In Scroogenomics, Joel Waldfogel talks about why giving presents during Christmas generates plenty of deadweight loss. While the old saying goes “it’s the thought that counts”, his argument is that we often receive gifts that we value far less than they cost (at the same time, we give gifts that cost much more than what recipients value them for). Consequently, the imaginary red tornado that distributes gifts is really just generating a whole lot of waste.
Based on that reasoning, it would seem that Chinese New Year is a lot more efficient for our society. When we give or receive angpows, money’s lack of intrinsic value means that there’s no debate as to its value. But think about how we buy oranges in cartons – might a just-in-time inventory system help to reduce the deadweight loss generated by the oranges? Since we don’t actually give the oranges but exchange them, perhaps all we need to do is to make sure we always have just two oranges on hand (barring the temptation to eat them).
Yours in prosperity,