A Christmas Repost

December 25, 2011
Posted by Jay Livingston

Economists, says Dan Ariely (WSJ article here), have a problem with gift giving.  It does not fit into their models.  It is supremely irrational.  Some economists write as if they are actually offended by it, as though gift giving is literally unnatural, a violation of human nature.  But if there is a “natural” economy, it is not an economy based on rational self-interest.  It is the gift economy.  Gift economies precede even barter economies.  The rationalized market we take for granted is an economy-come-lately.

Matt Yglesias in Slate  has a take similar to Ariely’s. He also has some suggestions for gifts. 

Even I said something along the same lines two years ago, and I’m reposting it.  If stores and radio stations can recycle the same old songs (including “mine”) every Christmas, and television can give us the same Christmas specials, why not?

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What was in those boxes we unwrapped and opened today? Gifts, most people would say.


But according to a Grinch-famous 1993 economics article by Joel Waldfogel, those boxes were also crammed with “deadweight loss” – the difference between what the giver paid for the book or bauble and what it was actually worth to the recipient.

Waldfogel surveyed Yale undergrads and concluded that “between a tenth and a third of the value of holiday gifts is destroyed by gift-giving.” Destroyed. That $40 sweater you gave to your cousin’s husband – you destroyed $10 of its value.

Here’s the key question Waldfogel put to his Yalies about gifts they’d received: “If you did not have them, how much would you be willing to pay to obtain them?”

By this method, a really good gift would mean a high deadweight loss. For example, I would never pay more than $40 for a sweater for myself. No sweater to me is worth more than that. But suppose a good friend bought me a really, really nice $200 sweater. I love that sweater. I love it precisely because it’s an extravagance I never would have allowed myself. But the most I’d be willing to pay for it is $40. So according to Waldfogel, my friend destroyed $160 (80%) of the sweater’s value.

When I first heard about the Waldfogel study, I thought it was a bit of self-parody – like those jokes about engineers , where the engineer sees everything in terms of the concepts of his profession and thus misses the point. (Waldfogel, for example, refers to the “inefficiency” of gift-giving, as though the point of gift-giving were efficiency.) But Waldfogel wasn’t kidding. He just published a follow-up book, Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.

In fact, gift-giving has become increasingly rationalized and efficient. Children write letters to Santa specifying what they want; brides and grooms have bridal registries that do the same. Cash and gift cards are becoming more popular as gifts. There is no doubt that gift-giving is an economic exchange, and it would be silly to pretend that economic value has nothing to do with it (it’s the thought that counts). But it’s equally silly to think that it gifts are only economic and that they have no social meaning.

MERRY CHRISTMAS

Taking Pictures or Making Pictures

December 24, 2011
Posted by Jay Livingston
(Cross-posted at Sociological Images.)

Ethnographers worry that their mere presence on the scene may be influencing what people do and thus compromising the truth of their studies.  They try to minimize that impact, and most of their reports give detailed descriptions of their methods so that readers can assess whether the data might be corrupted.

Photojournalists also claim to be showing us the truth – “pictures don’t lie” – but they compunctions about influencing the people in their photos.  Here for example is a photo taken in Israel by Italian photographer Ruben Salvadori.  (This is a screen grab of a video, hence the subtitles.) 


The defiant Palestinian youth, the flames of the roadblock – it’s all very dramatic.  But it is far from spontaneous.


Salvadori studied anthropology, and he is well aware that observers influence what they observe.  But editors want “good” photos, not good ethnography.  So observer influence is an asset, not a problem.
If you point a tiny camera at somebody, what is he going to do?  Most likely, he’s going to smile or do something.  Now imagine this enlarged with a group of photographers. That show up with helmets, gas masks, and at least two large cameras each, and they come there to take photos of what you do.  So you’re not going to sit there twiddling your thumbs.
No, the youths don’t twiddle their thumbs, not with the photogs on the scene.  Instead, they burn a flag.

There relationship is symbiotic.  The photogs want dramatic images, the insurgent youths want publicity.  Of course, even with the Palestinians youths and the Israeli soldiers, when the action gets real, nobody is thinking about how they’ll look in a photo.






(The full 8-minute video of Salvadori talking about photography in the combat zone was posted at PetaPixel back in October, though I didn't hear about it until recently.)

Factor Loading

December 20, 2011
Posted by Jay Livingston

Does my newsdealer know something I don’t?

Newsstands arrange their magazines by category.  There are shelves for Women’s Fashion, Sports, Travel, etc.  One of the newsstands at Penn Station had this interesting grouping.



Investors Business Daily and the Daily Racing Form. Hmmm.

Was I Sleeping in Econ 101?

December 20, 2011
Posted by Jay Livingston

Joe Nocera covers the business beat for the Times, and he’s now a regular on the op-ed page.  I’m sure he knows more about economics than I do.  But I was puzzled by the opening of today’s column about Fannie Ma and Freddie Mac
In their heyday, these strange hybrids — part corporation, part government agency — were the biggest bullies in Washington, quick to bludgeon critics who dared suggest that their dual missions of maximizing profits while making homeownership affordable for low- and moderate-income Americans were incompatible.
Apparently, Nocera agrees with the critics who thought those dual missions were incompatible.  Maybe I was doing my James Franco impersonation in Econ 101, but isn’t that the basic idea of free-market capitalism – that companies seeking to maximize their profits will make more stuff available at lower prices for buyers? 

If those missions are incompatible, then capitalism is a very wrong-headed idea.  But if Nocera is right, if powerful corporations pursuing profits do not always bring benefits to consumers, maybe we need to rethink anti-government, anti-regulation models and policies that treat Bank of America and Exxon-Mobil as though they were the local bodega.

(Nocera also says of the bullies, Fannie and Freddie, “they essentially wrote most of the legislation that affected them, which they larded with loopholes.”  Much the same could be said of the banking and energy behemoths, especially when Republicans are shaping the legislation.)