Is Christmas good for the economy?

You can look at the Christmas business as part of the economy. Or you can look at it from an economist’s point of view. The difference is pretty big.

The word “economy” is sometimes confused with “economics”. 

While “economy” is the system in which money, industry, and trade are organised, “economics” is the study of decision-making people. Since economics is a social science, the core of economics is to understand people’s behaviour – as individuals and in groups – and to improve people’s lives.

The proximity of economy and economics sometimes leads to the assumption economists were always business-friendly and entrepreneur-friendly. This is wrong. Economics does not advocate ever more production or work. Instead, the focus is on the human being. With all their wishes and needs, men and women are at the core of economists’ considerations.

This is often enlightening. The economic perspective is exceptional. 

Here’s an actual example of what I mean by that.

The Christmas economy is all those industries that participate in the Christmas business. It is a billion-dollar business. (If someone owned the Christmas brand, they would be by far the richest person in the world.) Film studios release high-budget movies during the holiday season, two billion Christmas cards are sent each year, and more than 20 million Christmas trees are sold  – all that in the US alone. On average, every US American spends about 900 US-Dollars on gifts and other holiday-related items. – Christmas seems to be good for the economy.

This is the “economy view”.

The “economics view” is far-reaching. 

What looks like an economic success story at first glance becomes more critical, at least more differentiated, at a second glance.

In most Western nations, Christmas Day is the least active day of the year for business and commerce; almost all retail, commercial and institutional businesses are closed, and nearly all industries cease activity. 

So public holidays are at the expense of economic output. Those who do not work do not contribute to the economic output. It’s that simple. 

Therefore, the widened view of economics leads to this question: Does the amount of shopping at Christmas increase a country’s economic performance, or is the performance reduced because people don’t work at Christmas?

Things are sometimes complicated in economics, right?

And it gets even more complicated when you put people first.

What is suitable for people? How much work? How much free time? What is the best ratio?

If you look at economic performance, you would think that the more people work, the better. If you look at people, it’s different because spare time is a precious good. – So, prosperity cannot only be measured in terms of gross domestic product.

Another aspect makes the “economic benefit” of Christmas even more questionable.

Despite all the spending, Christmas could be a so-called deadweight loss.  Because of the effect of gift-giving. The loss results from the difference between what the gift giver spent on the item and what the gift receiver would have paid for the same thing. In the 1990s, a study for the USA estimated the loss of wealth due to Christmas gifts at around 4 billion US dollars a year.

Some economists, therefore, tend only to give gifts of money. – This might be seen as heartless. But, hey, that’s the price economists have to pay for their enlightenment. ;-) 

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