How Much Money Should The Tooth Fairy Leave | Planet Money | NPR
he's got one thing on his mind:
What's the per unit value of a tooth?
Actually, there's no magic to it.
It's a question we can answer with real, hard statistics.
Because every year, for the last 20 years, Delta Dental,
the insurance company and tongue twister,
has been conducting the Tooth Fairy Poll, a nationally representative survey —
and as of 2018, a tooth was pulling in $4.13.
If you're the tooth fairy, you know that number used to be about $1.30.
A kid losing a tooth wasn't going to break the bank.
Now, maybe that doesn't seem like much of an increase to you,
but there's some weird stuff going on there.
Recently, the price of a tooth has skyrocketed.
The number is going up way faster than it should with normal inflation,
and these kids aren't even unionized.
In 2017 the tooth fairy paid out $271 million.
That's more than the annual operating budget for National Public Radio,
by about $50 million.
Meanwhile, the U.S. inflation rate is 2%.
The inflation rate for the price of teeth is 10%.
It's a good market for kids, but a bad market for the tooth fairy.
And the obvious question is: Why?
One theory: the way we calculate inflation.
That 2% number, that's the inflation rate for everything from fuel to bananas to a house.
And that's not stuff kids buy; they only care about a tiny little section of the economy.
So, maybe the price of kids' stuff has risen faster than inflation,
and the tooth fairy is just subsidizing the difference.
But really, that's not it at all.
Most of that stuff got cheaper over the last decade.
So, by economic logic the tooth fairy should actually be paying less than a decade ago.
But there is another way to think about it, and it's our leading theory:
Income elasticity of demand.
That's the idea that, as you make more money, you're going to spend disproportionately more
on some things than others.
Let's say that you get a raise, 10%.
That doesn't mean that you're going to suddenly spend 10% more
on every single part of your life.
You're not going to spend 10% more necessarily on food, for example.
But, there are these categories of things that people might splurge on
if they have the money.
And children are usually one of those things.
It's important to people to take better care of their families if they can.
So long as kids keep being cute, and the market stays healthy,
investing in teeth may be a good portfolio strategy.
So, it may be tough times for the tooth fairy, but there's a good reason for it.
Those grown-up teeth are for life, and so is family.
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