An Economic Indicator to Watch: the Tooth Fairy Index

With April Fool’s day just behind us, I stumbled upon a “semi-fictional” Planet Money video on a very important topic: the price of a tooth. As the accompanying article states, the amount parents pay their kids when they lose a tooth has risen much more than one would predict based from inflation. Twenty years ago, the price of a tooth was around $1.30. But last year, it was a whopping $4.13.

These numbers are all tracked by Delta Dental, a large dental insurance company. In 1998, they began tracking the amount of money kids find under their pillow by surveying parents, and estimate that the average gift for a tooth is $3.70.

The website boasts that the numbers they track generally align with market trends, though the numbers have shot up in the last few years. The Planet Money podcast toys with different reasons for this change, one of them being the income elasticity of demand. This is the idea that when your income increases, you will not distribute your additional income evenly. You will spend less on necessities and more on luxury goods. Giving kids money for their teeth definitely isn’t a necessity, but it sure is fun and makes you feel like a secret superhero. When parents’ incomes increase, their kids are likely to enjoy those benefits. This is compounded by the fact that, overall, parents are spending more money on their kids than in the past.

Or maybe it’s all just a scheme by clever, economically-sound kids that pull out their teeth in hopes of some extra candy money. This kid below is probably grinning because he just made quite a profit. All he has to do is spend his earnings on some big sour candies at the corner store and he’ll have another tooth falling out in no time.



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