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The Economics of Halloween

Calling all ghouls, witches, goblins, Spider-Men, Mario Bros and Wednesday Addams! Your favorite time of the year is near, for tomorrow is Halloween…the spookiest day of the year. Halloween, or All Hallows Eve, is known as the evening before All Saints Day. In olden times, it was thought to be the time when souls roamed freely on earth and when witches, ghouls and other mythical beings were said to be most powerful—a spooky time indeed! Over time, this annual event has been transformed into one that involves trick or treating, pumpkin carving, engaging costumes, and elaborate decorations. It is celebrated mostly in North America, although it has risen to more popularity in recent decades pretty much everywhere.

As always, I tend to question, how an annual event like Halloween impacts consumer spending and, ultimately, the economy? This year, Halloween spending is expected to reach an all-time high of $12.2 billion and a record participation in Halloween-related activities of 73%. Consumers are starting their Halloween shopping early, and more consumers are joining in on the Halloween fun.

Source: NRF and Prosper Insights and Analytics 2023 Halloween Survey

According to John Maynard Keynes, significant increases in consumer spending during major holidays can significantly and positively impact the economy, which would have not otherwise occurred if the event or holiday did not happen. In terms of Halloween, it’s easy to see the positive impact of millions of candies ($3.6 billion), costumes ($4.1 billion), and elaborate home decorations ($3.9 billion) to the overall economy.

“Skelly,” the 12-foot giant skeleton sold by the Home Depot, retails at $300 and is selling out fast.

Then you have the pop-up Halloween Stores like Spirit Halloween, which only operate around this time of the year. These stores hire temporary employees that staff their stores, especially towards the big rush to the big day. This increase in job numbers tend to stay up as we head into the Thanksgiving and Christmas holidays. Speaking of which, some retailers like Target and Walmart tend to introduce their holiday specials around this time as foot traffic increases. Around 20% of sales can be attributed to this time of the year as well. This partly explains why we see Christmas decorations alongside Halloween decorations—-an odd sight indeed.

Spirit Halloween’s pop-up and seasonal business model is a clever way to meet a seasonal and infrequent uptick in demand for annual events like Halloween.

But how does the state of the economy affect Halloween sales? Some economists argue that it is actually the other way around…the state of the economy affects spending during Halloween. For instance, in 2008, which is the period of the Great Recession, Halloween spending dropped to just $56 per person. When the economy started to rebound however, the spending per person on Halloween increased to $72 per person in 2011.

I think the short-run effects of Halloween are definitely seen in increased spending for this holiday, and to a certain extent, Keynes may be right. But another theory is that, the overall effect of this increased spending is also offset by the savings that people make in August-September in anticipation of increased spending in October. The overall effect to the economy may be minimal or even none at all.

On a more micro level, Halloween is a valuable economic lesson as well, especially for the younger ones. Economist Jeffrey A. Tucker, contends that Halloween teaches kids the importance of working hard for their rewards (trick or treating), bartering (exchanging candies I don’t want for someone else’s), even working hard on your costumes (the creative and cute ones get more candies), and the importance appearance and demeanor (smiles, cheerfulness, and cuteness).

So yes, an annual event does have an enormous impact on the economy, not only in overall economic output, but in terms of the intangibles: the smiles, time with family and friends, and the simple act of altruism. Speaking of altruism, maybe go the extra mile this year and consider these candies to be at the bottom of your Halloween shopping list. You might just get the extra smiles and cheers from those witches and goblins at your doorstep.


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