In this sense, the only efficient gift is an envelope of cash. But because Christmas is about exchanging gifts as opposed to one- sided offerings, what would be the purpose in Jack and Jill exchanging envelopes of cash? If they contain the same amounts, the exercise is pointless. If not, the exchange is embarrassing to the person who has given less, and can damage Jack and Jill’s relationship irreparably. The neoclassicist thus endorses the Scrooge hypothesis: The best gift is no gift.
holiday season? During recessionary times, two or three Christmases might be advisable (preferably spaced out during the year). But Keynesians also stress the importance of reining in the government deficit, as well as overall consumption, when the economy is booming. To that end, they might recommend a special gift or sales tax during the festive season once growth has recovered, or even canceling Christmas when the pace of GDP growth exceeds that consistent with full employment. MONETARISTS: Convinced that the money supply should be the government’s sole economic policy tool, and that it should be used solely to maintain price stability through equilibration of the money supply vis-á-vis aggregate production, the central bank should gradually increase nominal interest rates once summer ends and reduce them sharply every January. The changes in nominal interest rates they recommend depend on the central bank’s inflation target and the economy’s underlying real interest rate, and must reflect the rates necessary to keep the pace of change in consumption demand and large retailers’ inventories balanced. (Yes, it’s true: Monetarists are the dullest economists to ever have walked the planet!) RATIONAL EXPECTATIONS: These Chicago School economists disagree with both Keynesians and monetarists. Unlike the Keynesians, they think a fiscal stimulus of Christmas gift spending in recessionary festive seasons will not encourage gift producers to boost output. Entrepreneurs will not be fooled by government intervention and will foresee that the current increase in demand for gifts will be offset in the long run by a
None of these theories can possibly account for why people participate, year in and year out, in the ritual of holiday gift-giving.
KEYNESIANS: To prevent recessions from turning into depressions, a fall in aggregate demand must be reversed through increased investment, which requires that entrepreneurs believe increased consumption will mop up the additional output that new investments will bring about. The neoclassical elimination of Christmas gift exchange, or even the containment of Christmas largesse, would be disastrous during recessionary periods. Indeed, Keynesians might go so far as to argue that it is the government’s job to encourage gift exchanges (as long as the gifts are purchased, rather than handcrafted or home-produced), and even to subsidize gift-giving by reducing sales taxes during the holiday season. And why stop at just one
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