What the thing is
The lipstick effect is a hypothesis: that consumers buy more low-cost luxuries during economic crises.
Where it came from
Leonard Lauder publicized it in 2008, citing a post-2001 rise in his company’s lipstick sales after the terrorist attacks. The lipstick index, an economic indicator derived from the lipstick effect, was first applied to the early 2000s recession.
The theory’s underlying assumption is that a portion of consumers will keep buying luxury goods in a bad economy: instead of expensive purses and fur coats, they buy high-end lipstick. Lauder said a “Leading Lipstick Index” of sales across all Estée Lauder brands went up after the 2001 attacks, and he took higher lipstick sales as a sign of unwillingness to buy dresses. Across the country, lipstick sales were up 11% in the last quarter of 2001, echoing a 25% rise in cosmetic sales during the Great Depression. Lauder claimed that cosmetics purchases, lipstick above all, tend to be inversely correlated with economic health.
What it gets right
It identifies a real human tendency: small indulgences persist, or even spike, during hardship.
What it gets wrong
It misattributes causation. The 2001 lipstick sales rise was tied to celebrity cosmetics — not crisis psychology. Later recessions show lipstick sales falling with income, not rising. The usefulness of the lipstick index as an economic indicator is low.
Lipstick sales have also grown during periods of increased economic activity, the reverse of what the hypothesis predicts.
Why it matters now
It persists as shorthand for resilience and consumer irrationality — despite being empirically contradicted and stripped of explanatory power.
The idea has kept producing relatives. In the 2010s, as nail art became a fad in English-speaking countries and as far afield as Japan and the Philippines, media outlets reported that nail polish had replaced lipstick as the affordable indulgence in a recession, which led to talk of a nail polish index. During the coronavirus pandemic, mandatory face masks increased eye makeup purchases, suggesting a mascara index. A BBC News report cited coffee and artisanal bread as modern examples of the lipstick effect, and noted that this kind of spending has been associated with impulse purchasing and, in some cases, increased credit card debt.
Is it worth your time
No. It is a debunked economic trope masquerading as insight.
