Thursday 10 December 2020

An economist's guide to Christmas (not).

After discussing the idiosyncratic way I buy presents (more of which later) with Tom Chivers, he said: “An economist's guide to Christmas would make a good book title”. To which I sent him back a vomit emoji (Tom and I are actually writing a book together that doesn’t actually make me want to vom).

I am a little weary of pop economics advice on how to improve your life. I think sometimes the advice is a bit of a stretch from what economic models or empirics tell us.

For example, if I were to write a book like this, I could point to evidence that finds that we tend to overvalue the gifts we give others. Or perhaps highlight the fact that people would not pay as much for the gift they are given if were they to buy it themselves. I would then triumphantly argue we should just give people money instead.

This is bad economics and bad advice. This reasoning doesn’t take into account the warm glow you feel from giving the gift or the fact that someone went to the trouble of buying you a gift makes you happy. After all, isn’t this the reason gifts exist in the first place?

If you were to take anything from this, it suggests that giving a gift that is difficult to put a direct value on may be worthwhile – a homemade gift for example. But it depends on lots of factors which I am sure you already consider when giving gifts such as… do you think they will like it?

Let's be honest - we have all received gifts that we have been disappointed with. I remember my Dad once told me about the time my Grandfather gave him some sort of electronics set for his 18th birthday. My Dad recalled thinking at the time “does he even know me?”. This is probably why giving a gift can be so stressful, the thought that the other person won’t like it and think badly of you.

I think the old saying of “it is the thought that counts” is extremely important here. If you accept that giving gifts is a good thing and want it to continue, you also need to accept that people are going to get it wrong occasionally: it doesn’t necessarily reflect how they feel about you.

So how do I give gifts? Well I really like buying gifts for people. But the way my wife and I give gifts to each other is as follows: we don’t. Well, strictly speaking, this isn’t true. If we find something nice that we think the other will like, we buy it (recently, my wife bought me Dirt, a fantastic book about a journalist training to be a chef in Lyon and I loved it).

However, we worked out that birthdays, anniversaries, and Christmases amounts to 3 gifts a year, each. Given our average life expectancies (and marriage expectancy?) we are looking at well over 200 gifts. Buying one, thoughtful gift for someone is hard enough. Repeating the process every few months makes it ever more difficult, so we decided to stop.

We also have an aversion to accumulating physical stuff (despite my love of kitchen gadgets). So instead of buying each other stuff on special occasions, we tend to just go to restaurants or visit places to celebrate. But when we do get each other gifts, we are usually really happy with them and it removes the stress involved with time constraints of birthdays, etc. It also has the added bonus of being a surprise!

However, and this is the crucial thing here, I AM NOT ADVISING YOU TO DO WHAT WE DO. If you enjoy giving and receiving presents with your partner, or anyone for that matter, continue doing so. If you read this and think you might like to do the same, great. If not, also great!

In economics, we often model decisions as utility maximisation (basically, doing what makes you happiest). But what makes you happy is down to your preferences which are extremely difficult to change. Although it may be the case that you just don’t know until you try, if you are happiest in what you are doing, then keep on doing you. Oh and if do want to buy someone a present for Christmas, buy my book.

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