in North Carolina. When I watch them I wonder what would happen if one became extremely sick, and simple, off-the-grid home medicine couldn’t treat them. Would they say “we’ve chosen our fate, and now we die by it”, or would they seek treatment in a hospital they couldn’t afford which would be covered by the hospital’s charity care or perhaps Medicaid?”

One thing that Dr. Ozimek is missing is the fact that most homesteaders are tax-paying citizens. Does he think that living on a homestead exempts one from property taxes? Does he suppose that their vehicles don’t have license plates or that their fuel is purchased without the requisite state gasoline tax? Or that maybe they have some special card that lets them buy things like feed without paying sales tax? Perhaps homesteading equipment like tractors and tools and off-grid appliances are likewise purchased without any gain to “society.”

As well, he’s under the assumption, based on his vast body of knowledge gleaned from watching TV, that self-reliant homesteaders don’t make any money or have any insurance. I know homesteaders who are retirees from other jobs who have a fine pension and excellent health insurance. I know others who make a good living with their homesteading endeavors. And there are still others who live simply after working for years to pay cash for their homestead, or families in which one spouse works a full-time job to support the homestead.

But, Ozimek, whose informed point of view comes from only the most extreme of the group featured on for-profit-and-ratings television shows, doesn’t understand that. He continues to espouse the superiority of the non-agrarian lifestyle:

If we all lived “self-reliant” lives like Tony often implores us, spending most of our time on basic agricultural subsistence, then modern hospitals couldn’t exist. It’s only because most of us choose to not live agrarian “self-reliant” lifestyles that this care would be available to Tony, Amelia, and perhaps someday, their children. And what if both of them become too injured to work the land anymore? Would they starve to death, or would they survive off of the social safety net our government provides, like food stamps?

In fairness to Tony, Amelia, and Colbert, perhaps they would refuse the modern medical care and modest safety net in the case of an accident or illness, and would simply choose to die. I don’t think most homesteaders would, but we don’t know.

Yeah, because homesteaders can’t do anything but homestead.

Some people are producers and other people are consumers.

Ozimek thinks that someone with the extensive skills required to live off the grid would be completely unable to find employment and would have no option but to become a welfare recipient should their homesteading endeavor fall apart.

What he’s missing is that his cushy “civilized” lifestyle is completely reliant on the type of people he scorns. He forgets that someone, somewhere is growing his food. Someone, somewhere, is assuring that his energy reaches his home. Someone is ensuring that his plumbing works, someone is repairing his furnace if it breaks, and someone is transporting the goods he purchases to the store, where someone will sell him those goods.

But, that’s what happens when someone is only a consumer and not a producer. They think that producers are somehow less worthy, and that if they couldn’t produce what the consumers consume, they’d be totally out of options.

The cool thing about self-reliant homesteaders is that we aren’t one-trick ponies. We can produce all sorts of things and provide all kinds of services. It’s called “having skills.”

Most self-reliant homesteaders aren’t reality TV stars.

Since his entire argument is based on the tv programs he watches, the author doesn’t understand what self-reliance means to those of us who aren’t reality television stars.

It means:

• We provide a lot of our own food because we prefer to know where it comes from.


• We raise our own meat because we object to the way factory-farmed animals are treated.


• We use our own sources of power because maybe we’re green at heart or maybe we just prefer not to be tied into the “smart” grid.


• We learn to make our own products for cleaning, bathing, and making life pleasant because we don’t want to bring chemical toxins into our homes.


• We’d rather skip the middle man and spend our time actually making the things that most people work for hours to purchase from someone else who made them.


• We are far less likely to spend time at the doctor’s office because a) we aren’t huge fans of pharmaceuticals, b) we can take care of small things ourselves, and c) our healthier lifestyle means we tend to be less likely to be ill. (Although this isn’t always the case – even self-reliant homesteaders can get sick. And when we do, we use our insurance or we pay for it with savings. Just like everyone else.)


• We don’t need as much money because we just don’t need as much stuff.

But to someone who buys all of their food and other goods from the store and gets all of their medicine from the pharmacy, it can be difficult to understand the satisfaction that comes from evading those places.

But, safety…

Of course, if self-reliant homesteaders pass all of the Forbes columnist’s other tests, he can still dismiss their achievements by going full-blown statist.

Yet even if one refuses help and care, however, they still benefit from the modern civil society thanks to the private property protections, rule of law, and military that provide them with safety and security.

Many off-the-grid folks like to fantasize that their personal fire arms collection and self-defense skills are actually why they are safe. But how far would this take them in a society without the rule of law, an effective government, and law enforcement? The homesteader who is confident their security is in their own hands should go live off-the-grid in Syria and find out how far self-protection takes them.

And it’s not just police and a military that keep homesteaders safe. It’s also widespread prosperity. In the developed world, a basic education is available to all, and most people who want a job can find one. Living in a prosperous, modern economy means that homesteaders can take a good bit of their own safety from violence for granted and roving bandits are not likely to take their homes from them.

So, by the mere fact of our existence in this country, according to Ozimek, none of us are self-reliant. It boggles the mind that this fellow successfully wrote and defended a doctoral thesis.

This is how reliant people justify their reliance.

I guess what it boils down to is that this is what helps Ozimek and people like him justify living their lives without any practical skills. If things did go sideways in a long-term kind of way, who is going to be better off: a person who can claim a Ph.D. in economics or someone who can actually produce food?

The fact is, the less we require from society, the less power that society has over us. Our lifestyles give us some distance from the hustle and the bustle. We don’t have to make as much money because we don’t live in the consumer matrix that engulfs so much of society. We are content to live simply instead of hustling from one non-productive activity to another.

Most of us don’t eschew all the benefits of living in a modern society. It doesn’t have to be all or nothing. Having a corporate job doesn’t preclude growing your own tomatoes any more than having a herd of goats precludes having health insurance.

There is a joy in making a meal that came entirely from your own backyard that these people will never get to experience, and having spent many years in the corporate world, I can tell you which provides the most satisfaction for me.

In this society where nearly everyone is digitally connected 24 hours a day, it’s nice to step away from all that and break the addiction to constant stimulation. It’s nice to not always be trading the hours in your day for the things that someone else made while you were working on something that, if we’re being honest, is kind of pointless in the grand scheme of survival.

If Dr. Ozimek wants to talk about delusions and superiority, he could find all the inspiration he needs by taking a look in the mirror.

Black Lives Matter Activist: ‘White People Give Your Money, Your House, Your Property’ For Social Change

It"s hard to describe the person featured in this leaked periscope video as anything but unhinged. Whether or not she"s representative of the majority of anti-Trump, Black Lives Matter activists isn"t quantifiable at this time. It is, however, ridiculous to see people supporting this brand of hatred, designed to disrupt the very fabric of western civilization.
 
That being said, whatever happened to dignity and grace? Are those qualities no longer important to the left?
 
In this clip, a Black Lives Matter activist demanded that white people hand over their homes, money and property to pay reparations to black and indigenous people.
 
"The White House must die".
 

 
I find it hard to believe any "normal" democrat wants this sordid brand of activism representing their interests. For the republican party, this is like a gift that keeps on giving. The further entrenched the leftist media and activist organizations become, the more Americans become disgusted by them. Say what you want about the popular vote during the elections, the fact remains -- republicans have been making strident gains over the past 8 years in every facet of government, both national and local -- netting more than 1,000 legislative positions since 2010.
 
In my estimation, the behavior of the left is the result of decades of social engineering, which taught children that everyone was a winner and to avoid dangerous objects, like see-saws or playing dodgeball. They seem to be unable to deal with adversity; and instead of coping with defeat, like any normal well-adjusted person after an appropriate period of mourning, they become unhinged and resort to primeval animalistic behavior.

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