Spend your Deadweight Loss on Etsy

Economists hate the holiday season— we see it as a bunch of people mindlessly guessing at each others' utility functions, ultimately producing millions of dollars of deadweight loss for the economy. Bah humbug!

But gift-giving is important to people who are important to me, so I participate in the system, while trying to minimize the destroyed value as much as I can. From one soulless economist to any others out there, some gift advice:

Favor a premium item from a cheap category over the reverse.

When people shop with our own money, we're often at least a little rational, and don't want to overpay. Picking a more expensive item from a cheaper category is a great opportunity to get somebody something they really do want, but couldn't justify for themselves. Examples:

  • Premium coffee, chocolate, or beer
  • A very nice pen
  • Comfortable wool socks, gloves, or hats
  • Knives, pans, and kitchen gadgets

People are terrible evaluators in an absolute sense— instead, they evaluate relative to similar items.

For most people who aren't professional chefs, a $100 chef's knife will be the nicest cutting implement they've ever used. They'll appreciate the solid construction and the sharp blade, and think of the giver fondly when they use it. If somebody doesn't drink tea much, a $15 tin of exotic loose-leaf tea is likely to be a special and memorable experience.

On the other hand, that same $100 spent on an Android tablet, or toaster oven, or camera is going to feel cheap and utilitarian. Likewise in an Amazon gift card, where it's just going to be used the next time the recipient loads up a shopping cart.

Another way to blow out of the relative-evaluation trap is to give gifts that can't be valued at all: hand-made goods or consumables, or gifts of service or charity. People have different amounts of disposable income, but we all have limited time, so a gift of time and effort in honor of another person is meaningful no matter who you are.

Favor gifts that create experiences

I have a messenger bag with some fancy buckles that look like this:


Every time I open and shut that bag, the buckles make a satisfying little "clunk" as the perfectly-engineered buckle slides together. I love that clunk— it's a small experience of quality craftsmanship in the middle of whatever else I'm doing that day.

Likewise items that are connected to some adventure or outdoor pursuit. If you get somebody a sleeping bag, a camping stove, or a set of luggage, you connect your gift to the experiences they'll have using it.

Avoid highly taste-specific items unless you’re extremely sure about the recipient’s tastes

Shirts, pants, sunglasses— these are highly personal items that vary in fit, and I think of them as a risky buy. In the case that the item doesn't fit, the recipient now has to go return it (awk), find out how much you paid for it (awk), and select a new one (like a gift card but worse). Or just pretend they like it while secretly wishing they could throw it away.

This also applies to hobby-centric items. The more somebody is into a hobby or craft, the more specific their taste is likely to be. Don't buy a professional chef a knife unless you know exactly what kind of knives they like. Likewise audiophiles and headphones, skiers and poles, etc. It's similar to how you wouldn't buy a professional designer a random font pack for the holidays— it connotes that you know more about their trade than they do.

So where can you easily find items that meet these criteria?


To start with, Etsy has a huge variety of quirky, handmade items of all sorts. They even have curated, budget-adjusted gift guides. The site has a great user experience, and the support team is generally great about handling buyer/seller issues.

But my love for Etsy goes beyond there.

When you buy from Etsy, you're supporting a registered Benefit Corportation, fighting corporate akrasia by publicly and legally aligning their long-term social goals with their responsibility to shareholders. You're also supporting a seller market that's 86% female, with 30% of those using their Etsy shop as their sole occupation. They're not profitable at the moment, but they've flirted with it before, and their operating losses are reasonable compared to your typical Silicon Valley hyper-growth unicorn.

Beneath the surface, Etsy also has a world-class corporate and engineering culture. Their world-class engineering blog, Code as Craft, and have popularized many of the most popular ideas in the devops movement, such as "blameless postmortems."

The only way we can be satisfied after an error is made is to learn as much as we can about how it happened, so we can prevent it from happening again. Simply reprimanding someone after they make a mistake is a foolhardy approach, because this gives no confidence that it will prevent it from happening again.

-John Allspaw, Etsy CTO

They also have diversity numbers virtually unheard of in the startup world: 31% female in technical positions, and 37% female in leadership. They also actively invest in helping underrepresented and oppressed groups get access to technical education:

We’re proud to announce that Etsy has pledged $210,000 in Etsy Hacker Grants for Hacker School in the coming year...With our help, they will now offer needs-based living expense grants to people who identify as women, black, non-white Hispanic, Native American, or Pacific Islander. Improving the diversity of highly qualified applicants, as many have noted, is one way to reduce the barriers to building diverse employee populations.

Brian Christman, VP People at Etsy

Finally, their commitment to transparency and embracing failure produces some amazing talks, which they freely share. Dan McKinley's retrospective on implementing Infinite Scroll should be required viewing for any product manager before their first day on the job:

I've got a big crush on Etsy. If you're going to burn GDP in the fires of deadweight loss, there are few better places to do it.

A final note

The premise of this post is slightly tongue-in-cheek. I am troubled by how inefficient, obligatory, and corporation-driven the holiday season is. I am troubled by Christmas displays that start at Thanksgiving, by rows of gift cards near checkout for when you know you need to give something but can't be bothered to actually think about the other person. I am troubled by a culture that defines how much you care by how much you spend.

But that's not exactly the point of the holidays— done right, gifts are as much about the ritual as it is about the item. Nice wrapping paper, a hand-written card, eye contact and a smile as you give the gift, a story about why you chose it— all of these can make more of a difference in the recipient's experience than what exactly you got them. A gift, mindfully given, says "Hey fellow person on this planet, I spent time, thought, and resources, out of my finite supply, trying to figure out what would make you happy."

So yeah, let's mourn the deadweight loss of Christmas, and whine about how gift cards are like cash but worse. Then let's go take this opportunity to be humans with each other.