In Christian theology, Christmas marks a new covenant between God and man. It is no bad time to reflect on covenants between man and man as well; and ponder why so many religious traditions have put in place rules on interest, regulation of debt and duties of forgiveness — what we today would call debt writedowns — through regular debt “jubilees”. The problem of excessive debts has clearly been with us for a long, long time. Perhaps we could relearn some forgotten lessons about how to address it.

As for the Christmas festivities themselves, basic economic theory suggests they are a hugely inefficient effort. A famous (or should that be infamous) paper has shown the amount of “deadweight loss” caused by gift-giving: most gifts cost more than what the recipient would have been willing to pay for them, which is how an economist would measure their value. If one wants to give, surely giving cash is more efficient. The paper is here; and a short write-up — with appropriate doubts about the conclusions — by The Economist is here.

If the focus on cash seems a bit too cynical to you, lift your eyes to heaven, which is presumably above all material concern. But then, how does economics work in the afterlife? Enjoy the FT editorial that took on the question — and happy Christmas.

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