Growing up, one of my favorite holiday stories was Dr. Seuss’s How the Grinch Stole Christmas. In this tale, we meet the curmudgeonly Grinch, who hates the Christmas season and therefore decides to “keep Christmas from coming” to Whoville. To do so, he devises an evil scheme to steal any trace of Christmas from the town—removing Who pudding and roast beast from kitchens, taking Christmas trees and wreathes that adorn homes, and even lying to little Cindy Lou Who. Once he and his trusted canine companion Max return to their mountain top lair and revel in their malice, however, the Grinch is startled to hear the Whos joining together in song and celebrating Christmas—which came without ribbon, tags, packages, boxes, or bags. Seeing the Whos’ joy despite not having their decorations and gifts causes the Grinch’s heart to grow three sizes. Upon returning Christmas to the Whos, the Grinch is welcomed and even joins their celebrations.

Source: Wikipedia

Sounds like a heart-warming holiday tale, right? The miserly Grinch sees the Whos celebrating Christmas together in spite of adversity and has a change of heart. While this might be where the story ends, what does economic theory have to say about it? Economists traditionally assume that people act in their own self-interest, or that they do what is best for them personally at the time. This would explain why the Grinch stole Christmas (because it annoyed him), but we don’t really know why he gave it back.

Economic Altruism

Luckily for our purposes, the late economist Gary Becker has written about economic altruism, or why people act benevolently when it may harm them (or lessen their income). In his work, Becker describes two types of people: altruists and egoists. Altruists are willing to give up some of their income to others or to benefit society as a whole (which we can consider to be “social income”), while egoists think only of themselves. However, egoists can engage in seemingly altruistic behavior in times that the overall benefit to them outweighs the personal costs. That is, they might give up some of their income (to an altruist or to society) if this would then benefit them more than what they gave up. Becker calls this “simulated altruism” because their actions appear to be altruistic but their intentions are not.

With our Grinch example, the Grinch is most definitely an egoist at the beginning of the story—he steals Christmas from the Whos for his own benefit despite thinking that he will decrease the Whos’ social income. However, once he sees that the Whos still celebrate despite his actions, returns Christmas to the Whos. The Whos then welcome him with open arms and give him the honor of carving the roast beast. However, has he really become an altruist, as the narrator suggests (his heart did grow three sizes after all), or is he simply simulating altruism because he sees it as an opportunity to further benefit himself (with the invitation to dinner and the honor of carving the roast beast) by pretending to be benevolent? After all, what benefit would he get from a sleigh-load of Christmas gifts and toys, when he does not even like Christmas?

Now I may have mellowed your holiday cheer (economics is the dismal science, after all), but not even I can stop Christmas from coming.