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Opinion Why the whole world is overspending on the holidays

Let's try to add it all up: There's $110 for the tree, $70 for the wreath, $50 for lights. Plus $150 (on sale) for party-grade shoes, because the old ones were ruined by salt.

Then $80 for the turkey, $130 for the ham, $190 for the prime rib, $200 for wine and beer, $120 for champagne, that much again for the overpriced cheese plate, and don't forget that $40 bottle of brandy because Aunt Mavis will be here.

Add all the trimmings, and we're deep into the four figures before we've even thought of gifts. Six days later, we go and do it again for the New Year's Eve party.

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It doesn't make sense, does it? This was a tough year and we're in considerable debt, so maybe we could cut back. But we don't. Spending more than you can afford isn't just a side effect of the holidays – it's the whole point. This, all else aside, is a time for largesse and self-sacrificing excess.

Economists have long been baffled by it: Spending weeks of pay on a holiday-feast blowout is not something that fits into the traditional rational-actor models of economic thought. Moralists denounce it as the wealthy West's commercialization of a formerly austere and religious moment; back when the Christians occupied the ancient Dec. 25 holiday (and got the naming rights), we didn't do this sort of thing, did we? Our merchandise-focused society has obviously vulgarized the sacred.

Actually, holiday inflation is not unique to the wealthy, the postreligious, the capitalistic or the Western world. Ruinous overspending on feasts and festivals is one of the great global phenomena, one that unites almost everyone these days.

Poor households in Rajasthan, India, typically spend 10 to 15 per cent of their annual income on festivals, according to scholars – as opposed to 2 or 3 per cent on their children's educations. And South Asian wedding feasts can eat up several years' earnings.

In China, a group of economists found that the average amount spent on coming-of-age ceremonies in dirt-poor rural areas almost tripled between 2004 and 2009, and now amounts to as much as three times the typical peasant's annual income. I have visited favelas in Brazil where almost all economic activity revolves around carnivals and funk parties, and villages in India where entire families have been bankrupted and driven to suicide by marriage ceremonies that force them to borrow years of income. Among the very poor in Africa and Latin America, fiestas and ceremonies are often the largest single expenditure.

Sociologists and economists have struggled for years to explain holiday inflation. One theory holds that it's all about conspicuous consumption: As economists Omar Moav and Zvika Neeman wrote in a paper titled Bling Bling, Human Capital, And Poverty, "festivals, consumption of tobacco and alcohol, clothing, and display of jewellery, are more transparent than other types of consumption, and hence may provide a signal for wealth … to impress others."

Perhaps, for some. But there's clearly more to it than simply showing off. (Or the flip side of showing off – avoiding the loss of face and pride that come from failing to get blingy.) This is a rather pessimistic view of humanity, one that assumes that all our actions must be intended to produce immediate reward. But these celebrations aren't simply survival: They're what we live for.

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Other economists offer a more reasonable explanation, one that seems closer to our own experiences: that lavish spending on holidays is a form of "risk sharing." By showing largesse toward your neighbours and family, you are building relationships of mutual trust and respect (some economists call it "network maintenance"), so that when the chips are down, they might remember those wonderful evenings and spare you a moment's assistance.

As World Bank economist Vijayendra Rao put it in his analysis of expensive celebrations in rural India, "publicly observable celebrations have two functions: they provide a space for maintaining social reputations and webs of obligation, and they serve as arenas for status-enhancing competitions."

The second role, the status-enhancing one, is an attempt to place a well-shod foot in the door of higher success – and it usually fails. But the first role, Mr. Rao observes, is "central to maintaining the networks essential for social relationships and coping with poverty."

That sounds more like it. We are social animals, and our connections are all we've got. Largesse is part of our core humanity. Over-partying can be a terrible mistake, but it's the most human of mistakes. So have yourself a very merry Christmas and a happy New Year – the bill won't be due till late January.

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