As it’s Christmas and someone needs to be a scourge, economists are never afraid to step up to the plate and try to get some coal.
Yale Professor Joel Waldfogel wrote an academic paper in 1993 proclaiming that he finds “holiday gift giving destroys between one-third and one-tenth of the value of gifts”.
He thought that giving would destroy $4 billion to $13 billion a year of economic waste.
The Christmas Waste
Waldfogel’s position on waste is that if Peter buys Paul a gift for $50 he has to spend $50. Paul only views this gift as having only $40 of value to him, so in the transaction, there is $10 of economic waste.
The conclusion of the paper is to just give money. This way Peter only spends $50 but Paul can buy himself something that might give him more than $50 of economic value.
What does this Christmas economic destruction have to do with your life?
Waste in Life
The principle that Waldfogel is showcasing is Deadweight Loss, which is the difference in production and consumption of any given product or service. It is an inefficient allocation of resources.
In your life, it is how much output you get from a level of input.
This could be anything you do at work because it has always been done? Does it create more value than it does hassle? Do people just expect it done because it is always done but takes up time and energy and no one actually pays attention to it?
Consider that daily report that someone has to run and send out. Who looks at it? How often do people just delete it? Could it be a weekly report rather than a daily one? Could it be a monthly report instead of a weekly one? Could it be a dashboard that people look up as they require it and so no report needs to be run or sent out?
Efficiency
To avoid dead weight loss, everything should be giving you back what you put in and ideally more.
If the task you are doing, at work, at home, with friends, isn’t giving you back what you put in then it’s a candidate for questioning.
- Is it important?
- Should this task be done?
- If it should be done, should you be doing it?
- Where is the loss occurring?
- Can you do it differently and still get the same or better outcome?
There are always going to be periods of inefficiency, these are normal in the natural ebb and flow of life. This doesn’t mean we should be blind to the inefficiencies and make changes accordingly when we experience them happening.
Luke McMeeken-Ruscoe 