Around this time of year, some economists, who can suffer from a reputation for being selfish, are heard to be muttering that people shouldn’t give presents at Christmas because it’s not efficient.
Before concluding that economists are grinches, this isn’t in fact an Ebenezer Scrooge policy. What they mean is that, rather than giving presents, it may sometimes be better to give cash. Put this way, it makes a lot of sense, at least for most teenagers – just think, no more unwanted jumpers and bath salts, just money to do what they want with.
There is a more serious side to this argument. In the UK, government policy in the last year has cut universal benefit (income to people in need) and increased food handouts to families with kids. Economists would argue that cash is always king (it’s more efficient) because it allows people to deal with their most pressing needs, which may be for additional heating costs.
This type of efficiency matters in government policy-making, but when it comes to Christmas presents, efficiency isn’t everything. In a survey of top economists, fewer than one in five agreed with the statement “Giving specific presents as holiday gifts is inefficient, because recipients could satisfy their preferences much better with cash.” https://www.igmchicago.org/surveys/bah-humbug/ Even economists recognise that gifts to family members and friends are about inter-personal relationships and are a “signal” to show that you care – economics speak for “it really is the thought that counts.
