Are Homemade Gifts Better Or More Special?

That is what world renown economist Daniel Hamermesh says. The article is A homemade Christmas. Here is the relevant passage, which says that making your gifts is

"...an option that is not only cheaper but shows care and thoughtfulness, said Daniel Hamermesh, an economics professor at the University of Texas at Austin and author of “Economics Is Everywhere.” Hamermesh said studies have shown gifts typically cost more than they are worth to the people who receive them, information that should, but often doesn't, tone down frenzied Christmas shopping behavior.

“There is too much compulsion (at Christmas) to buy something nobody wants,” Hamermesh said. “If the point is to ... show that you care, you would do better (to make something) than spend the money.”"

The point Hamermesh makes about gifts costing more than they are worth to the people who receive them is something I discussed a few weeks ago with Is Christmas Gift Giving Inefficient?.

But just because you take the time to make something does not necessarily show that you care more than if, say, you took the time to earn extra money so you could buy a nice gift for someone. Why would taking time to earn money to buy a gift be less worthy or special than taking time to make a gift? And what if you are not good at hand crafts? Or what if your time is valuable? Do we really want President Obama taking a long time to sew his wife a dress?

Economist Steven E. Landsburg had some interesting things to say about gift giving in his book The Armchair Economist: Economics & Everyday Life. From chapter 2:

"I am not sure why people give each oher store-bought gifts instead of cash, which is never the wrong size or color. Some say that we give gifts because it shows that we took the time to shop. But we could accomplish the same thing by giving the cash value of our shopping time, showing that we took the time to earn the money.
My friend David Friedman suggests that we give gifts for exactly the opposite reason-because we want to announce that we did not take much time to shop. If I really care for you, I probably know enough about your tastes to have an easy time finding the right gift. If I care less about you, finding the right gift becomes a major chore. Because you know that my shopping time is limited, the fact that I was able to find something appropriate reveals that I care. I like this theory."

I think it might also mean that you cared enough to get to know the person in the first place. Dilbert had a funny strip on Christmas about this. Here is what happens:

Panel 1
Dilbert: Merry Christmas. Here's a hundred bucks.
Dogbert: And here's a hundred bucks for you.

Panel 2
Dilbert: We could save another step by setting up an electronic transfer with an annual recurring option.
Dogbert: Excellent.

Panel 3
Dogbert: Or we could not give gifts.
Dilbert: Hush your crazy talk.

Colleges And Universities Try To Be Like Hogwarts. What Would Carl Jung Say?

There was an article in the New York Times recently about how schools tell prospective students how they are just like Hogwarts. It was Taking the Magic Out of College by By LAUREN EDELSON. Here are some things she mentioned about her visits to colleges:

"[at one school they play] a flightless version of J. K. Rowling’s Quidditch game — broomsticks and all."

"So I was surprised when many top colleges delivered the same pitch. It turns out, they’re all a little bit like Hogwarts — the school for witches and wizards in the “Harry Potter” books and movies. Or at least, that’s what the tour guides kept telling me."

"During a Harvard information session, the admissions officer compared the intramural sports competitions there to the Hogwarts House Cup. The tour guide told me that I wouldn’t be able to see the university’s huge freshman dining hall as it was closed for the day, but to just imagine Hogwarts’s Great Hall in its place."

"At Dartmouth, a tour guide ushered my group past a large, wood-paneled room filled with comfortable chairs and mentioned the Hogwarts feel it was known for. At another liberal arts college, I heard that students had voted to name four buildings on campus after the four houses in Hogwarts: Gryffindor, Ravenclaw, Hufflepuff and Slytherin."

"[In] Cornell’s fall 2009 quarterly magazine, [it says] that a college admissions counseling Web site had counted Cornell among the five American colleges that have the most in common with Hogwarts. Both institutions, you see, are conveniently located outside cities. The article ended: “Bring your wand and broomstick, just in case.”"

"I’m not the only one who has noticed this phenomenon. One friend told me about Boston College’s Hogwartsesque library, another of Colby’s “Harry Potter”-themed dinner party. And like me, my friends have no problem with college students across the country running around with broomsticks between their legs, trying to seize tennis balls stuffed into socks (each one dubbed a snitch) that dangle off the backs of track athletes dressed in yellow.""

In the same issue of the NY Times, there was a review of a book by the famous psychologist Carl Jung. The review was titled The Symbologist by KATHRYN HARRISON. The book by Jung is titled THE RED BOOK: Liber Novus. One of the passages from the book was was about Jung's belief in the "deep subliminal connections between individual fantasies and world events."

Mixing fantasy and reality. Sounds like what these colleges and universities are doing by comparing themselves to Hogwarts.

Also, since my semester ended, it will be a few weeks until I post again.

The Ugly Truth About Pirates They Don't Show You In Those Johnny Depp/Keira Knightley Movies

You probably know that there are real pirates, with many of them operating off the coast of Somalia. Their economic impact is particularly interesting. Read Pirate Payoffs Feed Big-Money Lifestyle in Somalia: Big houses, fast cars, easy drugs: Ransom-fed lifestyle creates problems in Somali towns.

For one, the money pouring in is driving up prices. A pair of shoes that used to cost $20 now costs $50, for example. It also causes social problems with so many pirates using alcohol and drugs. "Teenagers threaten their parents that they will join the pirates if they don't get their way." How widespread and accepted is piracy? This quote says alot:

"The price of clothes, shoes and cosmetics is climbing, said Anshur Kamil, a businessman. Pirates don't even have to pay upfront. Those holding ships hostage that haven't yet received ransom can buy goods on credit — at elevated prices — and settle up their debts when the ransom money comes in, villagers say."

Can you imagine walking into a store and buying a pair of Gucci loafers and an Armani suit and telling the clerk "just put it on my tab, I'm good for it because I'm a pirate?" The article also implies that pirates are able to buy brides with their money.

Pirates have set up a stock exchange to find investors. See Somali sea gangs lure investors at pirate lair. This article was discussed at The Marginal Revolution.That article also mentions that it is not hard to attract young men to piracy since there are few legitimate economic opportunities in the area.

Economist Peter Leeson has written a book called The Invisible Hook: The Hidden Economics of Pirates.

Although the Somali pirates make millions of dollars, it still pales in comparison to what the movies make. Pirates of the Caribbean: At World's End took in about $960 million worldwide at the box office while costing about $150 million to make. Then it made about $295 million in DVD sales. And that was just one of the movies.

Is Christmas Gift Giving Inefficient?

In 1993, Yale economics professor Joel Waldfogel published an article titled The deadweight loss of Christmas. The idea is that gift recipients often place a lower dollar value on the item than its actual price. Maybe someone buys you a tie for $20 that you would pay no more than $5 for. So the inefficiency or deadweight loss is $15. Waldfogel estimated that in 1992, the inefficiency or deadweight loss in the United States from Christmas was anywhere between $4 billion and $13 billion.

Not everyone agrees with this. The article Christmas gift giving: a deadweight loss? from Business World mentions:

"the process of gift giving adds value to a gift over and above its retail price. Giving a gift instead of cash says the giver bothered to know what the receiver might want. There are times, in fact, when gifts that weren’t wished for turn out to be most valued. A thing one would not have thought of buying himself might end up a pleasant surprise. Or, an item the recipient might have had money to spend on but never bought for frugal reasons could also turn out to be a gift valued more than its price."

An article from the Economist magazine, "Is Santa a deadweight loss?: Are all those Christmas gifts just a waste of resources?, raised the question "So should economists advocate an end to gift-giving?" Here is the answer they provided:

"There are a number of reasons to think not. First, recipients may not know their own preferences very well. Some of the best gifts, after all, are the unexpected items that you would never have thought of buying, but which turn out to be especially well picked. And preferences can change. So by giving a jazz CD, for example, the giver may be encouraging the recipient to enjoy something that was shunned before. This, and a desire to build skills, is presumably the hope held by the many parents who ignore their children's pleas for video games and buy them books instead.

Second, the giver may have access to items—because of travel or an employee discount, for example—that the recipient does not know existed, cannot buy, or can only buy at a higher price. Finally, there are items that a recipient would like to receive but not purchase. If someone else buys them, however, they can be enjoyed guilt-free. This might explain the high volume of chocolate that changes hands over the holidays.

But there is a more powerful argument for gift-giving, deliberately ignored by most surveys. Gift-giving, some economists think, is a process that adds value to an item over and above what it would otherwise be worth to the recipient. Intuition backs this up, of course. A gift's worth is not only a function of its price, but also of the giver and the circumstances in which it is given.

Hence a wedding ring is more valuable to its owner than to a jeweller, and the imprint of a child's hand on dried clay is priceless to a loving grandparent. Moreover, not only can gift-giving add value for the recipient, but it can be fun for the giver too. It is good, in other words, to give as well as to receive."

Important Notice About The Final Exam For My Students

As I said in class and on the final test taking guide, the 2nd half of the final will be over the "study questions for final" But there will be 3-4 questions on the 2nd half from the last 4 chapters. Please pass this along to anyone in the class.

For ECON 2301 this means chapters 14-17.

For Econ 1301 this means chapters 14, 15, 17, and "Last Chapter"

Can Testosterone Help Women Earn More Money?

You may have heard that women get paid less than men. How big the difference is not always clear. Read Women and the Pay Gap. Now there is research on how testosterone affects pay. This is from the University of Chicago alumni magazine Risky business.

"In general, women tend to avoid the risks that men undertake more frequently, but testosterone may provide an equalizer. Studying the connection between testosterone and high-risk financial careers, Chicago Booth economist Luigi Zingales, comparative human-development professor Dario Maestripieri, and Northwestern University Kellogg School economist Paola Sapienza found that the hormone played an important role for women. The researchers began with a sample of 500 Chicago Booth MBA students; 36 percent of the women chose jobs like investment banking or trading, compared with 57 percent of the men. Higher testosterone levels correlated with greater risk-appetite in women, though not in men. But in men and women with similar testosterone levels, risk-related gender differences disappeared. The findings appeared in the August 24 Proceedings of the National Academy of Sciences."