Happy Valentine’s Day!
Every year on this day, lovers shower their partners in gifts, spending over-the-top amounts for things they would never purchase (at that price) any other day of the year. Americans alone spent circa $25 billion for Valentine’s Day gifts and entertainment last year in 2025!
But this year will be a bit different, after record inflation that has increased prices of everything from flowers to chocolates and dining in restaurants.
As a result, romantic Valentine dinners out will cost more and restaurants are modifying their menu to attract cash-careful customers.
But, from a strictly economic point of view, chocolates and roses, or any kind of market product are a ‘bad’ gift to give. Whenever someone gives you a gift, there is a gap between the expected value the giver thought you would get, and the value you would actually get if you had spent the same amount of money to buy something you really wanted.
The bottom line is that when someone else purchases something for you, they are not very likely to purchase exactly what you want. This is called ‘the Deadweight Loss’ and, on average, we value the items we receive as gifts 20% less than the items we purchase ourselves. Economists consider this to be a wasteful utilization of resources, as nobody gets what they want (apart from the seller!). So, according to an economist, the best gift to give would be cash! But ‘cash’ isn’t really very romantic, is it?
The best gifts are therefore the ones that have no financial exchange; ones that are thoughtful and creative. Pick a rose from your own garden, draw a picture, make a card, sing a song, or simply say … ‘I love you every day’!
What do you think about the economics of gift-giving? More importantly, what will you give your better half (= partner) this year?
Article for the friends and students of Michael Robbs.
Professional Trainer, Coach & Mentor of our Business English Courses