Economics of engagement rings

It has been a long and welcome break thanks to two bank holidays colliding with the weekend. Hence, blogging was off.

Back to work and here is a fun article to begin blogging.

Why do men buy diamond rings for our fiancées? There’s the emotional story. We enjoy making grand gestures of commitment to the people we love. Behind that, there’s the marketing story. DeBeers’ historic ad campaign, crafted by the real-life mad men at N.W. Ayers, convinced generations of lovers that diamond bands were synonymous with eternal devotion. But behind that, there is economic story that is just as important and fascinating.

Once upon a time, diamond rings weren’t just gifts. They were, frankly, virginity insurance….

Hmm.. What does this insurance thing mean?

Let’s think like an economist. An engaged couple aren’t all that different from a borrower and a lender. The woman is lending her hand in marriage to the man, who promises to tie the knot at a later date. In the days of Breach of Promise, the woman would do this on an unsecured basis — that is, the man didn’t have to pledge any collateral — because the law provided her something akin to bankruptcy protection. Put simply, if the man didn’t fulfill his obligation to marry, the woman had legal recourse. This calculus changed once the law changed. Suddenly, women wanted an upfront financial assurance from their men. Basically, collateral. That way, if the couple never made it down the aisle, she’d at least be left with something. And that something was almost always small and shiny. The diamond ring was insurance.
So, should a jilted bride give back the engagement ring? Today, the answer is often yes. But back when rings first came into vogue, part of the point was that she wouldn’t. It was a security against a default on the engagement.
The logic does not apply these days. But still one does  give the ring to provide a signal:
The good news is that this seems so alien to us today. Women have their own careers. They earn more degrees. And, for the younger generation, they out-earn men. More importantly, the stigma against premarital sex has disappeared. A broken engagement isn’t a lasting financial disaster for a woman like it was before. The diamond engagement ring has itself undergone a transformation. It’s no longer a security. It’s just about signaling nowadays. It’s anachronistic. But don’t try telling your girlfriend that

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: