The Economics of Elf

Intangible assets, labour relations, and productivity in the North Pole

Yesterday I went to a ‘quote along’ showing of Elf at the wonderful Prince Charles Cinema. The film was as excellent as always and it got me thinking of the economics of Elf, in particular the world of work and productivity. Elfonomics, if you will.

If you haven’t seen Elf (what have you been doing with your life?) it is about a human baby orphan who finds himself accidentally transported by Father Christmas (unfortunately called ‘Santa’ in the film) on Christmas Eve. He is adopted by one of the elves in Santa’s workshop, given the name Buddy, and is raised to believe he is an elf. Upon discovering his real identity he ventures to New York City to find his dad who has found himself on Santa’s naughty list. A whole host of fish out water antics ensues as Buddy wins over his new family, falls in love, and teaches us all the true meaning of Christmas.

However, I want to argue that it’s actually a film all about work. The narrator (Papa Elf) makes this explicit from the start. In the opening scene he explains that there are only three types of jobs that elves can do: clandestine cobblers; baking cookies in a tree; or making toys in Santa’s workshop. This final one is one to which elves are naturally well suited and is seen as aspirational for them. 

What is striking about the scenes we get of work in the North Pole is just how happy and productive the elves are. They seem to genuinely enjoy their work, there are clearly supervisors/managers who seem to be fair and respected, and their ultimate boss Santa is clearly adored.

This can be contrasted with the examples of work we see in New York. The first example is in the department store where Buddy finds himself. His colleague is clearly miserable at work and is given a task which she describes as ‘impossible’ by her mean boss who is paranoid about losing his own job and is so shocked by the work done by Buddy he describes it as ‘a little too good’ and assumes that the higher ups have got involved. 

The second example is set in a mail room. The room is dark and dingy and the work is drudgery. It is staffed by at least one ex-convict who laments over the role and his life to Buddy. The rest of the workers break off from their tasks to watch an intoxicated Buddy table dance (not like that, get your mind out of the gutter).

The final example is the most revealing. It is the work done by Buddy’s long lost father, Walter. He is an important executive at a publishing company (although not the head honcho) and despite the criticism from his son that he’s always at work, he and his colleagues never seem to do any work at all. For example, he lazily signs off on a book which has two pages missing and when is told about his error he just doesn’t care. When told by his boss to think up an idea for a new story he delegates it to his ‘two top writers’. Their big idea? Get someone else to do it. These people aren’t doing any work, are not interested in doing the work, and in some cases seem totally incapable of doing so.

I think Elf helps to dispel the myth of ‘quiet quitting’, a theory which claims that since the pandemic workers just aren’t putting in as much effort anymore. This myth has been peddled by newspapers in the UK and the US, but it is just that: a myth. Derek Thompson does a good takedown on it here. But just watch Elf. It was released in 2003 and all the work scenes in New York could be described as ‘quiet quitting’.

So, we know this isn’t a new phenomenon. Why is productivity so low? My first blog post addressed this issue in a UK context, but there are issues in Elf which explain why productivity is so low in New York and so high in the North Pole.

Let’s take Walter’s role first. It’s a publishing company and so in many ways covers standard issues such as profit and loss but also marketing and creative ideas. It highlights the importance of intangible assets. Intellectual property, brand recognition, and human capital are all essential for a publishing business. In their excellent book Capitalism Without Capital, Jonathan Haskel and Stian Westlake demonstrate the importance of intangible assets for businesses and the economy as a whole. Walter’s workplace has clearly failed to invest adequately in them. 

This should be contrasted with the workers at the North Pole. We know that they adapted to changing situations as Papa Elf created a new jet engine to help power Santa’s sleigh. This would no doubt have involved a lot of investment in research and development and taken a long time, but they did it anyway. Moreover, we know that the education system seems to be top notch as they learn about the latest advances in microchip technology. They clearly have all the skills and knowledge that they need to perform their role well. 

A second factor is management. None of the workers in New York have a positive experience with their managers. The manager in the department store is harsh and paranoid, there is no onboarding process for Buddy in the mail room and gets a snappy 30 second explanation of his role, Walter barks at his underlings and is in turn shouted at by his boss. It’s also clearly quite dangerous to work in the mail room as Buddy gets his face stuck to a suction tube and is allowed to be intoxicated on the job (Elf ‘n’ safety, innit). We know the importance of management on workers productivity. For example, there is research which shows how good bosses can positively impact productivity. 

Again, the North Pole serves as a useful contrast here. There are managers and supervisors who are competent, fair, and are clearly respected by the workers. What is more, we know that given the outside options open to elves and that they aspire to work for Santa, they are not being coerced. Santa has clearly invested heavily in identifying and training those with management skills while providing the right incentives to motivate the elves.

Finally, there is the housing crisis. This is not mentioned explicitly in Elf, but it is alluded to. For example, Buddy’s colleague mentions that her water has been cut off. This could be perhaps due to the actions of a slum landlord or the fact that she is spending so much money on her rent that she cannot afford to pay her other bills. We do know that New York has a housing crisis for the same reason there is one in the UK: supply has failed to keep up with demand. The restrictive planning system is gamed by NIMBYs which means there are not enough homes in the places where people want to live. Not only does this make housing more important, it hampers productivity and economic growth.

So, if we want to see productivity and economic growth increase then Elf has much to teach us. Governments and businesses need to invest in R&D, ensure that there is access to lifelong learning, promote good labour relations, and build more homes. 

I might write another post on the economics of classic Christmas films, but given I’ve already done this for three other classics, I’m running out of films to suck the joy out of.