[FOUNTAIN]The loss is North Korea’s

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[FOUNTAIN]The loss is North Korea’s

Giving a present is a happy thing, but it is more joyous when you receive a present. For those who have received a present during the Chuseok holiday, the feeling is even more special. And it is not just about the holiday season. The touching memories of a present that one receives from their family, relatives or lover on their birthday or anniversary remains for a long time.
This may sound coldhearted, but except for the emotional aspect, presents are a waste economically.
The price that a buyer pays for the present is different from the value of the person who receives the present. In most cases, people like presents because they are free. However, people tend to evaluate the price of the present they receive lower than the amount of money paid by the person who gives it. That gap is the social loss. Giving presents in cash is a way to reduce this social loss. In cases when people don’t know what the other person wants to receive as a present, the gap widens, and if it is an unwanted present, the social loss increases.
American economist, Joel Waldfogel ,researched right after Christmas on how much value students give to the presents they received during Christmas. The result was that students value the presents at 67 to 90 percent of the purchase price.
That means the students discount the value 10 to 33 percent compared to the people who bought the present. Of the $50 billion spent on Christmas presents in America in 1992, at least 5 billion to 16.5 billion dollar disappeared into thin air. This is the deadweight loss of Christmas that reveals the social loss due to the difference perceived by purchasers and consumers.
With free gifts, this kind of social loss always follows. Freely provided social services or hand-out government support results in lower utility for the beneficiaries, compared to the money spent on the project. The social loss rate for the public housing program for the homeless people in America in 2003 is assumed to be 9 to 39 percent.
Policies that people do not want also bring great social loss. It is the same when the government hands over the present of “self-independence” or “restoring correct history” or announcing the “tax bomb” when everyone hopes for a stable real estate price.
North Korea has sent a Chuseok present for the free support of the South Korean government.
It is the nuclear test card. It is a present that no one wants to receive and brings North Korea itself to a standstill. This present from North Korea will probably be the highest social loss in history.

by Kim Jong-soo

The writer is an editorial writer of the JoongAng Ilbo.
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