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Of course Christmas is inefficient, it's why we love it

December 24, 2017 - 19:13 -- Admin

Who'd can Christmas?

A few years back the Australia Institute produced research suggesting that as many as 6 million of us get gifts we don't want and sometimes give away.

Worse still, the gift givers know it. One in four said they knew that at least some of their gifts would end up wasted.

There were "millions of unused foot spas", as much as $800 million in waste, according to the institute's Richard Denniss, who's still at it. His new book, Curing Affluenza, is built around the proposition that we buy too many things. My colleague, Ross Gittins, picked up on his ideas this week.

The idea that this is wrong was made famous in one of the most downloaded economic papers of all time. It's called The Deadweight Loss of Christmas. It says the best gift a giver can buy with, say, $20, is exactly the one the recipient would have bought for him or herself. Because the giver usually won't hit that target, the gift he or she does give will nearly always leave the recipient worse off than if he or she had just been given the cash and spent it on his or herself.

It's an old idea.

In the late 1800s, George Bernard Shaw raged against the notion that "we must be drunken because it is Christmas, we must be insincerely generous; we must buy things that nobody wants and give them to people we don't like". All because businesses "depend on a week of licence and brigandage, waste and intemperance, to clear off their outstanding liabilities at the end of the year."

But Denniss, Shaw, Gittins, and also the late Christopher Hitchens who declared that his life's ambition was "to write an anti-Christmas column that becomes fiercer every year", miss the point. Christmas isn't about avoiding waste. That's what the rest of the year is for. It's about celebrating waste, just once a year, in order to be truly human.

Real life economists have little time for The Deadweight Loss of Christmas. Asked whether giving presents is inefficient, an overwhelming majority say no. In the US, when the question was asked of Nobel Prize winners and fellows of the American Economics Association, only 17 per cent said yes. Fifty four per cent said no, among them this year's Nobel Prize winner Richard Thaler, who replied: "To test theory, try a cash gift next Valentine's day."

>Australian economists are even less enamoured of it: 17 per cent agree, and 73 per cent disagree. "Gifts can be useless, but the institution of gift-giving may be very valuable," says one. "Through choosing a gift, the giver demonstrates an understanding of the interests and needs of the recipient, thereby indicating regard, perhaps even love," says another. "It ignores the benefit the buyer can get from putting thought into buying a personal gift, and the benefit the receiver gets from knowing that," writes another.

Splurging, wastefully, is empowering – all the more so if you don't have the money to do it. The poorest of the world's people splurge on special occasions in order to remind themselves that life's worth living. In A Christmas Carol, Bob Cratchit earns just 15 bob a week, but he buys presents for his children to show that he can.

Presents are all about symbolism, as is Christmas itself. It has little to do with Christ, especially these days. It's the one time of the year when friends and family can be certain they can get together, about the only one the Fair Work Commission still regards as sacrosanct.

In Australia, it symbolises the end of the working year, the beginning of the holidays, the beginning of summer. It's the one time of the year we can show ourselves to be our best, to truly value our fellow humans. It's precious. Make the most of it.

In The Age and Sydney Morning Herald Peter Martin is economics correspondent for The Age and the Sydney Morning Herald.

He blogs at petermartin.com.au and tweets at @1petermartin.