Now that Thanksgiving has passed, the holiday season is in full force. In previous blog posts, I’ve considered the economic impact of various holiday events and phenomena. This year, in the spirit of trying something new, I’ve decided to flip my approach and think about the economics that exist in a holiday story. Take, for example, Charles Dickens’s classic A Christmas Carol.

How the Economist Stole Christmas

A Christmas Carol by Charles Dickens
Source: Wikimedia

A Christmas Carol

The novella, first published in 1843, recounts the tale of Ebenezer Scrooge, a miserly accountant. On Christmas Eve, as Scrooge is going to bed, he is visited by the ghost of Marley (Scrooge’s former accounting partner), who is eternally chained by his selfish behavior while he was alive. Marley warns Scrooge that this could be his fate as well, and that Scrooge will be visited by three ghosts throughout the night—the Ghosts of Christmases Past, Present, and Future. The first ghost takes Scrooge back to his childhood and young adulthood, where he can revisit his past. During Scrooge’s next journey, with the Ghost of Christmas present, he visits the household of Bob Cratchit (Scrooge’s underpaid employee), where he can see how, despite the significant hardships that the family faces, they are all happy. Scrooge also observes a homeless family, which also deeply affects him. Finally, Scrooge is taken into the future, where he sees acquaintances mocking him upon his death. Upon waking the next morning, Scrooge has a revelation about his former “Bah humbug!” attitudes and transforms into a most festive and generous individual.

Economic Theory in a Classic Christmas Tale

Though the story was a social commentary of its time, it can also be used to understand various aspects of economic theory in the present day. At the beginning of the story, Scrooge scoffs at the idea of donating to the poor and instead states that they should die “and decrease the surplus population.” This notion comes from the work of economist and demographer by the name of Thomas Malthus, who postulated that population grew exponentially, whereas resources grew more linearly. Eventually, these trends would result in a situation where resources cannot support the population, leading to a population collapse. (Luckily, such a Malthusian catastrophe has been avoided.)

Another aspect of economic theory that appears in A Christmas Carol is the idea of perfect information. Perfect information—the notion that consumers have access to all relevant information when making decisions—is one of the requirements of a free market. If we consider Scrooge to be our “consumer” throughout the story, his visits with Marley and the three Ghosts of Christmases signify Scrooge’s increasing awareness. By the end of his time with the Ghost of Christmas Future, Scrooge has a much clearer understanding of his situation and his actions. Armed with this information, he then makes significantly different decisions about Christmas because he is more informed.

Leading in from my last point, Scrooge makes an informed decision and changes his mind about Christmas because he realizes that his actions affect individuals outside himself. In economic theory, externalities are the benefits or costs that external groups (for example, society) incur because of the actions of an entity (for example, one person or a company). In the case of A Christmas Carol, Tiny Tim (Bob Cratchit’s son with limited mobility) hopes to create a positive externality via the impact that his personal, private actions will have on his neighbors—after he visits the church on Christmas Eve, his father states that Tiny Tim “‘hoped the people saw him in the church, because he was a cripple, and it might be pleasant to them to remember upon Christmas Day, who made lame beggars walk, and blind men see.’”

Though written over 170 years ago, the text of A Christmas Carol still provides for various interpretations and adaptations—from film to cartoons to puppetry to theater to dance… and even economics.