I wrote this five years ago. Perhaps it is a holiday tradition to repost old posts about the deadweight loss of gifts.
In a kitchenware store a few years ago I came across the Rotary Nutcracker, a futuristic-looking device that cracks nuts in a new way. The girl at the cash register gave me a few walnuts to test it. It didn’t crack any of them. This was a curious product, I thought. Who would buy it? The salesperson told me that they’d stocked it for less than a year. I was the first person to test it. It had sold well during holiday season. Now I understood: people didn’t buy it for themselves, they bought it as a gift. As a gift, it mattered much less how well it worked — “it’s the thought that counts.” No wonder I was the first to test it.
Here, I saw, was my theory of human evolution in . . . well, a nutshell. Part of it. Humans are the only animals with occupational specialization — we specialize, and trade. It started with hobbies. Hobbies became part-time jobs. Part-time jobs became full-time jobs. To support full-time jobs — to generate enough demand for the products of this or that specialization — there has to be enough expertise, which builds up slowly. To build up expertise, our brains changed so as to cause creation of special events like Christmas, Japanese New Year, Spring Festival (in China), and a thousand other examples around the world. Such events increase the demand for high-end craftsmanship, thus helping the most skilled craftsmen — the ones most likely to advance the state of their art — make a living. Christmas increases the demand for Christmas cards (fine printing) and Christmas-tree ornaments, for example. Traditional gift-giving has the same effect: It increases demand for “the better things in life.” Most gifts, if you follow the usual norms, are (a) not something you would buy for yourself and (b) not something the recipient would buy. (As Alex Tabarrok has noticed.) They are harder to make — and thus reward skilled craftsmen more — than the stuff we buy for ourselves, just as Christmas ornaments are harder to make than common household objects and Christmas-card printing is more difficult than most printing. Weddings, with the gifts, finery, invitations, etc., are another example. The Rotary Nutcracker didn’t work in my tests but it almost worked. If enough people bought it as a gift, that would finance the research needed to improve it.
Marginal Revolution and James Surowiecki have recently written about the “deadweight loss of Christmas” — about how gifts tend to be worth less than their cost. I think they see this as bad thing but I see it as a good thing — at least, in our evolutionary past it was a good thing. Deadweight loss = research grant. Likewise, the denizens of The Devil Wears Prada appear slightly defensive about the social value of fashion. They seem to believe that fashion is less useful than “curing cancer” (by which they mean doing research to learn how to cure cancer). Actually, high fashion, with its hard-to-make skirts, belts, and accessories, is the same as curing cancer — they’re two ways of increasing the human skill set. Art is the old Science.