Showing posts with label christmas. Show all posts
Showing posts with label christmas. Show all posts

Sunday, December 24, 2017

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

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
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Tuesday, December 01, 2015

Twelve days. Low inflation keeps true-love's costs low

In Australia, inflation is just 1.5 per cent.

While some prices are climbing (cigarettes cost 5 per cent more than they did a year ago) others are plummeting. The electronics chain Dick Smith has cut the value of its stock 20 per cent ahead of a Christmas discounting spree.

But in the United States inflation is far lower, so low that price of the items named in the song Twelve Days of Christmas has climbed only 0.6 per cent.

It's the lowest increase since 2002.

PNC Asset Management has been computing the index since 1984. Especially sensitive to changes in the price of gold, musicians and poultry, at times it has jumped 16 per cent in a single year. But this year the price of gold rings is steady, and most wages haven't moved.

Costing no more than they did a year ago are the eight maids a milking, the nine ladies dancing, the eleven pipers piping and the twelve drummers drumming.

Only the ten lords-a-leaping have scored a pay rise. Sourced from the Pennsylvania Ballet, they are asking for an extra 3 per cent...

French hens, calling birds, and geese-a-laying all cost no more than a year ago, although the price of partridges has soared 25 per cent and the price of turtle doves has climbed 11.5 per cent.

"While the economy continues to chug along on a sustainable path, low commodity prices are keeping consumer costs down," said PNC chief investment officer Jim Dunigan in a statement. "True-loves should be thrilled that they can have their goose and better afford the gas to roast it."

The total cost of the true-love's basket is $US2855. Buying the items over the internet brings it down to $US1620.

 

2015 PNC Christmas Price Index

☆ Partridge: $25 (up 25%)

☆ Pear tree: $189.99 (up1.2%)

☆ A partridge in a pear tree: $214.99 (up 11.5%)

☆ Two turtle doves: $290 (0.0%)

☆ Three french hens: $181.50 (0.0%)

☆ Four calling birds: $599.96 (0.0%)

☆ Five gold rings: $750.00 ((0.0%)

☆ Six geese-a-laying $360 (0.0%)

☆ Seven swans-a-swimming $13,125 (0.0%)

☆ Eight maids-a-milking: $58 (0.0%)

☆ Nine ladies dancing: $7,552.84 (0.0%)

☆Ten lords-a-leaping: $5,508.70 (up 3%)

☆ Eleven pipers piping: $2,635.20 (0.0%)

☆ Twelve drummers drumming: $2,854.80 (0.0%)

Total: $2855 (US dollars)

Source: PNC Asset Management

In The Age and Sydney Morning Herald

 

 

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Wednesday, December 21, 2011

Christmas spending by country

From The Economist:


Freakonomics writes:

Despite their considerable wealth, the Dutch have clearly maintained their minimalist austerity chic. Not the case in Luxembourg, which has the highest GDP per capita in the EU, and the third highest in the world. So, while you may get a pair of wooden shoes for the holidays from that Dutch relative of yours, that Luxembourgian uncle stands to be much more generous.

It’s also worth noting America’s position. Despite considerably less per capita wealth, we appear to be spending only about $70 less per person than the Luxembourgers.


My guess is we are like the United States. But who knows? Especially this year.


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Monday, December 19, 2011

What economists know about Christmas - lots, enjoy


From Frontier Economics

Download the whole thing.

"It’s easier to think of economists as the prophets of trading doom than as Santa’s little helpers – too busy telling everybody what’s happening to productivity, energy demand and like-for-like sales to provide any insights into the annual exchange of goodwill and good-or-ill gifts to family and friends. So Frontier Economics has been scouring the academic literature of behavioural economics for tips to make that last struggle with your present list a little easier…"



Frontier Economics - Present Values



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Friday, December 24, 2010

Season's greetings

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Monday, December 20, 2010

Who said inflation was low? Here's the "true love" cost of Christmas


From PNC Wealth Management:


"Despite a sluggish economy and low inflation, the 2010 PNC Christmas Price Index® surged 9.2 per cent in the whimsical economic analysis by PNC Wealth Management based on the gifts in the holiday classic, "The Twelve Days of Christmas."

According to the 27th annual survey, the price tag for the PNC CPI is $23,439 in 2010, $1,974 more than last year. This is the second highest jump ever and largest percentage increase since 2003 when the index rose 16 percent. That comes on the heels of a modest 1.8 percent increase a year ago.

"This year's jump in the PNC CPI can be attributed to rising gold commodity prices, represented by the Five Gold Rings which went up by 30 percent, in addition to higher costs for wages and benefits impacting some entertainers," said James Dunigan, managing executive of investments for PNC Wealth Management.

Although these trends affect both indexes, the PNC CPI's surge is in marked contrast to the government's CPI, which grew a mere 1.1 percent, illustrating the difference in size of the two baskets of goods and services.

Among the 12 gifts in the PNC CPI, only four items (Pear Tree, Four Calling Birds, Six Geese a–Laying and the Eight Maids-a-Milking) were the same price from last year.

The 11 Pipers Piping ($2,356) and 12 Drummers Drumming ($2,552) saw modest increases, both up 3.1 percent, however these higher costs give greater weight to the index. Lords-a-Leaping jumped 8 percent to $4,766 but the biggest dollar increase this year was for the Nine Ladies Dancing, up $820, a 15 percent boost. None of these performers received a wage increase last year, and were playing catch-up in 2010."






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Tuesday, November 17, 2009

Scroogenomics - the Christmas debate writ large

Adam S writes:

"At the risk of being accused of being a bah-humbug Christmas hater, the amount of money we pour into that day is ludicrous. I just don't get it."

We're going through the same debate in our family.

I wrote about it here, quoting this guy, Joel Waldfogel who has now published a book, Scroogenomics: Why You Shouldn't Buy Presents for the Holidays.

"Christmas is a time of seasonal cheer, family get-togethers, holiday parties, and-gift giving. Lots and lots--and lots--of gift giving. It's hard to imagine any Christmas without this time-honored custom. But let's stop to consider the gifts we receive--the rooster sweater from Grandma or the singing fish from Uncle Mike. How many of us get gifts we like? How many of us give gifts not knowing what recipients want? Did your cousin really look excited about that jumping alarm clock? Lively and informed, Scroogenomics illustrates how our consumer spending generates vast amounts of economic waste--to the shocking tune of eighty-five billion dollars each winter. Economist Joel Waldfogel provides solid explanations to show us why it's time to stop the madness and think twice before buying gifts for the holidays."

Bah! Humbug to Joel, I say.

As I wrote at Christmas 2006:

"We continue to give presents notwithstanding what may be their economic inefficiency. We like to be pampered, and usually we're too stingy to do it ourselves. I know exactly the double CD I want for Christmas, and I have dropped a fairly unsubtle hint about it. Normally I'd be reluctant to spend the money, but at a time of indulgence, what the heck? And the look of pleasure on my wife's face at the look of surprise and pleasure on mine will make it all worthwhile."

Scroogenomics chapter below. Enjoy.

Scroogenomics Chapter



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Might we spend even more this Christmas?

"I am not saying that people lie, but they might deceive themselves, plan to spend less and then the Christmas spirit starts to spread"

If the global recession didn't kill Christmas, might the global recovery?

That's the question raised by a Westpac - Melbourne Institute survey showing that one-third of Australians plan to spend less on Christmas gifts this year than they did in 2008.

December 2008 was the vortex of the global financial crisis but was also the month in which millions of Australians received bonus cheques totaling $8.7 billion, enough to push up Christmas spending 13 per cent to an all-time high.

This year without the cheques the survey suggests 35 per cent of us are going to wind back our Christmas spending, swamping the 14 per cent who plan to spend more.

Most households are still planning to spend at least $300 with an impressive 40 per cent planning to spend more than $500.

But on balance every age group and every income group says it's cutting back...

Australians aged 45 to 49 plan to spend the most, preparing to shell out $403 per household. Households headed by the youngest and oldest Australians plan to shell out the least, perhaps because they're the poorest and have fewer friends and family to spend it on.

Because it's the first time Westpac has conducted the survey its senior economist Matthew Hassan cautions against taking it too literally.

"What people say they will do is not always the same as what they turn out to do," he told the Herald.

"There might be a bit of intention about these responses. People think back to last year and say I'm going to economise this year, I am going to be good. You see that every year going into the Christmas season."

"I am not saying that people lie, but they might deceive themselves, plan to spend less and then the Christmas spirit starts to spread and things slip and the kids start to plead for better presents."

Westpac is predicting a slightly bigger spend this Christmas than last, boosted by population growth, a return to economic growth and much stronger consumer confidence.

"If it happens it'll be a very good result," said Mr Hassan. "Last year we had $8.7 billion reasons to spend and we spent like never before. This year we are banking on an improved economy and improved confidence."

Retailers’ Association executive director Russell Zimmerman expects "modest" growth.

"We believe that consumers and retailers are in a much better place this year than Christmas last year, remembering that as we came to Christmas last year we were going into a global financial crisis," he said.

"This year we have low interest rates, the Aussie dollar is really strong ... employment is still quite stable and I think the consumer knows we have avoided a recession."

Published in today's SMH

Christmas Spending

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