Today, shoppers across America will participate in the largest shopping day of the year: Black Friday. The National Retail Federation is estimating that 164 million customers will be shopping between Thanksgiving Day and Cyber Monday. This estimate is unchanged from 2017. The actual result from 2017 was 174 million between Thanksgiving and Monday. A similar adjustment to the predicted value for 2018 would mean 174 million actual shoppers.

The NRF estimates that total sales for the holiday season will be between $717.45 billion and $720.89 billion, up from $687.87 billion in 2017. This would be an annual increase of 4.3 to 4.8 percent. The estimate for 2016 was between $678.75 billion and $682 billion, suggesting that the total sales for 2018 may be closer to $727.09 billion. This year, the NRF estimates that retailers will hire between 585,000 and 650,000 seasonal employees, compared with the actual 582,500 they hired during the 2017 holiday season versus an estimate of 500,000 to 550,000. We may therefore expect that retailers will actually hire about 685,000 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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