Today, shoppers across America will participate in the largest shopping day of the year: Black Friday. The National Retail Federation is estimating that 137.4 million customers will be shopping on Black Friday weekend, down from the 2015 estimate of 135.8 million customers. The actual result from 2015 was 151.4 million shoppers. A similar adjustment to the predicted value for 2016 would mean an actual number of shoppers close to 153.1 million.

The NRF estimates that total sales for the holiday season will be $655.8 billion, up from $633.0 billion in 2015. This would be an annual increase of 3.6 percent. The estimate for 2015 was $630.5 billion, suggesting that the total sales for 2016 may be around $658.4 billion. This year, the NRF estimates that retailers will hire between 640,000 and 690,000 seasonal employees, compared with the actual 675,300 they hired during the 2015 holiday season versus an estimate of 700,000 to 750,000. We may therefore expect that retailers will actually hire about 619,400 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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