Economist As Scrooge

In Today’s Weekly Standard, Harvard’s Harvey Mansfield writes on "Saving Christmas From The Economists":

Economists … have become critical of the frenzy of Christmas gift-making. … 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, … The economy as a whole… would be better off without the surge in sales of Christmas gifts at the end of the year.  …  In this aspect economics is … 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. …

To justify Christmas giving we need to look past the hasty confusion of the "consumer," so described by economics, to the soul of the giver and see how it is improved by the virtue of generosity. The benefit of giving is more to the giver than to the receiver–a paradox better known to common sense and the Bible than to economics. For having a generous soul saves one from living in the relentless anxiety of never knowing whether one has enough for oneself. … And let us not forget the advantage of generosity to liberty. The commonest form of slavery is slavery to money, and generosity is a kind of liberation as well as utility for yourself.

Economists have explained their critique often enough, and Mansfield has access to enough good economists, so I have to suspect Mansfield willfully misunderstands here — it must be more fun to defend Tiny Tim against mean old Scrooge.  But two points bear repeating:

  1. Economists fully grant that gift exchange is good if it just directly produces enough "warm fuzzy feelings."  I don’t see that exchanging gifts obviously makes us more virtuous, or reduces fear from want or "slavery" to money.  But directly creating valued feelings can be enough.
  2. Economists widely suspect that gifts are signals, given to show that we care, with the warm feelings coming more directly from seeing that others believe that we care.  This might seem a subtle distinction, but it can make a huge difference.  Signaling can easily lead to excess signaling, where most everyone can be better off with signals discouraged.  If we could not give Christmas gifts, no one would think us uncaring for not giving them.

My best guess is that Christmas gift exchange is another admirable activity, of which we have too much.

Added 15Jan:  Mansfield replies (via email):

Thanks very much for your attention to my piece and to my argument. 
To begin a reply I would say in speaking of caring and signaling you are too much concerned with others.  Virtue as virtue is concerned with the perfection of one’s self first and foremost.  Once you start looking over your shoulder at its effect on others, you encounter the difficulty you mention of distinguishing false concern, which is really your advantage, from the real thing, the advantage of another.
But you are a genuine homo economicus and I would not have you otherwise.

Let us assume you are right, that giving creates virtue, and that the usual concern about appearances is less virtuous.  Even so, by our (economists’) evaluation criteria, the question is: how much do people actually want to be virtuous in your sense?  We don’t recommend policy that creates virtue unless people actually want virtue; if people mostly want appearances, then we want people to get appearances.   

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