Every year, millions of parents spread the “Santa Claus” myth. Santa Claus is an all-knowing, all-powerful magical man who brings an almost unlimited supply of toys to children around the world. Santa Claus uses elves and flying reindeer, lives in poor conditions, and necessarily travels at 0.5% of the speed of light. Despite these claims being clearly dubious, parents are invested in this story regardless, taking their kids to see Santa, writing letters to Santa, leaving cookies at night, and perhaps most of all cost. It takes a lot of effort to collectively enforce these beliefs. why?
Another expression of this question comes from Gary Becker’s altruistic family model, where members maximize each other’s utility. The model descriptively approximates the relationship between adults: (a) if the wife was not also in the store, (b) if she also would have been there to buy the shoes, and (c ) If the husband were at the store, there is a possibility that the husband would buy shoes for his wife. This knowledge. But children are a strange exception to Becker’s model. Children’s usefulness is not maximized like other family members. We know this because children whose parents earn money own all the toys and sweets. The fact that this is not happening is evidence that their utility function is not fully taken into account in the distribution of income within the family.
At this point, parents argue that children do not know what is best for them. Translated into economics, children do not internalize the costs of their actions. In this sense, children are similar to drug addicts. Children’s utility functions are very short-sighted, ignoring costs to others and to themselves in the future. Stated this way, the problem of maximizing children’s utility becomes more familiar to us. How do we allocate to drug addicts, knowing that we do not internalize the costs that their demands have on us and their near-term selves?
Becker comes close to solving this problem with his “Rotten Kidd theorem.” This theorem argues that bad actors are still encouraged to internalize the costs of their actions, since blocking the supply of income, in turn, prevents future income. In other words, rational actors do not bite the hand that feeds them. However, the rotten child theorem does not take into account actors with abnormally high time preferences, such as modern children or drug addicts. Assuming that parents want to maximize their child’s current utility function, how can they allocate resources so that this little drug addict can functionally internalize the costs?
In the case of drug addicts, you (the income distributor) transfer an amount of income that is negative to the cost of monitoring. This results in income allocators achieving sub-par results because they would like to spend more but are unable to do so for fear of spending (or trading) by drug addicts. The case of drug addicts seems bleak, but what about children? What are the differences between drug addicts and children, such as the latter giving rise to superstitious myths about gift-giving, while the former do not? ?
Two explanations persist. One is a preference-based theory (“cute!”) and the other is what I call the “behavioral check” theory. In other words, Santa Claus makes parents punish their children and removes himself from punishing them. Rejecting preference-based explanations, the behavioral check theory relies on a “naughty list” that Santa is said to update regularly. However, behavioral tests are not convincing because Santa’s threats are never reliable. Some might argue that children don’t understand the lack of reliability, but behavioral checks make even less sense when you consider the child’s mental capacity. With such an incredibly short time horizon, why would children care about the punishment they receive months later?
I have instead seen parents take advantage of their children’s gullibility to buy what I call “seasonal” items, such as expensive electronics or other items that cannot be consumed frequently (i.e., candy). claim that you are assigning something that cannot be distributed to. Since children are dependent on their parents for income, rent-seeking behavior should be expected. For example, frequently asking for toys, sweets, etc. Rational parents are faced with two choices. One option is to give up and buy all the items the child requests, or to have unlimited access to the family’s income and allocate less food than what the child would buy. When parents want to maximize their children’s utility, but costs appear to be internalized, children face problems with opportunistic, rent-seeking behavior. Children know that their parents can now purchase items that are supposed to be distributed seasonally, but they have not yet done so. Appropriate period of time to wait. I would say there is a contractual issue. Parents want to “contract” with their children to receive some kind of gift each season (an expensive item that cannot be provided often), but children tend to “violate” when they ask for it. Get your items early.
For drug addicts, it seems impossible to enforce this contract, so the solution is often to reduce distribution (voiding the contract altogether). Children’s gullibility allows for more optimal outcomes. That is, the parent (income distributor) may exclude himself or herself from being subject to rent-seeking behavior and appoint someone else. Perhaps a jolly saint riding a reindeer. This yielded some testable predictions and proved that Santa Claus is a very effective reducer of dead weight losses.
Removing oneself as an income distributor may specifically stop the negative effects of rent-seeking on oneself, but does not reduce deadweight loss. If the parents appoint an uncle, the children simply ask the uncle for rent, but due to the courseless negotiations between the families, the parents are still at a loss. Therefore, you should expect that the appointed income distributor will be a stranger. However, naming a stranger in the present still gives children an incentive to rent-seek. If their utility function is maximized, they will refer to resources and move away from family toward strangers. Therefore, weight loss still affects families. So another prediction is that families will appoint strangers who will be difficult to rent. But also, whatever the reason, if the stranger’s utility is maximized by the child’s “good” behavior, the parent can turn the deadweight loss reduced by the child’s rent-seeking into a benefit. In reality, no one has this kind of incentive (unless they’re being paid, like Santa at the mall). Therefore, this stranger is fictitious and we should expect parents to be able to benefit from their child’s rent-seeking behavior. Finally, you should expect that this stranger will only be appointed if the family actually has disposable income to make the gift. Since there are no seasonal gifts, you should not expect imaginary strangers.
Santa Claus, the eternally unreachable stranger who commands children to be kind, fits all of these predictions. Santa allows parents to remove themselves from rent-seeking behavior, and children are prohibited from asking for rent directly in Santa’s presence. Instead, parents capture the value of rent-collecting children by arguing that Santa is only appealed to by the relative goodness of the children with whom he distributes the income. Santa Claus has also emerged as a common gift since the Industrial Revolution and the early 20th century, when children were actually able to earn disposable income by asking for rent and were allocated “seasonal” goods. did.
This refutes the behavior check theory by arguing that acting “nice” is just a way to capture value spent on rent-seeking, not a driving force for Santa Claus himself ( This, I argue, is explained by the need to separate parents) from the role of income distributors). Furthermore, none of my arguments suggest that parents’ rationale for Santa lies outside of their love for their children. On the contrary, love for children is the reason why they want to maximize their usefulness through Santa Claus in the first place.
Sam Branthoover is a doctoral student in economics at Ole Miss.
