Image: Unsplash- Mike Arney

The Economics of Santa Claus

Christmas is just around the corner, and soon every household will be thinking about money. How much can they spend? How can they afford everything they want and the Brussel sprouts? One person who doesn’t have any money worries at this time of year is Santa himself – he shows no signs of slowing down, with his business still turning out gifts year after year. But what costs drive business at the North Pole?

How much would it cost to give gifts to every child in the world? Let’s assume Santa just buys in all the stock (I’ve no idea how much an elf minimum wage would be). If we assume that a child gets half of the ­‘must have’ toys this year (with prices ranging from £9.99 for a L.O.L. Surprise doll to £­130 for an app-controlled BB-8 toy), that amounts to an average spend of £281­.94 per child.

With an estimated ­1.9 billion kids in the world, that amounts to an expenditure of £535.7 billion on toys alone…

Let’s make more assumptions – every child around the world is on the Nice List, and Santa spends the same amount of money on them all. With an estimated ­1.9 billion kids in the world, that amounts to an expenditure of £535.7 billion on toys alone.

Time to add in transport costs. Scientists have figured out that, in order to deliver all the presents in one night, his sleigh would need to travel at 60 miles per second, and use 9.3 million Megawatts of energy. To do this, Santa could use either petrol or reindeer to power the sleigh.

Taking the petrol option, it would require 30‑ million litres of the stuff, which would cost £35.4 million. If he wanted the reindeer option, he would need to feed them 540‑ million litres of raw oats that night for them to harvest enough energy to make the journey – this would set him back £40 million.

Now, according to the Forbes Rich List, Santa has infinite wealth, and so these costs make no difference to him whatsoever. But let’s imagine that wasn’t the case – where could he make the money to fund his gift-giving enterprise?

We also need to factor in premise costs – Santa must have somewhere to store all these gifts before delivering them. He could build his own storage facility, and that would probably be the best solution – if he were to rent all the storage space he needed in London, it would cost roughly £5.8 million for the year. A decently-sized house in the North Pole (Alaska, that is – you can’t buy land at the actual North Pole) would set you back a few million off the bat, and when you add in the land Santa would need to keep everything close, the millions keep piling on (based on storage space alone, Santa would need 3.5 million hectares).

Now, according to the Forbes Rich List, Santa has infinite wealth, and so these costs make no difference to him whatsoever. But let’s imagine that wasn’t the case – where could he make the money to fund his gift-gifting enterprise?

The most sensible thought is that Santa would licence his likeness for use in advertising. Santa is perhaps the one staple on Christmas products, and there are few advertisers who wouldn’t pay to use Santa on their products. Celebrities have the ability to influence customers to buy products – who, honestly, is going to buy anything Christmassy that doesn’t have some kind of link to Santa? The trustworthiness is a key factor when considering the value of a celebrity endorsement – trustworthiness defined as the statistical likelihood of buying a used car from that person. Tom Hanks has been top of the list for several years now, but Santa too is the epitome of trustworthiness.

Santa could command big money from companies – a company like Coca-Cola spends $3.3 billion each year on advertising, and Santa’s image is a big part of their Christmas campaigns…

Celebrities can rake in some serious money on these endorsements. Tiger Woods (after his infidelity revelations) still made $­100 million for promoting Nike.

Santa could command big money from companies – a company like Coca-Cola spends $3.3 billion each year on advertising, and Santa’s image is a big part of their Christmas campaigns. The damage and potential loss of income for Coca-Cola without Santa’s brand would make him well worth paying for – the company made $9 billion in profits this year.

As we see, Santa has got his financial situation figured out, hence the fact that he is able to bring joy to the world every year at Christmas. He’s not only a figure of joy and cheer – he’s also a master bookmaker too!

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