Does Santa Clause reduce the rate of savings?

by on December 7, 2006 at 7:40 am in Economics | Permalink

If Christmas didn’t exist as a holiday what would happen to consumption and production?  I can think of several hypotheses.

1)  Consumption would remain the same but people would spend more on themselves and less on others.  Would deadweight loss be reduced enough to make such a move wealth-enhancing?

One also wonders how much Christmas spending within the family is actually spending on oneself?  Did that catalog on my chair just happen to fall open to the page with the black pearls?

2)  Consumption would decline and savings would increase.  Many people go into debt to buy Christmas presents.  Does Santa Clause reduce the rate of savings?  Scrooge says yes!

3)   Other holidays would become more important and total consumption and giving would remain the same.  Is there a Coase theorem for holiday gift-giving?

Increased giving at other holidays, such as birthdays, would help to smooth production and consumption.  Consumption smoothing is welfare enhancing in partial equilibrium but not necessarily in general equilibrium.  I want my consumption smoothed but I’d like to get all my gift giving done in one big batch thank you.

Production smoothing is also generally welfare enhancing in partial equilibrium but not necessarily in general equilibrium.  In general equilibrium, a big push may be necessary to cover fixed costs.  The seasonal cycle may be an implementation boom.

Comments are open.

US December 7, 2006 at 8:16 am

How ’bout 4: Consumption would increase. No idea how to model this, but let’s not rule anything out.

josh December 7, 2006 at 9:10 am

2 and 3. People like to give and receive gifts, but it would be tough to fully replace the current Christmas season.

#5: There would be a lot less people checking “Christian” on their census forms.

meep December 7, 2006 at 9:57 am

When I was in Japan in the 90s, I noted that they had several gift-giving seasons, the one I got to observe directly was the mid-year gift-giving. That’s pretty much the name for it.

Interestingly, the gifts tended to be very practical and would get used up. At the grocery stores there were “gift packs” of toilet paper and aluminum foil. The family I was staying with got a sampler of fruit and a six pack of beer.

Then I participated in a family sports day contest, and they had one set of prizes for us foreigners (pretty knick-nacks, sake glasses, souvenir stuff) and the Japanese families (paper towels, toothpaste, aluminum foil, etc). It was highly amusing. I ran in races against 10-year-olds (I was 20) because they’d give us prizes for doing anything. Some of my cohorts thought it was degrading to compete against little kids, but I thought it was hilarious and lucrative.

meep December 7, 2006 at 9:58 am

In short, I think that gift giving is pretty popular, and likely to be abundant in consumerist societies. It’s just a matter of what kind of gifts. When the gift-giving opportunities are common, and one has limited space, the gifts are likely to be as the Japanese do for most ocassions. When it’s only once a year, and you’ve got lots of storage space, you’re more likely to see durable goods as gifts.

S December 7, 2006 at 3:43 pm

In Venezuela, the toy industry pushed for a children day in July.They got it.Two xmas for someone

Barkley Rosser December 7, 2006 at 5:30 pm


But your suggestion would mean that more people
would get the shaft on their birthdays.

Karl Smith December 9, 2006 at 11:42 am

Fiance is from the former Soviet Union, and no one in their extended family (all now in North America) is into even secular christmas. Birthday giving, however, has reached insane proportions.

Jerod December 11, 2006 at 1:19 pm

I think that Christmas is over rated. I think about it this is supposed to be the day in which Jesus Christ was born and we make it this day of buying presents, who gets the best material things, how many presents we’re gonna get. For me Santa Clause never exsited. I look at it as a day of happiest that should be spent with family.

tod June 19, 2007 at 3:09 am

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