Sunday, December 24, 2006

The Economics of Christmas

Happy Holidays,

Did you know that there are actually economists who study theories about Christmas Presents. Greg Mankiw summarizes the research here.

The idea is that Christmas gifts are signalling mechanisms, because in theory giving money should be the optimal gift (since the person can spend the money on whatever he or she wants). However, if a gift is a signal to show how much you care about a person, giving money seems like a big cop out.

You can test this theory out on your boyfriend or girlfriend, give them a gift certificate and see how they like it. Next Christmas--if he or she is still around---you can give them a gift.

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