With door-to-door Christmas caroling having gone the way of the horse and buggy, Halloween is our last national holiday where we get to meet a lot of our neighbors. Of course, the next day you might not recognize the children when they’re not dressed like little princesses, monsters, or superheroes. But their parents should look familiar.
However, Halloween has another big benefit. And that’s its impact on the economy.
According to the Foundation for Economic Education, major spending on a holiday can have significant positive short-term benefits for the economy, by encouraging extra purchases that might not otherwise occur.1
They write, “Many economists believe the increase in spending around Halloween has a positive effect on the economy. Increased spending generally leads to higher gross domestic product (GDP), helping to jump-start economic activity and lead to potential job growth.”
As you might expect, there are other economists who hold a contrarian view. They say that spending on seasonal consumer goods—especially one-use items like costumes and decorations—divert resources from more productive activities. They also point out that buying a costume for the purpose of collecting candy that you may not like is less efficient than using the money you would have spent on the costume to buy only the candy you do like.
This is an example of how the mathematics of pure economics can be divorced from human behavior. Yes, on paper the method mentioned above is a better way to get candy. But would anybody actually think this way. The entire holiday is a little silly and yet it’s this sense of fun that is the catalyst for significant economic activity.
According to the National Retail Federation (NRF), 69% of consumers are planning to celebrate the holiday this year. This is a higher participation rate than before the pandemic. As a result, they estimate that total spending will eclipse last year’s record of $10.1 billion for a total of $10.6 billion.2
But the benefits don’t stop there. According to economist Jeffrey A. Tucker, Halloween teaches children valuable lessons about how the economy works. In a paper for the Ludwig von Mises Institute, he argues that the holiday demonstrates to young people that they should work for their rewards, that bartering is an option, and that their appearance matters.
We wish you a happy Halloween and playfully suggest that everyone’s financial plan should consider a small budget for a good variety of candy around this time of year.