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Economics Doesn't Have to Be Spooky
Halloween isn't complete without candy, costumes, and economic concepts.
In the spirit of trick-or-treating, I’ve arranged this week’s newsletter to mirror a trip around your local neighborhood. Instead of collecting miniature candy bars, you’ll be collecting fun-sized examples of economic concepts you may see during Halloween. As a preview of what to expect, we’ll look at economic concepts that are behind:
To kick us off, let’s start by looking at spending estimates for the holiday and dive into candy rankings. Halloween spending is a big deal in the United States. This particular holiday, consumers are expected to spend around $10.6 billion. About $3.1 billion of that spending will go toward candy, and slightly more is expected to be spent on costumes. If you’re looking for empirical data on the best candy, check out FiveThirtyEight’s Ultimate Halloween Candy Power Ranking from a few years ago. Here are the Top 20 candies, but click the image to see where your favorite candy ranks among 86 options:
Now that you’ve got some talking points ready for your Halloween party tonight, let’s head around the neighborhood to pick up some fun-sized economic treats (or tricks). You be the judge!
So Many Halloween Decorations
(Economies of Scale)
Outdoor Halloween decorations have become more extravagant than ever, but that hasn’t always been the case. As you drive around your actual neighborhood, it isn’t uncommon to find some houses decked out with giant skeletons, inflatables, and animatronics. Halloween became popular in the United States in the 1800s, but most activities were centered around adults instead of children. Eventually, Halloween shifted from being a night for adults toward a children’s holiday.
In the early 1900s, there were only three major manufacturers of holiday supplies: The Beistle Company, Dennison Manufacturing, and Gibson. Outdoor decoration sales have grown rapidly over the past few years thanks in part to big-box retail stores stocking shelves with Halloween products. In an interview with RetailDive, a consumer and retail consultant highlighted the recent trend:
It goes back to the proliferation of big-box retail stores — the Bed Bath & Beyonds and the Home Depots and the Lowe’s and so on. As those chains grew in size and scale, the offering of seasonal merchandise — whether it was spring, summer, holidays as well as Halloween — continued to grow.
Firms benefit from economies of scale when their average cost falls as they produce (and sell) more products. If the creators of the famous 12-foot skeleton sold their products directly to consumers, the average cost would likely be much higher since they are constrained in their ability to maintain their own inventory. Having Home Depot as its main retail partner enables the firm to produce more products overall, store those products in Home Depot’s warehouses and on Home Depot’s shelves, reach Home Depot’s large client base, and lower the average cost of production through economies of scale.
Candy Prices Are Up
Inflation has hit everything from gas pumps to clothing stores across the entire world. Inflation is based on a general price increase that impacts a wide variety of goods and services in the economy and not just a few sectors. As the general price level increases, each of your dollars can buy fewer goods than before the change. Often, we look at inflation as lowering your purchasing power.
Inflation has hit the candy aisle as well. The most popular brands, as well as those big assortment bags, have seen an average price increase of around 13% since last year. The largest price increases came from Skittles (42%) and Starburst (35%)! In an effort to avoid raising prices, some companies decide to keep the same sales price but decrease the product size instead. It’s a concept cheekily referred to as shrinkflation.
Your favorite bag of dark chocolate Hershey’s Kisses is actually a couple of ounces smaller than the last time you purchased them and a two-pack of Reese’s Peanut Butter Cups is a tenth of an ounce lighter than before. Shrinkflation has the same result as typical inflation in that each unit of a product is more expensive, but smaller packages can trick some customers into thinking they’re not paying more.
The Annual Candy Exchange
(Gains from Trade)
As your kids (or maybe even you!) travel around the neighborhood picking up treats, they may find themselves with a bag full of some less-than-desirable candies. Their siblings and friends likely have some candy in their bags that they aren’t too fond of either. Instead of forcing your children to eat the candy they don’t like, they can be collectively better off by trading with their siblings and friends.
Everyone lays their stash out on the floor and begins arranging piles to see what they have collected. Then the negotiations begin! You don’t love those fruit-flavored tootsie rolls, so you’re willing to let them go for cheap. You didn’t grab as many peanut butter cups as you had hoped, so you’re willing to give up some good candy to get the ones you want the most. Nearly all of us have experienced this event and may not have realized that we were seeing the results of a concept known as gains from trade. The concept and exchange are so common that Walmart featured it as part of a 2019 commercial campaign:
The back-and-forth trades continue until there are no additional mutually beneficial trades left. While you may still be stuck with some of those strawberry tootsie rolls, at least you have more Twix bars than before. As long as there wasn’t any coercion involved, all parties should be at least as well off as when they started. That there are gains from trade is one of the foundational concepts in economics, and it’s one that young kids learn early in life without realizing they’re actually learning economics.
The Top Pet Costumes of 2022
The top costume for kids this year are Spiderman and Princess, which coincides with the Walmart commercial linked above. Witches and vampires rank at the top ones for adults, while pumpkins and hot dogs top the list for pets. For the curious ones still here, you can check out the Top 10 costumes this year for each consumer group based on a survey by the National Retail Federation:
That’s right, dogs are listed as a consumer group. That may surprise some of you when you consider that dogs only marginally (and not usually voluntarily) participate in Halloween festivities. Pet costumes, however, are part of a larger spending pattern in which Americans spend close to $700 per year on their pets each year. While some of that spending is related to pet care costs, a portion of it could also be classified as conspicuous consumption.
The term was inspired by Thorstein Veblen, who interpreted a lot of the spending by wealthy households as an attempt to signal their wealth to others rather than true consumption for personal benefits. This spending, however, can happen at any income level and those signals can be amplified over social media. Conspicuous consumption is the consumption of attention that is generated when others see how much money the spenders have that they can waste on unnecessary products.
First Lady Mamie Eisenhower decorated the White House for Halloween for the first time in 1958. Decorations included skeletons, jack-o-lanterns, dried corn, and pumpkins [The White House Historical Association]
51% of Americans planned to decorate their home or yard for Halloween this year [Statista]
This year Home Depot increased its overall Halloween and fall assortment to 861 products during September and October compared to 418 in the same period last year [RetailDive]
An estimated 39% of people will buy greeting cards as part of their Halloween-related purchases [National Retail Federation]
Illinois is the largest pumpkin producer in the United States with more than 15,000 acres devoted to gourd. Illinois farms typically grow more than 500 million pounds of pumpkins annually [US Department of Agriculture]