The Real Economics of Holiday Gift Giving

It’s trendy to get your economist on around the holidays and complain about the inefficiency of gift exchange.  Giving money is a more efficient way to make the recipient better off.  But that’s a fallacy that only trips up poser-economists.  To a real economist, that’s like observing that eating an omelette is an inefficient way to get all of the nutrients we need in our breakfast.  Yeah, so?  That’s not why I ate it.

A real economist recognizes unregulated, voluntary exchange when he sees it.  He doesn’t bother inventing some hypothetical motivation for the exchange because he understands revealed preference. If they are doing it voluntarily then it is efficient, regardless of what they think they are getting out of it.  Indeed, the pure consumption value of buying a plaid sweater for somebody is a perfectly good motivation.  And since the recipient voluntarily accepts the gift, even better.  If there was a Pareto superior alternative they would have done that instead.

So this holiday, swat that poser economist in red off your left shoulder, hold hands with the real economist in white on your right shoulder and give to your hearts’ content.  (Oh and I am very easy to shop for.  Just don’t forget to include a gift receipt!)

The Ornament Game

Each Christmas my wife attends a party where a bunch of suburban erstwhile party-girls get together and A) drink and B) exchange ornaments. Looking for any excuse to get invited to hang out with a bunch of drunk soccer-moms, every year I express sincere scientific interest in their peculiar mechanism of matching porcelain trinket to plastered Patricia. Alas I am denied access to their data.

So theory will have to do. Here is the game they play. Each dame brings with her an ornament wrapped in a box. The ornaments are placed on a table and the ladies are randomly ordered. The first mover steps to the table, selects an ornament and unboxes it. The next in line has a choice. She can steal the ornament held by her predecessor or she can select a new box and open it. If she steals, then #1 opens another box from the table. This concludes round 2.

Lady #N has a similar choice. She can steal any of the ornaments currently held by Ladies 1 through N-1 or open a new box. Anyone whose ornament is stolen can steal another ornament (she cannot take back the one just taken from her) or return to the table. Round N ends when someone chooses to take a new box rather than steal.

The game continues until all of the boxes have been taken from the table. There is one special rule: if someone steals the same ornament on 3 different occasions (because it has been stolen from her in the interim) then she keeps that ornament and leaves the market (to devote her full attention to the eggnogg.)

Theoretical questions:

1. Does this mechanism produce a Pareto efficient allocation?
2. Since this is a perfect-information game (with chance moves) it can be solved by backward induction. What is the optimal strategy?
3. How can this possibly be more fun than quarters?

Grim Trigger

He tottered over to the thermostat and there it was: treachery. Despite a long-fought household compromise standard of 74 degrees, someone — Adler’s suspicions instantly centered on his wife — had nudged the temperature up to 78.

For the sleepy freelance writer, it was time to set things right . . . right at 65 degrees. “I just kept pushing that down arrow,” he said of his midnight retaliation. “It was a defensive maneuver.”

The article suggests that women generally prefer higher thermostat settings than men.  (It is the opposite in my household.) The focus is on air conditioning in the summer and I wonder whether this ranking reverses in the winter.  (My wife prefers more moderate temperatures:  cooler in the summer, warmer in the winter. )

Repeated game exam question:  will this make the climate wars better or worse? Give your answers and reasons in the comments. Ushanka Shake: Knowledge Problem.

Nerdy Chicago Weather Joke

Q: How do you prove the existence of Spring in Chicago?

A: By continuity.

In February it was zero Farenheit. Today it is muggy and approaching 90.  By continuity, Spring happened somewhere in between.  But note that this existence proof is not constructive.  It is of no help in telling us exactly when it was that Spring fluttered by.  I must have been sleeping at the time.

How Long is Winter in Chicago?

I have been trying to come up with a practical measure of the length of Chicago winters.  Here are a few.

• On Oct 4 I swapped out my summer clothes for winter clothes.  Tomorrow I will take the summer clothes back out of storage.  7 months of winter.
• On Nov 10 I wore my heavy winter coat for the first time.  I downgraded to my wool coat for the first time on March 27.  4.5 months of deep winter.
• Sep 9 was the first day I did not wear flipflops. I wore them for the first time last week. 4.5 months of non-winter.

When to Snuff It

This post suggests that data on suicide seasonality debunks the myth of “winter blues.”  Most studies show that suicide rates peak in the Spring suggesting that Spring is a more depressing season than Winter.  But to make this inference we need a model of the optimal timing of suicide.

Suppose that your emotional well-being is a stochastic process which is mixed with a seasonal trend.  If Winter makes everyone unhappy, then this transient shock confounds the movements in the underlying stochastic process. You are not able to uncover the realization of your emotional random walk until after Winter is over and the seasonal component has washed away.

So you are really depressed in the winter but you are willing to wait it out to find out how you feel in the Spring. If Spring arrives and you are still depressed, you know you are riding a permanent shock.  Thus, the spike in suicides in the Spring actually proves that Winter is indeed the most depressing season.

Snow, Creativity, and Walnut Soup

This is a beautiful post from Alinea at Home.  It is worth reading the whole thing, but this bit resonates with me.

And that’s why I think I was drawn to the Alinea cookbook above anything else.  Because it’s so not me, but represents traits and skills I admire in others, but had not yet been willing to take the risk to figure out how to adapt or embed in myself.  I don’t know if it’s possible for me to change in that way or explore the possibility of rewiring (or even just tinkering with) my brain in this manner, but I knew I needed to get better about breaking out of my comfort zone, and doing it with food seemed to me to be a path that would make me the most willing to learn.

There are people who inspire and there are people who are very good at getting inspired by others.  We need both.