Halloween’s Effect on the Economy

A:

Based on the Keynesian school of economic thought, major spending holidays can have significant short-term benefits for the economy by encouraging extra purchases that might not otherwise occur. According to the National Retail Federation, in 2017 Americans planned to spend a record $9.1 billion on Halloween, up from $8.4 billion in the previous year.

It could also be argued that the state of the economy affects the Halloween industry more than Halloween affects the economy. In a down economy, for instance, consumers may be less likely to spend on frivolous goods such as costumes, candy, pumpkins and home decorations, or attend parties. Conversely, booming economic times might serve as a boon to Halloween expenditures. Regardless of which way the relationship is considered more causally significant, many economists believe the increase in spending has a positive effect. Increased spending generally leads to higher gross domestic product (GDP), helping to jump-start economic activity and lead to potential job growth.

It is entirely possible, however, that the net positive effects of Halloween consumer spending are offset by net negative effects elsewhere. For example, some consumers might anticipate an increase in spending around late October and, to compensate, increase their savings during the preceding months. This tends to reduce gross spending during August and September. Others might curb their spending in November, both to compensate for increased spending for Halloween and also in expectation of Christmas spending. (For related reading, see: 8 Tips to Help You Control Holiday Spending.)

Employment and Commercial Activity

Halloween also has a seasonal impact on employment and commercial activity. The NRF report revealed consumers planned to spend on average $86.13 in 2017 and a large share of that would go for costumes and candy. Many retail stores open up only for Halloween and, when November arrives, these shops close up and wait until the next spooky season. Additionally, some industries expect and plan for large increases during the holiday, including producers of pumpkins and candy. Other economists argue spending on nearly useless consumer goods such as costumes and decorations only used for one day deviates resources from more productive activity. If saving is reduced as a result of holiday spending, the total capital investment stock is all the worse for it. The receipts of companies that employ people full-time year-round might drop because more dollars are chasing seasonal goods.

Others have argued Halloween is full of in-kind payments, such as costumes or candy, rather than lump-sum transfers, such as cash, because in-kind payments are more inefficient in satisfying consumer wants. After all, you can buy whatever you really value most with cash, whereas it is unlikely that your candy bar is your most valued good.

An economics writer, Jeffrey A. Tucker, argued in his 2009 article for Ludwig von Mises Institute that Halloween teaches valuable economic lessons that could have very long-term benefits: children should work for their rewards, bartering is an option and appearance matters. The most accurate answer is probably this: Halloween is a substantial industry and has an impact on the economy. However, it is very difficult to identify exactly what that impact is and whether it is a net positive. (For related reading, see: How Much Americans Spend on Halloween.)

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