Tuesday 18 December 2018

The Economics of Christmas


Christmas is typically a peak selling season for retailers. For some, it represents as much as 30% of annual sales.

The average American will spend USD700 on holiday gifts and goodies. That totals more than USD465 billion according to National Retail Federation estimates. And if that money was spent on U.S. made products, it could generate 4.6 million jobs. Christmas Day itself is the least active day of the year in the Western world.

Despite overall spending and economic stimulus arguments advanced, one economist’s analysis suggests overall Christmas spending is a deadweight loss under orthodox microeconomic theory. Why? Because of the effect of gift-giving. This loss is calculated as the difference between what the gift giver spent on the item and what the gift receiver would have paid for the item. For example in 2001, the estimate was USD4 billion in deadweight loss in the U.S. alone. In other words, 25% of all purchases could be unwanted items (others suggest it lies between 10% to 33%).

Pope Francis likened the obligation to buy gifts at Christmas as “material slavery”. The sooner we are free and get back to the real meaning of Christmas – the gift of a Saviour born to save everyone “who calls on His (Jesus) Name”. Amen!

“Merry Christmas Everyone”



Reference:
Surprise! Christmas Spending Isn’t Good for the Economy, David Kyle Johnson



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