Gift Giving And A Giant Hole in the Ground

Please note: this article references a card game called “Cards Against Humanity.” This is not a family friendly game by any stretch of the imagination and will likely be offensive to many. 

Recently, the company behind the game Cards Against Humanity raised over $100,000 in donations to dig a giant hole for no reason. You can read about it on their website here. While this might immediately cause you to recoil at such waste, the economics behind this situation need to be considered carefully. There is a lesson to be learned here, and it might have something to do with Christmas presents. 

Let’s follow the money. It began in the hands of those who donated to the hole. They gave it up, and we honestly have no idea why. Maybe it was for laughs, who knows? The money then traveled to the people behind Cards Against Humanity. They, in turn, gave it to the people who actually dug the hole. The people who donated now have (in total) $100,000 less, while the people who dug the hole have $100,000 more. As far as society-at-large is concerned: nothing happened.

The hole that was dug did not add or detract any value or usefulness. Money changed hands and some dirt was moved. This relates to what is known in economics as the parable of the broken window. The broken window parable goes like this: a boy throws a rock through a window, shattering it. The shopkeeper is distraught, but shells out the cash to the local window-maker to replace the window. We see that the breaking of the window created economic activity and was therefore good for society, right?

Wrong. Watch this video for a more detailed explanation:

In fact, the math works out to a net loss. While the window maker gets more wealth by producing the window, the shopkeeper is out money he could have used to buy something else. The world is short whatever that money could have been spent on instead of replacing a window it already had. The world is actually just losing a perfectly good window.

When we consider economic questions, we need to take into account as much of the equation as possible. What is actually happening in a transaction? We may be tempted to condemn the waste of money on digging a giant hole, but on closer analysis there is a net wash as far as society-at-large is concerned. 

Much to our surprise, the hole in the ground actually did provide a little bit of value. It brought us to together to talk about it. It provided a laugh for some, and thoughtful reflection for others. It may even have motivated someone to rid the world of such perceived waste and meet real human needs. Digging a giant, pointless hole in the ground is kind of like gift-giving. On average, I suspect most people spend X number of dollars on gifts and receive X number of dollars in gifts. It probably balances out most of the time. Of course, the gifts are often less valuable because no one is as good at picking out what we like than we are, so if you account for useless or unwanted gifts, gift-giving is likely an economically wasteful exercise. 

With one key exception: there is a message behind the gift: an expression of love. Like the twisted laughter that comes with knowing that people pooled together over $100,000 dollars to dig a whole in the ground for no reason, there is a certain joy in receiving a material token of another person’s love for you. If all of this still does not sit well with you that is fine. I will share with you the advice of the Cards Against Humanity people in answer the question, “Why aren’t you giving all of this money to charity?”

“Why aren’t YOU giving all this money to charity, it’s your money.”

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