Santa Needs Prices

A superficial observer might argue that Santa Claus has no relevance to economics, because in Santa’s world, there is no scarcity. But Santa, though magical, is not omnipotent. He faces constraints.

First, Santa only delivers tangible, conventional presents to boys and girls. If someone wrote him a letter asking for world peace, cold fusion, or a resolution of the Riemann hypothesis, I don’t think Santa could deliver. Santa is a nice guy, and he surely recognizes that, say, perpetual nutrition for the world’s poor is more important than giving Jimmy in Boise a new toy train. So we must conclude that Santa is only capable of creating and delivering specific material items to the lucky recipients on Christmas Eve.

How does Santa decide what orders to give his elves to fill that bag?

Even if we restrict our attention to specific material items, Santa still has limits on what he can deliver. His elves are busting their cute little butts 364 days of the year so he will be ready with his pile of goodies on the special night; he can’t hand out more toys than they can produce.

And while it’s true that Santa can apparently slow or stop the passage of time, and can somehow fit through chimneys (and even enter houses with no obvious access point), he still needs a reindeer’s nose to navigate through fog.

Let’s summarize the situation: Santa has information directly communicated from all the boys and girls around the world about the presents they would like, and he even seems to know each child’s ranking of potential presents. Santa’s operation at the North Pole is like a factory that can crank out items from a huge catalog, making at least one present from each child’s wish list. Yet, Santa can’t make everything from every child’s list. As he’s loading up his sleigh on any given Christmas Eve, Santa knows that if he wanted to give Susie one more doll, then at least one other kid on Earth…


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