Today, I cover one classic economics paper, “The Deadweight Loss of Christmas.”
I love this paper. In fact, this paper confirmed that I made the right choice to major economics.
The paper’s summary is that gift giving creates dead weight loss because it takes time to think about the gift, purchase the gift, and no matter how good you are you will not get the gift that the person wants.
Grandpa and grandma will give sweaters or clothing that is not your style or will not fit. Dad may want fishing gear but you may not be able to afford that so you end up giving something way less of value.
So giving unwanted gifts leads to a cost of returning the good, which involves going back to the store and for the firm, it costs money to get the return and do something with the returned good.
So in the end, there is a huge dead weight loss.
Now the argument goes that sentimental value and feelings can compensate for that dead weight loss somewhat but it is costly.
How do we handle this deadweight loss?
Give cash instead!
Cash is awesome because it can be used anywhere, no deadweight loss.
Ah, such economic epiphany!
The funny thing is that Koreans and Chinese give cash as gifts so looks they figured out about dead weight loss-
These days because giving cash directly seems too aloof, we have gift cards-
And few days ago, I was shopping at Marshall’s and heard this-
When I heard the gift card ad, I remembered the paper about deadweight loss, wow…how memory works. And now I know why I am a researcher.
My wife finds it cool and amusing the fact that researchers can connect anything to research.
Anyway, I was just curious how fungible Marshalls gift card was. So what is the utility, if it is almost like cash then it should not have a much discount on a used gift card website. For instance, you don’t see Amazon gift cards at a discount because you can pretty much buy everything on Amazon so it is like 100% cash.
I looked up Marshalls gift card value through CardPool.
Actually the discount is about 4-5%, wow- that is quite low. I thought it would be higher because the Marshall inventory changes a lot with whatever they can get. So that was interesting. I guess Marshalls gift cards are like cash not much dead weight loss.
One caveat, of course, there is only 9 results so small sample… still an insightful exercise-
Finally, if you are not sure, just give an Amazon gift card. It works 😀
Thank You Jesus for all Your love and wisdom.
I am thankful for being able to conduct research.
Let us share Your love and wisdom with others.
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