No Free Lunch
Valentine economics and true love
By: Cielito F. HabitoPhilippine Daily Inquirer
For those who bought or will buy flowers for your special loved one today, you know you’re spending much more money than you normally would for the same flowers at any other time of the year. And we all know that the price shoot-up has nothing to do with rising costs of production; rather, it’s a classic law of supply and demand story at play—in this case, of a once-a-year surge in demand inducing dramatic price increases. The outcome is premised on nothing else changing as demand rises; this fundamental law in economics says that when demand for something increases, its price will move up, ceteris paribus (that is, holding everything else constant). With the same premise, a fall in demand will lead to a similar fall in the price; witness how prices of shellfish plummet when Red Tide renders them undesirable to consumers, for example. On the other hand, increasing supplies—holding everything else constant—will depress price, and vice versa. These sum up the immutable Law of Supply and Demand in economics that as the story goes, an uninformed past president wanted repealed by Congress.
But wait a minute—is there really a ceteris paribus situation as demand surges for Valentine flowers? Doesn’t the supply of flowers, especially the ever-popular roses, also increase around Valentine’s Day? Last week, a news item bannered that farmers in La Trinidad, Benguet were assuring the public of enough supply of flowers for Feb. 14, and that flower supplies are even higher this year than last year. After all, flower growers always prepare ahead for the Valentine season by planting more and planning for greater production to meet the heavy demands then. More than six truckloads of fresh flowers are reportedly delivered daily from La Trinidad to the Dangwa and Dimasalang markets in Manila, now well-known as the bagsakan or wholesale market for fresh flowers coming from the North. As of Jan. 30, a dozen red, pink and white roses was selling for P120 to P250 in Dangwa. But Dangwa’s flower vendors said in interviews that they expect the price to reach up to P450 per dozen as Valentine’s Day approaches. Why should prices rise so dramatically if there is actually a corresponding increase in supply to meet the seasonal surge in demand? In other words, since we don’t actually expect a shortage situation that would bid prices up, aren’t price increases for flowers unwarranted?
The fact that flower prices do shoot up on Valentine’s Day suggests one of two things. Either the unusual surge in demand on that day still far outstrips whatever increase in production flower growers can muster for the season, or there is some measure of market control (cartel-like forces) on the side of the traders/producers that permits them to set prices at seemingly unwarranted high levels. I’d say it’s probably a mix of both.
For many, Valentine’s Day has become an occasion less about loving and more about spending and earning profits. Those in my generation would recall how Valentine’s Day in our younger days was an occasion for handmade cards and gifts. Well, not anymore. Now it’s more about mass-produced greeting cards and other commercially sold tokens of affection. It is estimated that about a billion greeting cards are exchanged around the world on Valentine’s Day; greeting cards have indeed become a multibillion-dollar industry worldwide. For some countries, Valentine’s Day business is a major pillar for the economy. Countries like Columbia, Ecuador, the Netherlands and some countries in Africa make the bulk of their flower exports during Valentine season.
Similar statistics have yet to be complied for the Philippines, but the volume of Valentine’s Day commerce in the United States has been estimated at around $14 billion—comparable to the gross domestic product (GDP) of entire countries for a whole year! This is almost entirely in the form of consumer spending on things including flowers, cards, chocolates, jewelry, clothing and accessories, restaurants/nightclubs, hotels, and other gift items—now including such high-value items as smart phones and tablets. A survey by the US National Retail Federation estimates that the average American will spend $126 this Valentine’s Day, 8.5 percent higher than last year and reportedly the highest in the survey’s 10-year history. If this is a barometer of an improving American economy, then this bodes well for our own economy as well, and that of many other economies that depend on exports to America.
Amid the fury of consumer spending in this annual celebration of love, Valentine’s Day spenders often miss the fact that there are countless people around who are missing out on such love, and in certain cases, are even victims of this celebration. Chocolates, for example, are associated with issues on child labor in cocoa farms in West Africa, which has given rise to an international campaign to pressure chocolate companies to sign the “Commitment to Ethical Cocoa Sourcing.” The very industries feeding Valentine commerce are, in some cases, going against the very object of the day’s observance.
Closer to home, thousands of families rendered homeless by a string of natural disasters in the South could not even think of celebrating Valentine’s Day amid more urgent needs and concerns. Perhaps if we could just divert a portion of what we had planned to spend for our significant other today to helping alleviate the plight of recent disaster victims, then we could have a more meaningful celebration of true love for those needing it most this Valentine’s Day.
A Blessed Valentine’s Day to all!
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E-mail: cielito.habito@gmail.com
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Tags: economy , featured column , flowers , law of supply and demand , opinion , prices , Valentine’s Day
