The real economics of Valentine’s Day

So Love2Learn on Reddit pointed out a silly video giving the economics of Valentine’s day. It’s a fun little piece, done in a dry deadpan that the presenter must know is hysterical.

It’s also wrong, most especially when he says that Valentine’s day spending doesn’t stimulate the economy because, after all, the money would be spent elsewhere, or it would be banked, the bank would lend it out for investment, and investment is just another form of spending.

If this were true then not only would we not worry about how the Christmas season went, but we’d actually be unhappy when it went well because all that money could have been spent on investment instead. Really, sometimes banks and big companies sit on money, or let it spin unproductively in the financial circulation where it never touches a factory or a road. And this is one of those times. So spending is good–it creates jobs, generates tax revenue, and so on.

And it’s good because all those chocolates and roses satisfy our demand for the same, right? Not so fast. Valentine’s day actually demonstrates a very different economic point: The idea—put forth most eloquently by John Kenneth Galbraith in The Affluent Society—that demand can be created by the very people that are selling us the stuff.

In other words, in many cases men don’t buy women chocolates because they feel like it, and many women didn’t just wake up this morning and think, hey, chocolates would be nice. Rather, the hype surrounding Valentine’s day has created at least part (I’d say most) of the demand for chocolate. Which is common sense–all that advertising has a purpose, after all.

That’s actually a major point: If our demand doesn’t come from our pre-existing wants, then the economy isn’t just satisfying our wants–it’s creating wants, which it then satisfies. (If it even does satisfy them; the Valentine’s hype may create more longing and misery than all the chocolate in the world can fix.)

So suddenly we lost a good part of our justification for our economic fixation on production and growth: If the purpose of the economy is to satisfy our wants, and our wants are created by hype, might we not be happier, not with more chocolate, but with less hype?