Saturday, November 27, 2010

Coming upon Christmas

With less than a month to go until Christmas, I thought I'd touch, very briefly, on the more materialistic aspect of it - namely, gifts. I used to have the notion that Christmas had become corrupted by the capitalistic urge to make money, with retailers utilizing the holidays as an excuse to sell you many things you didn't necessarily need, for yourself and others. Those people would be influenced by all those advertisements, like puppets on strings, giving their dollars to whoever pulled their strings the best. And then to alleviate their buying binge, they'd give some of the purchases to friends and family, expecting them to do likewise so they'd feel somewhat better (reciprocity bias). Then I realized that I am a capitalist, and my viewpoint changed.

Well, it didn't really change, per se. At least, not my cynical view that people might purchase things they didn't need. However, I no longer thought of the holiday as "corrupted" and people being played like puppets on strings. And so, I felt no guilt at retailers and everyone using the holidays as an excuse to sell things. If people wanted to buy things (choosing to enter into a transaction as responsible adults), regardless of need or not, then who was I to judge them for buying them, and who was I to judge retailers for taking advantage of that desire and discounting merchandise in competition for those people's dollars/pounds/euros/whatever? After all, if they didn't want to participate in Christmas from a gift-giving view, they did not need to. Sure, there is the social proof bias that everyone else in your family is doing it, and so you should too. Then there's the reciprocity bias that everyone will give you a gift, and so you should return the favor too (even if the gift given is not the same dollar value as the gift received). So opting out of the holiday could be hard. But people didn't seem to want to opt out - why opt out of receiving gifts, even if it means you have to buy gifts yourself?

The view in the first paragraph is a Galbraithian inspired view, incidentally. The view in the second paragraph is more Hayekian in influence. My viewpoint has shifted in general from a Galbraithian viewpoint to a Hayekian one, and I thought the example above might be a nice illustration of how those two economic schools of thoughts see the world. We are puppets on strings in a Galbraithian world, and the person who understands our bias can easily manipulate us into doing whatever they want, via advertisements, speeches, or whatever. There is some truth in this, I think.

However, there is also truth in a Hayekian point of view that we are not mere computers who will do things if the proper line of code is written. To extend the metaphor, we are computers who can reject the line of code no matter how it is written. We can be influenced, but we can choose what to be influenced by. There are many lines of code written by different programmers, but we can choose which one to accept. And we often do. This is very easy to do for a person aware of the psychological biases in our mind, but I think that any person can do this, and people do this more often than we realize. So I think there is some truth in this too.

My perspective, ultimately? I think the truth lies somewhere in between. We are rational creatures who can be manipulated some of the time, but other times we pause to reflect and make the choice to transact or not, to listen or not. We are Galbraithian and Hayekian in our behaviour.

(Greg Mankiw does a much better job of explaining this than I do. To see his little summary, go here where he discusses the little box of information he put into his Economics textbook on Galbraith and Hayek.)

One more thing. After 24 years of opting out of Christmas each year, I've decided that I might as well opt in this year. I partially opted in last year, but copped out by getting boxes of chocolate for people. This year I've decided to have some fun by thinking of what book or object a friend of mine would like. Of course, a wishlist by that person would also be good, though part of the pleasure of giving a gift finding something that the person doesn't know about but would want it if he or she knew about it. As I've signalled over the majority of my life that I do not participate in Christmas though, I am curious if this contradictory signal will be properly interpreted by friends and colleagues. In other words, I wonder if reciprocity bias will assert itself in time. I don't think so if people receive their presents on Christmas day. But before, giving ample warning? I think that would give enough time for reciprocity bias to do its work (I have a wishlist, incidentally, but I think anyone reading this is smart enough to figure out where to look if they happen to receive a gift from me and choose to listen to their  reciprocity bias). Though I might end up with a bunch of chocolate as a result, which would be a hilarious turn. (If so, I'll have to host loads of wine and champagne tasting parties to get rid of them, which some people no doubt would like.)

Why books, by the way? Because I consider my friends erudite enough that I think each of them would enjoy a book that broadens his or her horizons. Though I may give wine or champagne/sparkling wine (to satisfy the aparatchiks of the EU) to some in lieu of books.

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