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Does Santa Clause reduce the rate of savings?
If Christmas didn't exist as a holiday what would happen to consumption and production? I can think of several hypotheses.
1) Consumption would remain the same but people would spend more on themselves and less on others. Would deadweight loss be reduced enough to make such a move wealth-enhancing?
One also wonders how much Christmas spending within the family is actually spending on oneself? Did that catalog on my chair just happen to fall open to the page with the black pearls?
2) Consumption would decline and savings would increase. Many people go into debt to buy Christmas presents. Does Santa Clause reduce the rate of savings? Scrooge says yes!
3) Other holidays would become more important and total consumption and giving would remain the same. Is there a Coase theorem for holiday gift-giving?
Increased giving at other holidays, such as birthdays, would help to smooth production and consumption. Consumption smoothing is welfare enhancing in partial equilibrium but not necessarily in general equilibrium. I want my consumption smoothed but I'd like to get all my gift giving done in one big batch thank you.
Production smoothing is also generally welfare enhancing in partial equilibrium but not necessarily in general equilibrium. In general equilibrium, a big push may be necessary to cover fixed costs. The seasonal cycle may be an implementation boom.
Comments are open.
Posted by Alex Tabarrok on December 7, 2006 at 07:40 AM in Economics | Permalink
Comments
How 'bout 4: Consumption would increase. No idea how to model this, but let's not rule anything out.
Posted by: US at Dec 7, 2006 8:16:26 AM
It's Santa Claus
Posted by: The Tsunami at Dec 7, 2006 9:08:30 AM
2 and 3. People like to give and receive gifts, but it would be tough to fully replace the current Christmas season.
#5: There would be a lot less people checking "Christian" on their census forms.
Posted by: josh at Dec 7, 2006 9:10:39 AM
Isn't this answerable? What do cultures that don't celebrate Christmas do?
Posted by: Jody at Dec 7, 2006 9:22:32 AM
When I was in Japan in the 90s, I noted that they had several gift-giving seasons, the one I got to observe directly was the mid-year gift-giving. That's pretty much the name for it.
Interestingly, the gifts tended to be very practical and would get used up. At the grocery stores there were "gift packs" of toilet paper and aluminum foil. The family I was staying with got a sampler of fruit and a six pack of beer.
Then I participated in a family sports day contest, and they had one set of prizes for us foreigners (pretty knick-nacks, sake glasses, souvenir stuff) and the Japanese families (paper towels, toothpaste, aluminum foil, etc). It was highly amusing. I ran in races against 10-year-olds (I was 20) because they'd give us prizes for doing anything. Some of my cohorts thought it was degrading to compete against little kids, but I thought it was hilarious and lucrative.
Posted by: meep at Dec 7, 2006 9:57:17 AM
I tend to agree with Scrooge, but mostly for psychological and not necessarily economic reasons.
Many folks do Christmas shopping as a manic binge. The key is to get the wallet open in the first place. It's pretty common, once the spensding starts, for people to neglect to count their costs while in such a manic binge. This is especially true and most easily seen in the Friday-after-Thanskgiving chaos. The big retailers all employ strategies to induce and amplify this mania, by attracting early crowds and putting time and supply limits on the best deals.
I doubt whether retailers would be able to duplicate the same scale without the Christmas motivation wherein you buy gifts for many people as part of an appeal to love, Christ, your better nature, what have you.
I have seen this mania at another time, so it CAN be re-created to some extent. My state, Massachusetts, has a one-weekend per year sales tax holiday, and people show up in droves. To save a measly 5%. Reason can't possibly have much to do with that.
Posted by: bk at Dec 7, 2006 9:58:19 AM
In short, I think that gift giving is pretty popular, and likely to be abundant in consumerist societies. It's just a matter of what kind of gifts. When the gift-giving opportunities are common, and one has limited space, the gifts are likely to be as the Japanese do for most ocassions. When it's only once a year, and you've got lots of storage space, you're more likely to see durable goods as gifts.
Posted by: meep at Dec 7, 2006 9:58:58 AM
The question of what do you celebrate
instead of Christmas is relevant. Pretty
much all societies have some time of the
year when families gather and give each
other presents. I do not know when it in
Buddhism, but among Muslims it is the
Eid al Fit at the end of Ramadan, with
"Christmas lights" up all during the
month of Ramadan in Muslim countries, and
in Hinduism it is Diwali.
BTW, in the old atheist world of communism
in the Soviet Union, it was New Year's, with
people putting up "Christmas trees" and the
whole bit, while "Grandfather Frost" came to
give the presents to the good little boys
and girls...
Posted by: Barkley Rosser at Dec 7, 2006 1:50:31 PM
In Venezuela, the toy industry pushed for a children day in July.They got it.Two xmas for someone
Posted by: S at Dec 7, 2006 3:43:17 PM
More smaller gift-giving holidays distributed around the year would obviously increase social welfare. Just ask anyone with a birthday withing a week or two of Christmas. ;-)
Posted by: Ken at Dec 7, 2006 4:58:58 PM
Ken,
But your suggestion would mean that more people
would get the shaft on their birthdays.
Posted by: Barkley Rosser at Dec 7, 2006 5:30:12 PM
I think people would get more for their birthdays, weddings, and other celebrations. Ask anyone who has his or her birthday near Christmas and they will tell you "I get the shaft since my birthday is so close to Christmas." I think people have some set range or amount that they want to give to people, regardless of the number of holidays or celebrations each year. And, that giving is a function of how close you are to that person and some other factors.
This would seem to explain why in countries without Christmas still have major gift-giving holidays and celebrations.
And, I'm not so sure consumption would increase as much as Tyler thinks. Gift giving is a consumption activity. You give gifts to people who are close to you, and their well-being and happiness is part of your utility function. And, for those of us who give gifts to Toys for Tots and strangers, just giving makes us feel good. Indeed, buying things for ourselves (especially if they are big purchases) can be satisfying but they often carry some degree of guilt.
Posted by: Scott W at Dec 8, 2006 2:31:05 PM
Fiance is from the former Soviet Union, and no one in their extended family (all now in North America) is into even secular christmas. Birthday giving, however, has reached insane proportions.
Posted by: Karl Smith at Dec 9, 2006 11:42:32 AM
"One also wonders how much Christmas spending within the family is actually spending on oneself? "
That sentence may go a long way to answering the concern about "deadweight loss," though perhaps I'm interpreting it differently than you meant it. 'Tis better to give than to receive, right? So, is there any reason that the benefit to the giver shouldn't itself be considered an economic good?
Posted by: Tom Hanna at Dec 9, 2006 4:33:33 PM
I think that Christmas is over rated. I think about it this is supposed to be the day in which Jesus Christ was born and we make it this day of buying presents, who gets the best material things, how many presents we're gonna get. For me Santa Clause never exsited. I look at it as a day of happiest that should be spent with family.
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