I am amused and somewhat impressed by his theory. And for those reasons, I have done nothing to dispel the "Santa as Big Brother" mythology he is selling. On the other hand, Little Dog has rejected the theory completely. When his brother reminds him of the ever present watchers, Little Dog glances around the room nervously as he howls, "There are no elves!" Obviously he's a little wary of them because his own behavior at times would make him a legend of the Naughty list. His defense is to try to get me to tell him that they don't exist, and thus are no threat to his Christmas morning bounty.
After one evening of Little Dog's impassioned insistence that the elves are not in our living room, not on the curtain rods and could not sit in the lights because they would be burned, I offered an alternate idea.
"Little Dog, tonight after you go to bed, I'll call Santa and tell him how you were doing today. That sound good?"
He pondered this for a moment, then looked up at me with those giant blue eyes. "Mama, I have an idea. When you talk to Santa pretend that I was good. Ok?"