Yanis Varoufakis: Seven Economic Views on Christmas Presents

By Yanis Varoufakis, a professor of economics at the University of Athens. Originally published at his blog

Coming out of the festive season’s hibernation (spent in Sydney), I thought it appropriate to commence the New Year with a cheeky take on the usual clash between different ‘schools’ of economics, focusing on how each of seven such ‘schools’ might view Christmas…presents.[1] Besides the comic value of the entries below, there is a serious aspect to them: for they reveal, at least, partly, the pompousness, the self-importance, the vacuity, the dark side even of each and every economic theory.

The Neoclassicists: Consumed by their view of individuals as utility maximising algorithms, and their fixation with a paradigm of utility-driven pure exchanges, neoclassicists have no way of seeing the point in Christmas gift exchange. For one, it is a fundamentally inefficient form of exchange. When Jill receives a present from Jack that cost him $X, but which gives her utility that is less than the utility from some alternative commodity Y, which retails for $Y (that is less than or equal to $X), Jill is forced either to accept this utility loss or to embark upon the costly and usually imperfect business of exchanging Jack’s gift for Y. Either way, there is a deadweight loss involved. In this sense, the only efficient form of gift is an envelop containing cash. However, since Christmas is about exchanging gifts, as opposed to one-sided offerings, what would the purpose be in Jack and Jill exchanging envelops stuffed with cash? If they contain the same amounts, they are pointless. If not, they are embarrassing to the person that has given less than the other and can damage Jack and Jill’s relationship irreparably. In this sense, the neoclassicist is drawn to the Scrooge conclusion: the best gift is no gift!

Keynesians: To prevent recessions from turning into depressions, a fall in aggregate demand must be reversed through increased investment which will only come if entrepreneurs trust that increased consumption will mop up the extra production that new investments will bring about. In this sense, the elimination of Christmas gift exchange, or even the containment of Christmas largesse, would be a terrible thing during recessionary periods. Indeed, they might go so far as to argue that it is the role of the government to encourage gift exchanges (as long as they are purchased, as opposed to crafted or home produced), even to subsidise gift giving through sales tax reductions during the festive season. To the extent that it is possible, Keynesians would want to have Christmas two or three times yearly during recessionary times (preferably spaced out during the year). On the other hand, Keynesians are also keen to stress the importance of reining in the government deficit, as well as overall consumption, when the economy is booming. To that effect, they might suggest a special gift, or sales, tax during the festive season once growth has picked up again, even to cancel Christmas when GDP grows beyond a pace consistent with full employment.

Monetarists: Convinced that the money supply is the sole tool that government should ever use, and that the government’s task is to keep average prices stable through the equilibration of the money supply vis-á-vis aggregate production, monetarists believe that the central bank ought gradually to increase nominal interest rates once summer ends and reduce them sharply every January. The changes in nominal interest rates they recommend depend on the central bank’s inflation target, the economy’s underlying real interest rate, and must reflect the rates necessary to keep the rate of change in consumption demand balanced with the rate of change in the inventories of large retailers. (Yes, it is true: Monetarists are the dullest economists that have ever walked the planet!)

Rational Expectations (Chicago School) economists: They disagree with both Keynesians and Monetarists. Their quarrel with the Keynesians is that they think that a fiscal policy stimulus of Christmas present-buying in recessionary festive seasons will not succeed in encouraging gift producers to produce more gifts. Keynesians are, in their opinion, underestimating the acumen of entrepreneurs who will not be fooled by such government intervention since they will foresee that the current increase in demand will be offset in the long run by a drop in demand for gifts in the future (as the government subsidies will turn into increased taxation and/or there will be fewer Christmases during the good times). As output will not rise, all the government subsidies and the additional Christmases will achieve is more debt and higher prices for no new output or employment.  

Libertarians-Austrian economists: Supporters of Friedrich von Hayek and Ludwig von Mises have two major objections with Christmas. First, there is the illliberal aspect of the festive season: they feel that the state has no right, and no business, to force entrepreneurs to close down, against their will (for four days 25th & 26th December, 1st and 2nd January) in a fortnight. Secondly, there is the tendency of the ever-lengthening pre-Christmas consumption boom to expand credit thus causing bubbles in the toy and electronics market. In this sense, Christmas is like an annual ritual of creating bubbles during the Fall that will burst in January with potentially damaging consequences for the rest of the year. 

Empiricists: Convinced that observation is our only tool against ignorance regarding economic phenomena, empiricists are certain that the only defensible theoretical propositions are to be derived by establishing empirical patterns where changes in one set of variables (the exogenous variables) constantly precede changes in another set of variables (the endogenous ones), thus establishing empirically (e.g. through Granger tests) the direction of causality. This train of thought leads them to the safe conclusion that Christmas, and a spurt in gift exchanges, is caused by a prior increase in the money supply and a ceteris paribus drop in savings.

Marxists: In societies in which profit is derived exclusively from surplus value ‘donated’ (as part of the capitalist labour process) by workers, and which reflects the capitalists’ extractive power (bequeath to them by one-sided property rights over the means of production), the Christmas tradition of gift exchange packs a dialectical significance: On the one hand, Christmas gift exchange is an oasis of non-market exchanges that points to the possibility of a non-capitalist system of distribution. On the other hand, it also acts as another opportunity for capital to usurp humanity’s finest instincts and subvert them in its own petty interest so as to boost its own returns through the commodification and cheapening of all that it pure and good about the festive season. As for the more purists amongst the Marxists, i.e. those who still advocate the so-called ‘law of the falling (long term) rate of profit’, they are convinced that capital’s capacity to profit from Christmas diminishes from year to year, thus creating social and political forces which, in the long run, undermine the festive season.



[1] (Readers may profit from comparing my take with that of Dario Perkins’ here.)

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  1. The Dork of Cork

    Noticed that Yanis left out distributionist economic thought.

    In the environment of todays Europe a distributionist gives out cash to his nieces and nephews in exchange for some minor token of value (A pair of stockings perhaps) , making it clear beforehand that nothing extravagant is required of them as it is clear to the distributionist that young people NEED THE CASH while he is happy to make them feel ok by just receiving a minor present which really only serves a symbolic function.
    The distributionist if seen as the local Treasury understands that the power of capital in a industrialized world overpowers all labour and therefore comes to the conclusion that those poor young people labouring to exchange equal value gifts is a waste of time and energy as they are only young once (and only can get work for 8 hours a week)
    They are now free to celebrate new year with their friends in West Cork / Kerry – as a small amount of money is generally very effective in buying happiness and freedom from the shackles of debt slavery.

    1. from Mexico

      Have you read Joseph Huber’s critique of MMT?

      You seem to operate more in same the tradition that Huber does, what he calls “the currency school.” MMT, on the other hand, operates in the tradtion of “the banking school,” he charges.

      As Huber explains:

      “So ‘currency vs banking’ conveys a general frame of reference of lasting relevance to modern money systems. NCT and contemporary monetary reform initiatives clearly stand in the filiation of currency-school teachings and have a close relationship with 19th and 20th-century chartal theories of money. Likewise, they carry the (partially burdensome) legacy of monetary reform movements of the interwar years, such as the stamp scrip movement and the social credit movement, both of which aimed at full nationalisation of money.17 An ancestry of academic origin can be traced through various approaches to 100% reserve banking of the 1930–40s.18 NCT takes up the main structural components of previous currency-type teachings, and continues their legacy in up-to-date reformulations applying to today’s still further modernised monetary and banking conditions.”


    2. from Mexico

      Also, I’m not at all clear as to what you are advocating when you speak of “distributionist economic thought.”

      Is it a policy like Brazil began implementing in 1995? Maria Ozanira da Silva e Silva discusses it the following paper at length, and it guarantees every Brazilian a minimum income, whether they work or not:

      “FROM A MINIMUM INCOME TO A CITIZENSHIP INCOME: the Brazilian Experiences”


      It looks like Switzerland now wants to get in on the act:

      “Switzerland to vote on $2,800 monthly ‘basic income’ for adults”

      Should it come as any surprise that the company that Marc Rich — the tax-evading felon who Clinton pardoned in the last days of his presidency — founded and later moved to Switzerland is one of the most vocal opponents? To wit:

      “At least one of Switzerland’s biggest CEO’s has said if the measure passes, he would consider moving his company out of the country .

      “I can’t believe that Switzerland would cause such great harm to its economy,” Glencore CEO Ivan Glasenberg told the Swiss Broadcasting Corporation. “And I say that not just as the head of a company, but as a Swiss citizen.”

      Glencore said the measure could have a disastrous effect on other Swiss companies, including Nestlé, Novartis and Roche.”

      The sordid history of Marc Rich, Ivan Glasenberg and Glencore is told in the video documentary, Stealing Africa, which can be seen on the internet here:


      1. The Dork of Cork

        I have not read all of Hubers paper but his critical observations of MMT over the first few chapters ring through for me.

        MMT effectively allows free banking with the backing of the state behind it – the worst of all worlds in my opinion.
        Without doubt MMT is just another branch of economic liberalism.

        When I talk of distributionist thought I am thinking of the Co – op movement in Ireland 100 years or so ago , Bellocs agrarian bias,
        But we now live in a Urban . industrial machine – in such circumstances the writings of CH Douglas form a more practical basis of redistribution.

        The Swiss proposed allocation looks a bit excessive – but the capacity to absorb the surplus goods produced by Industry would depend on the local industrial capacity of the state and the prevention of free credit banking going on concurrently with fiat allocation – in such a unhealthy circumstance massive inflation would be the most likely result.

        Also we have a problem which was not on a large scale during Douglas time – the almost total not production of basic secondary goods in western economies as they have been structured in such a fashion to absorb external primary and basic secondary goods , somewhat balanced by the export of more complex goods worldwide.

        For example we now have non consumption of beer in local areas given the paucity of money demand in Ireland
        High volume and weight beer must be exported so that people can use oil to drive around in circles and get those luxury goods they always wanted until they have got them and don’t need them anymore.

        The long range export of beer outside of local areas has never happened on a large scale until today – why is that ?
        These strange production / demand loops do not make any physical economic sense.
        So why are they happening ?

  2. jack

    This would have been far more interesting if it had actually engaged in the microeconoic debate to be had; I was encouraged after the first, but then the author jumps to a lot if irrelevant snark about various macro schools in a (failed) attempt to get a laugh. Instead, the author could have talked of the behavioralists. for examample. so disappointed

    1. from Mexico

      Yes, it was pretty disappointing. There seems to be a reluctance to take the bull by the horns.

      The stark reality is that the field of economics, despite its protestations to the opposite, has concerned itself much more with moral and religious instruction than with science. And as with all religious and moral endeavors, there is a tendency towards dogmatism. And so most economists, like all good evangelists of the faith, really don’t do doubt and questing for reality very well. What they do well is certainty and distortions of reality.

      The trick for economists is to cloak their ontological and metaphysical dogmas in the virtuous garments of science. The best of science entails a generous dollop of skepticism and doubt, and the ability to alter one’s theory when theory doesn’t coform to reality. Of course what economists do is just the opposite: they attempt to alter reality to fit theory.

      Can the behavioralists break the mold? I hope so. But I must admit to being somewhat agnostic.

  3. no more banksters

    “All these theories enhanced the beliefs of some economists like F. A. Hayek, whose economic models were totally excluding altruism and were totally dependent on personal interest. Another economist, James M. Buchanan, disputes the concept of “public interest” and supports that organizations should be managed by people whose motive is money. Concepts like “feeling of personal fulfilment” or “sense of duty”, are not included in their theories.”


  4. Susan the other

    “The dark side of each and every economic theory” We need a global intervention. It can combine all our media resources as well as neighborhood shoulder-to-shoulder gatherings. It will have to be extended over the course of many months, maybe years. And it must be relentless. No excuses. We will no longer enable ourselves to indulge our addiction to absurd economic theories. By the end of the intervention we should all be in tears, hugging each other without laughing. Sharing responsibility evenly.

  5. F. Beard

    And then there’s the Christian view of Christmas:

    … Freely you received, freely give. Mathew 10:8

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