The Magazine

When the Giving Is Good

Saving Christmas from the economists.

Jan 14, 2008, Vol. 13, No. 17 • By HARVEY MANSFIELD
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The wrappings are off and the Christmas gifts stand exposed to the light of day. Did you get what you wanted? Christmas is under attack not only for materialism, not only for multicultural failure, but now also for lack of utility. Economists as ambitious as they are cagey--perhaps bored with economics in its usual confines--have become critical of the frenzy of Christmas gift-making. The gist of what they say: Christmas is a highly inefficient way of connecting consumers with goods.

That confident description of Christmas, full of boyish impudence and gleeful irreverence, tells us something about the nature of economics. It could not have been given if we as a people were not devoted to economics, more so than to what is sacred in Christmas. But still such thinking makes us decidedly uneasy.

Now, if we can look at Christmas from the standpoint of economics, why not look at economics from the standpoint of Christmas?

Economic analysis says that consumers would be better off making their own purchases, buying things they know they want, rather than trying to get the benefit out of gifts bought ignorantly for them by others. Worse than ignorance is the imposition of the giver's own taste or views, as when a conservative woman I know kept giving her liberal sister the gift of a subscription to a magazine her sister did not want to read. Christmas offers compelling opportunity to the human temptation to improve one's friends and relatives. As for the economy as a whole, the analysis continues, it would be better off without the surge in sales of Christmas gifts at the end of the year, if only businesses could be sure that the same sales would be spread out more evenly. Thus, however nice it is to receive presents, it is against the general utility that we feel compelled to give them at one time.

Or is it against our liberty to feel compelled to give at all? The economists' critique of Christmas giving exposes a characteristic dilemma in their thinking about utility and liberty. Most of the time economists these days do not care to pass judgment on the things people buy or sell. These are "preferences" not examined within economics; they are givens from which economists take their start. "Preferences" imply priority, one thing preferred to another. Perhaps it might be better to call them whims, not necessarily implying any set preferences but in principle open to sudden change without reason or explanation. Not passing judgment in any way leaves individuals free to make their own choices without being frowned on by moralists.

This is the liberty aspect of economics, and its premise is the sovereignty of the individual. The individual can want what he wants, not what he ought to want or, in someone else's analysis, is naturally inclined to want. The sovereignty of individual preferences also helps economics by freeing it from having to understand human nature. Economists can make mathematical models of behavior without considering whether their mathematics describes actual human beings accurately. Economics, no longer confined to a particular subject--namely, money--can expand into other fields such as psychology, sociology, and political science.

On the other hand is the utility aspect of economics, revealed in the critique of Christmas giving as less useful than it could be. Here economics does pass judgment on preferences, preferring those that are useful over useless whims. Here, too, is the connection we expect between economics and learning to be economical and to economize. In this aspect economics is not a means to any end you may think up but itself an end, a way of life--the life of efficiency and frugality. This life is bourgeois, middle-class, and opposed to your wasting your money on whims, as do rich aristocrats.

In the history of economics there is a movement from objective utility to free, subjective preferences, but from the first, economics was divided between utility and liberty. Adam Smith praised the free market as "the system of natural liberty," but he also deplored spending on "trinkets of frivolous utility," which are naturally bought and sold under that system. In The Wealth of Nations he contrasts the waste and vain display of aristocratic hospitality (the ancestor of the free lunch) with the productive, profit-seeking frugality of the commercial class. The fundamental incoherence in economics is that it wants to pinch pennies (utility) but has no reason to stop you if you don't (liberty). That is why economics is always important but never decisive. Economists never say, Listen to me! They always say, Listen to me if you want to know what I have to say.