To say that individuals who are in the market for a product are not in need of silly advertising, but instead in need of the best product, is to overlook the economic consequences of substitutes. FULL ARTICLE by Jeremiah Dyke
Source link: http://archive.mises.org/12368/the-supposed-sham-of-advertising/
The Supposed Sham of Advertising
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It’s not terribly hard to comprehend that without telling people you are selling a product that it’s unlikely anyone will go out and buy it.
If you’re selling something, make it known that you are doing so, for sure. But what about all the advertising for products that said company isn’t selling to those the advertising is directed at? You get those products in stores. When I’m in the market for headphones, for example, I generally look at a few stores’ inventory of headphones via an online catalog (not exactly advertising), then compare specs and perhaps research some further. I don’t just watch TV or read newspaper advertisements to see if I can find any advertisements from the manufacturers about their headphones.
I submit that the value of advertising applies as well to fostering the free market, to wit:
Keynesians won the war of ideas, even though Austrians had superior facts & logic. When it comes to promulgating an outlook, there is no substitute for marketing. An outlook is not adopted solely by its veracity, but by how well it is understood, fits into the user’s way of life, and is applicable. Note how well Keysianism has been presented by its advocates. They aver: it is the evil of the greedy capitalists that cause recessions, depressions, and destructive policies; it is immoral for some to earn billions, while others are in poverty; this must be corrected by government, who acts as Robin Hood. (Even a high school dropout says: the rich make all our problems; its bad for them to got so much, while I ain’t got none; so their loot should be given to the community.) Such rhetoric is clear, simple, ‘moral’, and easy to apply with regard to policies. Were Austrians able to advertise their outlook in as clear, simple, ‘moral’, and applicable a manner, they would be more competitive.
It would then be: governmental theft, fraud, & irresponsibility cause economic problems, which are corrected by allowing responsible behavior to be rewarded, while punishing criminal activities. (Someone else will have to place this into a jingle.)
You show that advertising has benefits. Seems rather one-sided. Anything has pluses and minuses, including advertising. Overall, I agree letting it be is the best approach, but that’s because the minuses are the price we pay for free markets, not because advertsing is pure 100% good economics.
John, the author didn’t stress the minuses of advertising, but he did mention them. He noted that quality products are usually related to advertising because of the higher initial outlay for effective ad campaigns, and the greater risk involved if the campaign doesn’t result in more sales, for example. There was another point or two about the costs, as well.
Re: John,
I can show that having clothes on has benefits. It may appear one-sided to you if you were a nudist. I could not care less what you think about clothing oneself. That’s the beauty of subjective valuation.
Irrelevant. If everything has plus and minuses, then what’s the point of making that point?
It is 100% good economics, since advertising is nothing more than using your own resources for an activity that expectedly will bring benefits.
Allen wrote,
“Keynesians won the war of ideas”
That is because Keynesians were heavily subsidized by the state to develop and expand their propaganda machine. The state robs everybody of their wages and profits and then pays the Keynesians to advertize keynesianism.
All the while, private individuals advertize Austrianism with their own limited ressources.
That is why Keynesianism “won” the battle, but the did not win the war.
Cybertarian notes that Keynesians were subsidized by the state, which remains the case. Yet that does not show that the Austrians were competitive in their advertising. Moreover, the victory of statism was a consequence of the statists winning the war of ideas. Let us note that when America was founded, the pervasive belief was “that government is best that governs least.” So fundamentally, the statists out-competed the free marketeers, advancing government intervention. To this day, the Austrians fail to provide a quick & simple rebuttal to the view that it is moral to redistribute wealth.
Wealth redistribution isn’t the problem, for that is simple charity. One person may volunteer to be very charitable with his/her wealth, while another might choose never to redistribute a single penny of his/her earned income.
What is immoral is pretending to have the authority to force redistribution from a person who chooses never to voluntarily redistribute a single penny. Encourage them, shame them, threaten to boycott their business, but never pretend that you control them.
“Social Contract” is nothing more than modern monarchical-mercantilist code-speak for “Divine Right.” That was the statists’ advertising victory (i.e. key canard). From that key canard, the “competition” with free markets became a fixed game.
Bottom line: when businesses get caught lying about their products/services, most often they go bankrupt — but when the state gets caught lying about its pretense of products/services, it most often attempts a legislated expansion of itself to ensure a continuation of everyone’s coerced compliance.
John wrote,
“Anything has pluses and minuses”
“but that’s because the minuses are the price we pay for free markets, not because advertsing is pure 100% good economics”
Translation: The free market has pluses and minuses. The plus is the gain and the minus is the cost. So the free market is not 100% good economics.
Incredible conclusion. Write a paper on it and submit it to KJE (Krugman Journal of Economics)
“To this day, the Austrians fail to provide a quick & simple rebuttal to the view that it is moral to redistribute wealth.”
Hard to rebut a pure assertion.
Inquisitor, in response to “To this day, the Austrians fail to provide a quick & simple rebuttal to the view that it is moral to redistribute wealth” writes: “Hard to rebut a pure assertion.”
It is quite easy, simply present an Austrian rebuttal or two, to the pure assertion.
You may note that on previous blogs, when people wrote that there have been such rebuttals, I asked for examples. I have yet to hear from them.
Re: Allen Weingarten,
It cannot be moral to redistribute wealth, Allen, since “redistribution” implies thievery, coercion, aggression, the taking of property by force. Asserting the morality of redistribution of wealth is a contradiction in itself. That’s the rebuttal.
That’s not a problem for those who reject property rights.
There have been in terms of natural rights arguments, argumentation ethics, logical arguments against positive rights (based on the fact that they undercut negative rights), epistemic arguments by the likes of de Jasay against utilitarianism of the sort often underpinning positive rights… it’s still hard to rebut it in the sense that you need to explain the underlying framework of your arguments.
Ludwig Von Mises said that the science of economics is value neutral; it says nothing about what an end should be, only whether the means to achieve the end are appropriate or not.
Socialists of Mises’s day advocated a redistribution of wealth to increase the wealth of all. Von Mises argued that such scheme would do the opposite. He said an economy cannot rationally allocate resources without prices. Prices arise on the market; a system in which individuals voluntarily trade their own property for mutual benefit according to their own subjective valuation. Under socialism, however, the states owns everything. There is no voluntary exchange, therefore there are no prices, and thus there can be no rational allocation of resources. The result is poverty. (http://mises.org/media/3958).
If the goal is to increase the wealth of all, then, it is ‘immoral’ to forcibly redistribute it.
One could argue that equality should be the goal. I don’t see how that could be consistently applied in any state. Some group of people would have to redistribute, while all others would have to follow their plan for redistribution. The latter group would be quite unequal to the former.
Involuntary taxation and redistribution of wealth is theft, pure and simple. This has been argued countless times by libertarians and Austrians. You might argue that it is not an effective or convincing rebuttal, but I fail to see how it is not quick and simple.
I am more and more against prolific, proliferous advertising.
I fully accept the need for informing the consumer, and that is advertising´s great contribution to the market economy.
But I know that much advertising is “twisting the customer´s arm,” not informing him, prodding him to become a consumerist (non-saver) buying more and more. This latter form of advertising cannot generate profits, which must reflect a true Misesian entrepreneurial serivce to the market. It is the mystique of the Keynesian multiplier. It is often flagrant waste. Economies of scale that produce more not really wanted stuff ain´t economy.
sincerely, and always ready to share opinions with you. Joe Keckeissen in Guatemala
(where “useless” anti-economic advertising is rampant!!!)
JOSEPH E. KECKEISSEN April 2, 2010 at 3:23 pm
I am more and more against prolific, proliferous advertising.
I fully accept the need for informing the consumer, and that is advertising´s great contribution to the market economy.
But I know that much advertising is “twisting the customer´s arm,” not informing him, prodding him to become a consumerist (non-saver) buying more and more. This latter form of advertising cannot generate profits, which must reflect a true Misesian entrepreneurial serivce to the market. It is the mystique of the Keynesian multiplier. It is often flagrant waste. Economies of scale that produce more not really wanted stuff ain´t economy.
sincerely, and always ready to share opinions with you. Joe Keckeissen in Guatemala
(where “useless” anti-economic advertising is rampant!!!)
Reply
JOSEPH E. KECKEISSEN April 2, 2010 at 3:23 pm I am more and more against prolific, proliferous advertising. I fully accept the need for informing the consumer, and that is advertising´s great contribution to the market economy. But I know that much advertising is “twisting the customer´s arm,” not informing him, prodding him to become a consumerist (non-saver) buying more and more. This latter form of advertising cannot generate profits, which must reflect a true Misesian entrepreneurial serivce to the market. It is the mystique of the Keynesian multiplier. It is often flagrant waste. Economies of scale that produce more not really wanted stuff ain´t economy. sincerely, and always ready to share opinions with you. Joe Keckeissen in Guatemala (where “useless” anti-economic advertising is rampant!!!)
Read more: The Supposed Sham of Advertising — Mises Economics Blog http://blog.mises.org/12368/the-supposed-sham-of-advertising/comment-page-1/#comment-682362#ixzz0jycuDbLw
Old Mexican writes, and I agree, that redistribution implies theft, thievery, coercion, aggression, and force. Michael Clem says much the same thing. As they say, this is brief & simple. Yet something more is required for a rebuttal for two reasons. The first is that the interpretation of “morality” by our detractors (such as by the school of John Rawls) defines morality differently, where it requires greater equality between the haves and the have-nots. The second is that Austrian economists claim to be Wertfrei, where there is an objection (qua Austrian economics) to addressing the realm of values. For example, Ludwig von Mises, (1949, p. 881), stated that, “economics is apolitical or nonpolitical… it is perfectly neutral with regard to judgments of value, as it refers always to means and never to the choice of ultimate ends.” Moreover, In Human Action, p. 720, Mises writes “There is, however, no such thing as a perennial standard of what is just and what is unjust. Nature is alien to the idea of right and wrong. ‘Thou shalt not kill’ is certainly not part of natural law…”
In short, the rebuttal by Austrians remains to be clarified, and must be placed on a philosophical foundation. Old Mexican & Michael Clem speak straight, yet remain to provide a foundation on which to appeal to the public. Still I appreciate what they have written.
isn’t it rather on the proponents of redistribution to justify why intervention is required?
Yes Newson, the proponents are obligated to justify this, and people such as John Rawls have made their case by defining “morality” in terms of equalization. Moreover, my question was how the Austrian economists rebut what has become the accepted view in America. So I asked for a “quick & simple Austrian rebuttal”.
Let us note that this has yet to be presented. It is true that a few bloggers have given their own quick & simple rebuttal, but that is not the same as quoting an Austrian position. Allow me to note that non-Austrian rebuttals can be quoted (although each has its difficulties in reaching the public).
Objectivists, such as Ayn Rand provide a definition of morality, based on reason, where redistribution of wealth is immoral. Their difficulty is that the public does not accept their atheistic outlook.
Religionists rebut redistribution by quoting the Decalogue, which says thou shalt not steal. However, Judaism & Christianity have yet to explain why they have often justified such theft.
Anarchists have rebutted redistribution on the basis of the morality of freedom. Their difficulty is that the public rejects anarchy.
The bottom line is that the public holds the prevalent view that we know emotionally that we have to take from those who have too much, and give it to those who have too little. It remains for the Austrians to provide a sound rebuttal.
I think most of us agree that advertising isn’t violating any rights. Campaigns are funded with a company’s own money.
I’m still not sold on it being a net benefit. Imagine laundry soap companies X and Y, each advertising their soap. X may be able to make more profit by advertising its soap to customers of Y’s soap, causing them to switch, so it does so. The same for Y, so it invests more. In each step of this arms race, it benefits the other side to invest in more advertising, even though the net benefit to customers is nothing, and the price of both soaps in the meantime rises.
Hmmm, maybe the argument is that if one company is doing better than the other and can thus justify its greater advertising spending, it must by definition be serving the desires of the customers more. The customers apparently desire more advertising and appeals to their emotions, or whatever, and the company is simply delivering. If customers valued the product and shunned advertising, no company that advertised a lot would do well with these customers. So maybe I am sold on the argument, and my criticism is simply of customers who put up with expensive, dumb advertising.
this just doesn’t happen. there’s invariably a point where the higher-priced branded powders are joined on the shelves by the “no-label” powders, at a hefty discount, and often made by the same manufacturers to be marketed as a supermarket generic.
ultimately, great advertising won’t save a bad product. (“new” coke).
I don’t think any discussion about the percieved deception, and consummerisum inherent in some advertising is complete without pointing out just how much the state contributes to the conditions which make these unsavory forms of advertising possible and effective.
If we are a nation of suckers willing to believe the most outlandish claims coming from the most untrustworthy of authorities then it is because the state has made us so. It insists upon taking every child at the age of 3,4,5 and putting them into its indoctrination camps for 12+ years, training each generation more completely than the past to accept any claim from authority as absolute. It is outrageous to complain about the lack of intelligence and weary skepticism in Americans and point the blame at advertisements, rather than the state which schooled them.
As for consummerism, or more accurately, what may be concieved as TOO MUCH consummerism. How can we seriously talk about this without talking about the state’s inflationary monetary policies, punitive taxation, and “regime uncertainty” generating anti-wealth and anti-business rhetoric? When the federal gov. is seriously discussing confiscating people’s “private” savings plans, and when it has for nearly a century confiscated their savings through inflation, when those who are irresponsible are rewarded at the expense of the most responsible, is it really that foolish to act in a manner frequently decryed as “cosummerism?” Again, does it make sense to blame advertising for this when there we have a massive leviathan clearly encouraging the behavior we dislike?
Just because you don’t like what you see in advertising is not adequate reason to condemn it (It is, afterall, a purely voluntary arrangement). Any more than not liking how gov. roads are built and managed is reason to condemn the idea of building roads. The state distorts everything, even good ideas and concepts are harmed by it’s influence.
excellent point, jake. when one calculates the phenomenal cost of government propaganda, commercial advertising seems incredibly parsimonious and well-directed.
besides, so many industries face obstacles in providing a genuinely different product to competitors, that often the edge is through form, not substance. in electricity generation in my country, australia, often the generation industry is a state-sanctioned monopoly, so all competition occurs at the retail level. the underlying product is essentially the same. advertising seems to be the only way to differentiate from the competition. naturally the market gets the blame, and the regulatory framework gets ignored.
Another point that has been overlooked thus far, is that advertisers create jobs and pay for vital communications services which would otherwise come at the consumer’s expense. Every day I use search engines, watch a youtube video or so, check my Gmail and facebook accounts for messages, etc., and I pay not a cent for it. Advertisers supply every penny. I watch tv and listen to the radio, and I don’t have to pay a thing. I read magazines and newspapers, which, although they are not free, derive some of their sustenance from advertisers, so that the subscriber does not have bear the entire cost.
So, rather than being seen as a waste of time, deceivers of the people, and defilers of the Temple, advertisers should be viewed as benefactors of society–and their stockholders.
P.S. Kudos for using the screenshot of the Sham-Wow guy to illustrate the title of the article. I laughed hysterically!
The libertarians might have a chance at winning something in 2016 if they spent all their money completely on advertising and public relations from now until 2015, rather than just wasting it all on ballot access when nobody knows whether you’re talking about a librarian or a libertine. What good is ballot access without (i.e. name recognition and identification or sympathy with viewpoints) votes?
>One pernicious idea radiating throughout political circles is that advertising is a waste of resources.
And yet, curiously enough, liberals passionately advertise their values.
And how often have we wondered, too late, why a better or less expensive item was not better advertised? Marxists are braindead.
>Austrians fail to provide a quick & simple rebuttal to the view that it is moral to redistribute wealth.
Only selfishness can rebut the selflessness implicit in socialism. Economics is not a substitute or basis for morality. Morality is the base of economics. See Ayn Rands _Capitalism: The Unknown Ideal_ for for the only rational defense of capitalism.
>Religionists rebut redistribution by quoting the Decalogue, which says thou shalt not steal.
This is an evasion of the selfless essence of religious morality. Within selflessness, the individual doesnt even exist, much less have a right to property. Thus socialism is a policeman who “returns” the “loot” that the creator of wealth has “stolen” from the “victim,” ie, the person who did not create it. Within selflessness, not sacrificing yourself, including your property, is theft from everybody else, who have a “right” to you. Selflessness is cannibalism. See Ayn Rand’s _Virtue of Selflessness_.
See Jerry Kirkpatrick’s excellent, _In Defense of Advertising_. He has a web site.
Do politicians, running for office, seek to give us the best product or are they intent on the most hype?
The author derides the ‘fallaciousness’ of his invisible opponents’ arguments, and yet this article sets up and bashes a series of straw men, amounting to little more than quixotic windmill-tilting. I’m not at all convinced any sensible adult member of contemporary society when pressed would obstinately affirm that all advertising was a waste of resources (and even if it was, it’s the private money of those advertising to waste); this seems to be a trivial and essentially non-existent issue.A real and relevant issue would be the irresponsible targeting of vulnerable audiences (read: children) by unscrupulous advertisers who will abandon all sense of social responsibility to get that dollar. It is absolutely beyond my comprehension how people who spend their days working out how to create desperate demand in children and ‘tweens’ (a marketing term originally) where it didn’t exist before go home and sleep at night.
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