Oct 07

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Government shutdown great for some businesses

I’m occasionally surprised by the variety of anecdotes that support theories of market efficiency and the rapid adaptation of consumer behavior in free economies. The recent government shutdown seems to have introduced one such case.

CBS reports that traffic is suddenly booming for “sugar daddy” websites. The news organization quotes folks at seekingarrangement.com and whatsyourprice.com for support. While the industry usually experiences a lull in the autumn months, this year it is facing a “massive increase in daily signups.”

According to spokespeople for websites in the industry, a theory is that women who depend on payments through WIC–a nutrition program for women, infants, and children–are the driving force behind the surge in signups. This is because half the signups are single mothers.

If true, those signups could be on the verge of multiplying since actual WIC payments apparently have not decreased yet, but could drop soon. According to the USDA, WIC has a contingency fund that lasts for more than a week. As of today, the shutdown has been going on for just about that long. The sudden change in behavior is worth noting given that the surge has occurred in anticipation of the declining payments, not simply as a result of declines.

Furthermore, the theory is sensible given that likely “sugar babies” are probably women in financial need. According to seekingarrangement.com’s homepage:

“Sugar Babies are students, actresses, models or girls & guys next door. You know you deserve to date someone who will pamper you, empower you, and help you mentally, emotionally and financially.”

A convincing sign that the government shutdown is responsible for the business boom would be a sudden reversal in the trend coincident with Congress and the President coming to an agreement. On the other hand, the theory may be correct even if a post-agreement reversal does not occur. It is possible that a significant portion of new recruits will stay with the program even after the government assures continuing WIC payments.

About the author

Eric Madsen

Mr. Madsen is a Chartered Financial Analyst (CFA) charterholder and a Manager at Fulcrum Inquiry, a finance and economics consulting firm that performs economic damages analysis involving commercial litigation, financial investigations, business valuations, and forensic accounting. He also holds an MBA from the UCLA Anderson School of Management and a B.S. in Economics. He conducts expert analysis in finance and economics. Mr. Madsen may be contacted at 213.787.4122 or at emadsen@fulcrum.com.

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