Utility and Psychic Income

Harvard professor Harvey Mansfield has an interesting article in The Weekly Standard. In the article, Mansfield discusses the economics of Christmas. Or more specifically, economic studies of Christmas, criticizing economists who have, in turn, criticized Christmas as a woefully inefficient method of transferring goods. He makes his point by referring to work that looks at Christmas from the standpoint of the receiver. Evidently, there are studies that discuss the utility or value of a wrong or inappropriate gift (from the standpoint of the receiver). One presumes the receiver could be better off selecting their own gift, (see gift certificates or money as a utility maximizer).

Mansfield then proposes to look at Christmas from the stand-point of the giver, extolling generosity and preferring it over liberty (as in the liberty of the marketplace if I understand correctly). However, in his last paragraph, the author talks about generosity as a "utility." While I might quibble about the term, I will offer that Mansfield is ascribing an economic aspect to generosity.

To my understanding of the idea of "psychic income" (the subjective value of nonmonetary satisfaction gained from an activity), the giver receives value from bestowing a gift on an acquaintance, friend, or loved one. And thus there is an economic aspect to Christmas. And while the psychic income of the giver may be different from the perceived utility of the receiver, there's still plenty of economics to provide a sound and valuable explanation, as well as theoretical utility. However, one could provide a defense for this explanation if one goes back to the concept that voluntary exchange creates wealth. It never says anything about incurring transactions costs (the bother of returns and exchanges).

Of course, one could always reduce transaction costs and offer a Christmas list to those who ask. It works at my house, and generally there's a minimum of activity at the returns and exchange counter because of it.

I look forward to your comments.