The Economic Fallacies of Black Friday: 2019 Edition

Today, shoppers across America will participate in the largest shopping day of the year: Black Friday. The National Retail Federation is estimating that 165.3 million customers will be shopping between Thanksgiving Day and Cyber Monday.[1] This estimate is higher than the 2018 estimate of 164 million.[2] The actual result from 2018 was 165 million between Thanksgiving and Monday.[3] A similar adjustment to the predicted value for 2019 would mean 166.3 million actual shoppers.

The NRF estimates that total sales for the holiday season will be between $727.9 billion and $730.7 billion, up from $701.2 billion in 2018.[4] This would be an annual increase of 3.8 to 4.2 percent. The estimate for 2018 was between $717.45 billion and $720.89 billion[5], suggesting that the total sales for 2019 may be closer to $711.95 billion. This year, the NRF estimates that retailers will hire between 530,000 and 590,000 seasonal employees, compared with the actual 554,000 they hired during the 2018 holiday season versus an estimate of 585,000 and 650,000.[4] We may therefore expect that retailers will actually hire about 502,500 seasonal employees. On the surface, this may appear to be a marvelous celebration of free market capitalism. But let us look deeper through the lenses of the broken window fallacy and the idea of malinvestment.

To view holiday shopping as a boost to the economy ignores the fact that people could either be spending that money in other ways or saving it. In other words, such an approach is an example of the broken window fallacy because it focuses only on what is seen and ignores opportunity costs. If people would save their money rather than spending it on various holiday gifts, then this money would be invested in one thing or another. As Henry Hazlitt explains in Chapter 23 of Economics in One Lesson, saving is really just another form of spending, and one that has a greater tendency to allocate resources where they are most needed.

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References

1. McGinty, Mary (2019, Nov. 15). “More than 165 million people expected to shop over five-day Thanksgiving weekend”. National Retail Federation.
2. Smith, Ana Serafin (2018, Nov. 16). “NRF survey says more than 164 million consumers plan to shop over five-day Thanksgiving weekend”. National Retail Federation.
3. Smith, Ana Serafin (2018, Nov. 27). “Thanksgiving weekend multichannel shopping up almost 40 percent over last year”. National Retail Federation.
4. Shearman, J. Craig (2019, Oct. 3). “NRF forecasts holiday sales will grow between 3.8 and 4.2 percent”. National Retail Federation.
5. (2018, Oct. 3). “NRF forecasts holiday sales will increase between 4.3 and 4.8 percent”. National Retail Federation.
6. McGinty, Mary (2019, Oct. 24). “Holiday shoppers plan to spend 4 percent more this year”. National Retail Federation.
7. (2018, Oct. 24). “Consumers will spend 4.1 percent more than last year during winter holidays”. National Retail Federation.
8. Maximus, Nullus (2018, Nov. 23). “The Economic Fallacies of Black Friday: 2018 Edition”. Zeroth Position.