An economic lesson for Valentine's Day
It’s the holiday season once again! Perhaps you bought a greeting card? Some chocolates? A little jewelry? How about some flowers? There seems to be no shortage of different ways you can spend your hard-earned money on the ones you love the most. In fact, Valentine’s Day is one of the top-ranked holidays in the US based on spending expectations. If you’re curious, here were the top U.S. spending events from last year based on data from the National Retail Federation:
After a pandemic-restricted Valentine’s Day last year, overall spending in the United States is expected to increase to $23.9 billion this year. While this year may be a bit more than last year, it still isn’t back to pre-pandemic levels quite yet. One of the biggest spending changes, however, will be on “experiences” like dinners outside of the house or going out to the movies. So what are the most popular gifts this year? Candy (56%), greeting cards (40%), and flowers (37%) all took the top spots.
While only around 53% of Americans celebrate the holiday, spending is expected to be around $175.41 per person this year. Here’s a look at the past 15 years of Valentine’s Day spending expectations. Keep in mind that these values haven’t been adjusted for inflation:
Have you ever stopped to think about what message your gift is actually sending to the person you’re giving the gift to? The concept of “signaling” in economics means performing an action as evidence of what you’re saying. A lot of times, a strong signal is a wasteful investment. Want to show future employers you’re dedicated and hardworking? Complete a 4-year college degree. Your diploma is a piece of evidence that you can use to signal that you’re willing to spend a lot of time and money to prove your credibility. It also separates you from everyone else who is not willing to invest those resources.
So how does Valentine’s Day fit into the signaling model? If you wanted to save a lot of time, you could give the one you love an envelope full of cash. It would be really efficient and the recipient can buy whatever gift would make them the happiest. While the logic is sound, you and I both know this likely wouldn’t go over well. This signal would be a particularly bad one.
Time to head to the store in search of a gift! If you’re responsible, you’ve already picked up your gift, so consider this a flashback to the searching process. You likely considered various options and ran each option through your head. You considered the price of the gift and the message your gift would signal once they opened the gift. Diamonds may be a bit too much for a couple that just started dating, so what about the classic chocolate and flowers combination?
A little over half of all men this year will buy candy (52%) or flowers (56%) for their Valentine. What message does this gift send? Your recipient will likely thank you for making the same decision as the majority of other men have made. Depending on your romantic arrangement, that may not be the best signal to send. You essentially remembered the day and took the time to pick something up, but you didn’t invest all that much time in the process.
If you’re running out of time and you think chocolates will be good enough, don’t fret too much about paying higher prices for chocolates this year. Unlike coffee prices, cocoa prices have been fairly consistent over the past few years. Next year we can think about gifts that send a better signal, assuming you’ll be giving the same person a gift next year…
So flowers and chocolates are off the table, but we still need a gift that really signals to them how much you care. In that case, it helps to remember that some of the most effective signals are costly ones. You’re going to have to spend more of your personal resources. If you don’t have the financial means to splurge, think of creative ways that you can spend your time instead. Remember, that envelope full of cash (even if it’s above the national average) will likely appear tacky.
That time could be spent shopping for hours looking for that perfect gift. Unfortunately, I can’t help you with that because that will likely depend on how long you’ve been together. You could also spend your time together instead. Perhaps spend the evening cooking a special meal for them or go to that one movie they’ve always wanted to see (bonus points if it’s a genre you hate). The most important part about signals is that they need to be credible. Show them you care by spending your resources and be sure that you’re separating yourself from others.
If you’re not a great cook and you’ve already run out of time to find a good gift, you could always buy them a really good book instead.
There are an estimated 43,026 people employed in the chocolate production industry [IbisWorld]
Americans eat around 5.8 pounds of chocolate per person each year [OurWorldInData]
The US imported $5,565,475,000 worth of cocoa in 2021 [US Department of Agriculture]
The median pay for a floral designer is $29,140 per year [Bureau of Labor Statistics]
57% of US adults say Valentine's Day is celebrated because of pressure from commercial entities [YouGov]
Esther Howland of Massachusetts is credited for selling the first mass-produced Valentine’s Day cards in the 1840s [Time]