Sunday, 28 December 2003
Topic: The Economy
Notes toward a unified theory of the economic deadweight of Christmas gifts as a function of acquisition cost and social shame...
[ This item also appears in the new issue of Just Above Sunset Magazine now available online - see left panel. ]
Economists simply can't understand why people would do something as stupid as giving presents at Christmas. This was an idea first formulated in 1993 by Joel Waldfogel, an economics professor now at the University of Pennsylvania, in his seminal paper, The Deadweight Loss of Christmas.
Ross Gittins explains this in So, Scrooge was right after all in the December 24th issue of the Sidney Morning Herald.Conventional economics teaches that gift giving is irrational. The satisfaction or "utility" a person derives from consumption is determined by their personal preferences. But no one understands your preferences as well as you do.
So when I give up $50 worth of utility to buy a present for you, the chances are high that you'll value it at less than $50. If so, there's been a mutual loss of utility. The transaction has been inefficient and "welfare reducing", thus making it irrational. As an economist would put it, "unless a gift that costs the giver p dollars exactly matches the way in which the recipient would have spent the p dollars, the gift is suboptimal".
The difference between what givers pay for presents and the value the recipients put on those presents is the loss being referred to and, since it's equivalent to tearing up banknotes, economists call it a "deadweight" loss.
Ah! This goes a long way to explaining any number of ugly neckties I have received.
Here are the details:Waldfogel has recently refined his calculations on Christmas's deadweight cost, using a new survey to estimate that, per dollar spent, people value their own purchases 18 per cent more than they value items they receive as gifts.
But there has been research to identify some hidden consideration that makes the seeming irrational rational after all.One possibility is that gifts may procure a source of insurance for the giver. Parents, for instance, may give gifts to their children in the hope the children will care for them in their old age. Adult children may give gifts to their elderly parents in the hope of being remembered at that last great gift giving with lawyers present. Then, money will do fine.
Another line of inquiry is that gifts, particularly inefficient ones, serve as costly signals of the giver's intention to invest in a future relationship. Or maybe gifts are exchanged to break down mistrust, permit co-operation and build relationships.
But such a model doesn't explain why people continue to give gifts in well-established relationships where there is little mistrust and dumb signaling isn't necessary.
Then there is the paper by the economists Bradley Ruffle and Todd Kaplan, Here's something you never asked for, didn't know existed and can't easily obtain: A search model of gift giving. (Hard copy available from the School of Business and Economics, University of Exeter, Streatham Court, Rennes Drive, Exeter EX4 4PU)
These two claim gift giving makes sense in cases where the giver's knowledge of where to find something the recipient wants is greater than the recipient's own knowledge. Or if the giver is in a position to get it cheaper.
So the rule is that the giver gives a gift only when her "search costs" for the gift are lower than those of the recipient.
Gittins comments that this emphasis on the hassle involved in finding suitable presents helps explain why, even though it's regarded as poor form to give money, parents are more likely to resort to money as their children get older. The parents' search costs rise as they become less certain what their kids would like, whereas the kids' search costs fall as they become more independent. This theory also helps explain why people who go on trips return with presents. Their gifts tend to be things that are dearer or harder to find at home. Even so, it's hard to believe the theory accounts for more than a fraction of gifts.
Gittens adds his own theory:I prefer the theory that, because of the discipline many people impose on themselves to ensure they stay within their budgets and make ends meet, many of us have trouble allowing ourselves to indulge in the odd luxury purchase.
So we're pleased when friends and rellos brighten our lives by giving us little luxuries - from chocolates to perfume to jewelry - and when Christmas and birthdays give us a license to spoil the kids.
I should tell you Ruffle has opined that the utility from gifts consists of not only the monetary cost and value of the gift, but also the emotions associated with it.
He contended that "gift giving improves welfare if the giver's pride and the receiver's surprise from the gift plus the receiver's monetary valuation of the gift exceed the giver's monetary cost".
Predictably, however, the economics profession has shown little enthusiasm for this airy-fairy speculation and Ruffle himself seems to have abandoned it.
I see this emotional component a slightly different way.
I myself hold that the shame of not giving a gift when everyone else has drives the whole business. One must give gifts. If one doesn't, one is a pariah. And the shame of giving a gift that is "not right" - or so obviously inexpensive that the recipient wonders how they have offended you and why you're insulting them, but is of course too kind to voice those thoughts - also drives up the "gift cost factor."
Thus the whole business of giving gifts is an elaborate social mechanism by which we avoid the pain of being ostracized. One gives what one really cannot afford to another who really doesn't need the item, and avoids a whole lot of pain.
But I liked the gifts I received. The very rare brandy will go well with the cool nights, and the gourmet cookware I'd never buy for myself will enable me to do some great meals for my friends. I just assume that what gifts I gave to others were shrugged off as marginally acceptable - the best I can hope for these days.
And I bought myself a new pipe - the kind I like. My gift to myself. I got that right.
Saturday, 27 December 2003
Topic: Iraq
In an alternative universe where folks don't actively try to bring about the apocalypse...
Wednesday, 10 December 2003 I posted this:
What? The apocalypse scares you? Really? What's your problem?
and James Benjamin today at The Left End of the Dial has some thoughts on the apocalypse stuff.... The apocalyptic types, regrettably, run the show in Washington DC these days, however, and seem hell-bent on continuing their crusade to purify America and the world.
I'm not entirely a pessimist, though, and here are a few ideas I have for the upcoming year:
1. The events of 9-11 were truly horrifying, and should have never happened. The take-home message that I accepted was that we in the US are also vulnerable to terrorist attacks. Terrorism, which I tend to look at as military action using unconventional means by extremists who do not possess conventional means of warfare, is a fact of life. We do what we can to protect ourselves, and hope for the best.
2. The "war on terror" was a mistake. An unending war against an amorphous "enemy" will not foster security: instead, it has fostered paranoia at home, paranoia regarding US intentions abroad, and has energized those extremists who have their own apocalyptic visions of purifying the world and expunging its evil influences. My hope is that the next President will immediately acknowledge that the "war on terror" approach has been wrong, and that working with the international community to handle the problem of terrorism will be more effective. It sure beats alienating our friends, creating new enemies, and overextending our military and wasting our financial resources like we are currently doing. Right now, the US government has become the ideal dance partner for the apocalyptic-minded Islamist groups like Al-Qaida. The current path will only increase the tempo and intensify the dance. We need to simply refuse to dance, and instead go back to working with our friends.
3. The current president is incapable of ending this "dance of death" with equally militant apocalypse-minded Islamic groups. He needs to be replaced this November.
4. Rather than capitalize on the deaths of terror victims in the name of some grand crusade against some amorphous evil entity, our government should instead frame terrorism and terrorists for what they are: criminals. The approach of our current president has only made terrorist groups appear as "forbidden fruit" in the minds of young men and women who are most likely to be sympathetic to these groups. The latter approach has the potential for turning these same groups into "tainted fruit". My hope is that the next President understands this.
5. Living in fear is no way to live. Bad things do happen. Most of the time they don't, and often one doesn't find trouble unless one actively seeks trouble. As a kid, I eventually learned that being street-savvy was good for self-preservation; being street-savvy is not a fear-based approach but instead is more of a common-sense approach. I suspect that there is an extension of street-savviness that can be applied to international relations and to the problem that terrorism presents. Be cool, keep your eyes and ears open, but always remember that there's nothing to fear but fear itself.
Well, he could be wrong.
We have, however, chosen the other way - endless military actions to overthrow governments who have some sort of connection to terrorism, or might have. Threaten - no diplomacy and no negotiations - and if they don't cave in and admit their humiliation, make them pay the price. Replace those governments with secular, free-market democracies, with our guys in helmets on every corner, making sure they get the message. Makes the world safer. Anyway, that's that idea, and that's what we do.
I'm not sure exactly how that fixes the problems with terrorists, who don't seem to need governments of any sort, really, but that is what we do.
And no matter who writes what, or who votes for whom, that is what we will continue to do, as the majority of us really do revel in our power.
To be able to do anything we want in the world, to anyone we want, any time we want, no matter what anyone anywhere says... well, it's hard to walk away from such dominance, such pre-eminence, such authority. It's addictive. And it begins to feel like God's gift.
Maybe it is. That idea is in the air a lot these days. Bush and Rove claim so.
And so dissent, questioning and suggesting alernatives become blasphemy. Such are our times.
Friday, 26 December 2003
Topic: The Culture
The Lord of the Rings: The Return of the King - as seen by a columnist who claims to be a novelist, a Christian libertarian and member of both Mensa and the Southern Baptist Convention.
In World Net Daily you will find this by one Vox Day, in his weekly column. Vox Day, a pseudonym one supposes, is also syndicated nationally by Universal Press Syndicate.Peter Jackson has made a film for all time, but also one that is uniquely apropos today. As John Rhys-Davis, the actor who played Gimli, has said: "I think that Tolkien says that some generations will be challenged. And if they do not rise to meet that challenge, they will lose their civilization."
Today, our civilization faces just such a challenge, with enemies within and without. America, the champion of the West, is challenged by the orcs of violent Islam, the would-be Sauron that is the United Nations, and its Nazgul - France, Germany, Russia and China. Nor should we forget our globalists in government, who, like Saruman, would betray everything to which they are sworn in an attempt to win the favor of the growing shadow.
We cannot all be Aragorn. But, perhaps we can each strive to be a Frodo, shouldering our lonely burden for the sake of those and that which we love. And we can hope for loyal companions such as the trusty Sam Gamgee, who will walk by our side, always ready to lift us up and carry us when we falter.
In this manner, we will persevere ... until the return of the King.
Okay, I get it. Aragorn is not exactly the "Fisher King" figure in your typical "mythic" reading, the king-healer. He's really Jesus. Got it.
And Jesus will save us from the United Nations - the evil unbodied eye. The swarthy orcs, them dusky bad folks, are the Muslims. The black riders, the undead enslaved former kings, who exist only to kill for their evil master, are really "Old Europe" - France, Germany, and Russia - and the other major power who thought the Iraq war was unnecessary, China. And the globalists in our government, Powell and those guys at the State Department, who think we should consult and cooperate with other nations rather than humiliate and threaten them, are just like the evil wizard who seeks to cut down all the trees, strip the earth bare, breed half-human warriors and win the favor of the evil one (the United Nations).
How odd. Why didn't I see that? No one ever asked me to join Mensa. Oh well.
Thursday, 25 December 2003
Topic: Bush
Americans and the French: Is George Bush "Forrest Gump with rockets?"
On Sunday, 21 December I commented on an item from The Economist which seemed to be an analysis of what passes for humor in France. See this: Jerry Lewis, Monty Python and ? Le P?re No?l est une Ordure ? - The reason we don't get along with the French? Our sense of humor.
I came across this reaction from an American living in France:Name: Michael Padnos
Hometown: Vauvenargues, France
As an American living in France, I am always astonished to read the American press on the subject of the frogs. What, precisely, was the point of the article about "Do the French have a sense of Humor?" Was it to prove that the word "humor" did not exist in the French language until recently? The writer seems to think the French have never had any funny films with an int'l reputation: has he ever heard of M. Hulot? How about batches of Depardieu films, and "The Tall Blond man with One Black Shoe", just to mention a few that come to my mind in an instant. The French satirical TV program "Les Guignols," which the author does mention, is about 100 timnes funnier --and more popular -- than any American equivalent; Fench satirical magazines and newspapers, of which he mentions only a few, are VERY funny --and v. popular; there is no equivalent for this massive outpouring of ha-ha anywhere in American culture.
America seems to think that the best way to view the world is through the eyes of a moron - hence Forrest Gump. For me, one of the pleasures of living in France is things here are seen as endlessly, hilarously funny, and nothing is as funny to the French as the French themselves. The French, in my experience, love to laugh at almost everything, starting with themselves. Indeed if you want to see the difference, just step into a restaurant in the U.S. and listen to the silences, or the pompous businessmen busy one-upping one another; and then step into any restaurant in France and listen to the level of laughter.
To a person used to living in France, the country that invested joie de vivre, America seems like a grim and terrified place, and its leader like Forrest Gump with rockets.
Please, spare us all that sniggering at the French. I find it so false, and so tiresome, and so uninformed, and so jingoistic, and so smug - I'll stop there. I trust you get the point.
Forrest Gump? The movie America loved, about how a man with no education, no experience in the world, no social skills and the intellectual capacity of s seven-year-old was somehow better than everyone else, and more worthy of our admiration and his success than those who value such silly qualities? The simple, innocent man.
Curious. This American living in France is onto something.
Forrest Gump may have been the movie that made the election of George Bush possible. It posited the virtues of 1.) knowing nothing, 2.) being unable to really learn anything, and 3.) being utterly incapable of seeing any complexity. Gump was cute and endearing, and saw only simple truths. And only good things happened to him. We all loved Gump. So we elected one.
Topic: Photos
A warm, rainy Christmas Day in Carlsbad, California
Outside in the rain....
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