Economics of love and Valentine’s Day

The one thing that Wikipedia has to say about Valentine’s Day in the Philippine setting is: “It is usually marked by a steep increase in the price of flowers, particularly red roses.” And we all know how true that is. The shoot-up in price has nothing to do with rising costs of production; it’s all about demand. The phenomenon of Valentine’s Day prices of red roses is one of the best illustrations of the Law of Supply and Demand: If nothing else changes, higher demand will raise the price of a good, while higher supply will lower it, and vice versa. Wherever market forces determine prices, this is a law that simply cannot be repealed, as a past president reportedly wanted Congress to do.

As the flower-savvy in or around Metro Manila would know, the area around the Dangwa bus terminal near Dimasalang Street in Manila is the place to go to find a wide variety of flowers, and cheap (especially if one settles for the rejects, which can still be quite good). Truckloads of fresh flowers are transported there daily from La Trinidad, Benguet, whose mountain slopes host a thriving cut-flower industry. What is now the Dangwa fresh flower market with dozens of shops started with a few stalls in the 1970s, relying on flowers sent through the Dangwa passenger buses plying the Baguio-Manila route. A bouquet of roses that would normally cost P300-P400 would see a fivefold hike in price on or before Valentine’s Day, to as much as P1,500-P2,000. Try buying them after dinnertime tonight, though, and you’ll probably be able to get them even below the normal price. That’s supply and demand at work.

To many, Valentine’s Day has become an occasion less about loving and more about spending and profits. It used to be an occasion for handmade cards and gifts; now, Valentine’s Day cards and gifts (especially flowers and chocolates) are a multibillion-dollar industry that props up whole economies. Cut-flower exporters like Colombia, Ecuador, the Netherlands and some African countries make the bulk of their export sales revenues during the Valentine season. A survey taken by GE Money among Asians years ago came up with the perhaps unsurprising result that Filipinos celebrate Valentine’s Day the most, among the eight countries surveyed. But it was the Singaporeans who appeared to be the biggest Valentine spenders, with 60 percent of those surveyed indicating that they would spend $100-$500 for the season. In Japan and Korea, women spend more for Valentine’s Day, as it is customary for them to give chocolates to men on that day. (Men return the favor on “White Day” a month later, with a gift of white chocolate or nonchocolate candy.) No doubt, the holiday creates tremendous jobs and profits where it is celebrated, but ultimately, the day is still about celebrating romantic love.

The economics of it need not be confined to commerce, jobs and profits. Self-styled “romantic economist” William Nicholson explains that there’s much in economic principles that can be applied to one’s romantic relationships as well, that he wrote a whole book on it with the same title. In it, he shows how the tools of economics can be applied to achieve the best return on one’s “investments” in the market for romantic relationships. As a sample, the first of 10 rules he lists is: “Restrict your supply, but only once you’ve differentiated your product.” In other words, play hard to get (restrict your supply) to increase your price (value). One needs to be expensive, he argues, because people don’t want someone who can be obtained by just about anyone. People want to feel they have earned exclusive access to their lover’s affections. But then it’s not a good idea to be standoffish from the beginning either. One has to demonstrate his/her own distinguishing assets first. “People won’t know you’re worth the extra cost,” he points out, “until you’ve differentiated yourself from others in the market.” We Filipinos are masters at that. Playing “pakipot” (acting disinterested when actually very eager) may be the way to go to catch your prized Valentine, even in this modern world.

A love-filled Valentine’s Day to all!

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