It’s that time of year again. Pumpkins festoon front yards. Horror movies abound in theaters. Candy is sold by the ton. And costumes, scary, sexy, and just plain crazy are purchased, modified, and tailored just for the bacchanalia of the that most weirdest of nights in the fall – Halloween.
But what can Halloween actually say about economics? After all, this is a column on economics, wealth, money, and time. Well it turns out that Halloween night, after the trick-or-treaters have returned with their loot, provides the ideal setting for playing a game that illustrates how trade builds wealth. The name of the game is called the candy trading game.
The basic mechanics of the game is as follows. Take the trick-or-treaters to a big room and ask them to sort their candy into piles of similar types: M&Ms with M&Ms, Kit Kats with Kit Kats, Spree with Spree and so on. Then ask them to value each of their pieces of candy on a scale of 1-10, with 1 being the least liked and 10 being the most liked.
Since the valuation of candy is an individual and subjective thing, most likely each participant will have a pile of favorites (say Snickers) and a pile of yucks (say Black Licorice Twizzlers). Given a mostly random distribution of candy that results from going door-to-door, each costumed candy collector will find that the value that they ascribe to their haul will be somewhere around the 5 mark.
Now, without adding or subtracting any candy, allow the make-believe menaces to freely trade with each other. Soon Lik ‘Em Aids will be changing hands for Black Cows; Pixie Stixs for Reeses’ Peanut Butter Pumpkins, and so on.
Finally, stop the trading (albeit temporarily) and ask the crew to reevaluate their stash. Generally, the results will show that all groups report an increase in the value of their candy holdings even though no candy has entered or exited the economic ecosystem. The increase in value is, or course, variable, but when this game is played in more controlled settings (say a classroom), the increases can be quite dramatic. Increases of 30 to 60 percent have been seen in all groups simply be re-arranging who has what.
This is perfectly expected. Anyone who has ever trick-or-treated, or has chaperoned those who have, know that a time-honored tradition upon returning home is to trade with each, eat what you like, and hold onto what you don’t (either until you can justify throwing it out or until you get desperate enough to eat it).
The only mystery and horror is why, when we grow up, are we confronted with businesses and governments hell-bent in stopping free trade. I guess devils can be found even outside Halloween.