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Wednesday, December 8, 2010

The Economics of the Christmas Tree

So far as I know, no one has ever won the Nobel Prize for studying Christmas Tree Arbitrage. It’s about time someone did. I am not discussing people who buy artificial trees, although this is perhaps the only situation when something made of plastic and aluminum is actually greener than a real tree.

Christmas trees are a unique phenomenon because they are purchased only once a year and are used for only – at most – one month. When tree-buying season is in full frenzy, you can observer herds of customers as one after another they pull a tree forward from a pile, rotate it to view all sides, shake it to see if any pine needles fall loose, and – if they have been unwise enough to bring them along – discuss its merits with their family. The whole time it is hideously obvious they don’t have the slightest idea what they’re doing. Of the millions of people who buy a Christmas tree each year, not one of them knows what he’s looking for or what constitutes an ideal tree. The tree purchaser must rely on guesswork and the scant information a tree should be generally green and triangular, ultimately making his selection from pure exhaustion.

Is a Scotch Pine superior to a Noble Fir? Is it more efficient to buy the economy-sized three-foot model, or does it pay to buy in bulk, like with the two-quart plastic drink cup labeled “BEST VALUE” in a movie theater? No one knows. We know how to shop for cars, bananas, stereo equipment, and internet porn, but when it comes to Christmas trees, we’re at a complete loss.

In the old Soviet Union, people would get a ration ticket entitling them to a Stalin Pine or Lenin Fir. They’d stand in line five days only to be handed a coffee maker instead. They’d go home disappointed, but they’d have a right to be disappointed because they’d know they didn’t get what they’d gone after. And then they could have a cup of coffee.

But Americans have no such luck. Everyone who buys a tree has a vague sense he’s overpaid, that his friends are laughing up their sleeves – “Can you believe he brought home that?” – but there’s no way to be sure. How much is it worth to have a dead tree in the living room? What is the market value of the pleasing aroma of pine sap, a place to display blinking lights and children’s ornaments made of construction paper and macaroni, and a circle of pine needles on the floor?

To understand the complexity of this situation, let’s make a graph. Let the X axis represent the Tastes and Preferences of the Consumer. Label this “U.” You might try labeling it “T” but that’s only going to lead to trouble, believe me. For the Y axis, calculate the average cost of a tree in foot pounds multiplied by the opportunity cost of driving it home, installing it in the living room, stringing it with lights and glass balls, going to the store to buy more glass balls to replace the ones the cat knocked down, admiring it in the darkness with a glass of eggnog, unstringing it before New Years, dragging it to the door, taking it to the recycling plant to be chipped and shredded, and sweeping up the fallen pine needles. Call this “Tree Hours.” Now draw a red line from the bottom left side toward the top right. Halfway up, stop and go straight across, then down for a little bit, then up again, then straight, down, and up until you reach the other side. Look at what you have. You don’t have the slightest idea what it represents, do you? Well, neither do I.

I await the call from the Nobel Prize Committee.

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