Galbraith dies

by Henry on April 29, 2006

John Kenneth Galbraith died yesterday. I spent several weeks earlier this year reading the Parker biography which I enjoyed (although it was surely a little prolix). He comes across as having been a surprisingly patrician character for someone who grew up in a small town in rural Canada – he enjoyed hugger-muggering with the powerful, and according to his biographer never once changed a nappy for any of his several children. But for all that, he was prepared to risk serious damage to his career in pursuit of truth, issuing, for example, a quite damning indictment of the Allied bombing of civilian targets in Japan when he was director of the United States Strategic Bombing Survey and might have been expected to toe the official line. He also showed himself entirely willing to break with political friends when he thought they were in the wrong. Whether he was a first rate economist or not (and he may very well have been; Brad DeLong for one has suggested that his contribution has been sorely under-rated), he was surely an absolutely first rate public intellectual, and genuinely witty to boot (Dan is fond of quoting his dictum that “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. “) Someone who will be missed.

(Incidentally, there is one rather peculiar claim in the NYT obituary: that

Mr. Galbraith argued that technology mandated long-term contracts to diminish high-stakes uncertainty. He said companies used advertising to induce consumers to buy things they had never dreamed they needed. Other economists, like Gary S. Becker and George J. Stigler, both Nobel Prize winners, countered with proofs showing that advertising is essentially informative rather than manipulative.

“Proofs showing” only works here for restricted notions of ‘proofs,’ and decidedly odd notions of ‘showing.’)

{ 4 trackbacks }

Jacob Christensen » John Kenneth Galbraith
04.30.06 at 6:04 am
The Glittering Eye » Blog Archive » John Kenneth Galbraith, 1908-2006
04.30.06 at 9:44 am
American Witness » Blog Archive » A true hero - R.I.P.
05.01.06 at 9:20 am
John Quiggin » Blog Archive » Becker and Murphy on advertising
05.12.06 at 3:47 am

{ 48 comments }

1

Carl Manaster 04.30.06 at 12:02 am

RIP. I don’t know much about economics, don’t find the subject interesting, but I have read many of Gailbraith’s books and always enjoyed – and learned a lot – from them. He’s a hero.

2

goatchowder 04.30.06 at 1:19 am

So, is “decidedly odd” a polite way of saying “complete bollocks”? Because that’s what Becker and Stigler are talking.

Advertising is an intensely manipulative activity. It is commercial, privately-held propaganda. It is only “informative” to the degree that it is ineffective.

Effective advertising– indeed good branding and marketing and salesmanship in general– works by manipulating and engaging the emotions. It does not rely on the brain’s higher faculties; it circumvents them.

3

josh 04.30.06 at 1:37 am

Sad news indeed (though he certainly had a good innings).
I’m in no position to appreciate Galbraith as an economist; but he certainly was a good writer (and an intelligent observer of both culture and international affairs). It’s been some years since I read his novel ‘A Tenured Professor’, but I remember it being surprisingly good (it certainly compares well, if memory serves, to Marx’s novelistic efforts, discussed recently on this site — and Ayn Rand’s, for that matter; for one thing, it’s much shorter, and intentionally funny).
As to the (cited) evidence of Galbraith’s being ‘patrician’: I wonder how many men of his generation did change their childrens’ nappies?

4

Quo Vadis 04.30.06 at 3:13 am

#2

I’ve spent a considerable amount of time studying advertising at the graduate level. I can tell you what people who are responsible for showing concrete results for money spent on advertising believe: The primary goal of effective advertising is to inform the consumer; anything else is a waste of money. The problem for advertisers is to get consumers to pay attention to their advertising. People tune it out, just like you and I do. Beyond that it’s just not that sophisticated.

5

tennin 04.30.06 at 4:07 am

I see two possible circumstances under which one might plausibly believe that “advertisement is essentially informative rather than manipulative”:

1) Residence in a parallel universe or

2) Never having actually seen a television commercial.

6

DC 04.30.06 at 8:05 am

“The primary goal of effective advertising is to inform the consumer”

Could have fooled me. The last ads I saw for, say, Coke, McDonalds, Mercedes or Gap seemed to have goals other than informing me of the true qualities of their product.

7

david 04.30.06 at 8:07 am

Yeah, I remember how much info those Mars Blackmon adds offered about Nike shoes. That Tim Hardaway barbershop ad too.

8

Daniel 04.30.06 at 9:34 am

I’ve spent a considerable amount of time studying advertising at the graduate level. I can tell you what people who are responsible for showing concrete results for money spent on advertising believe: The primary goal of effective advertising is to inform the consumer; anything else is a waste of money

I’ve spent a considerably amount of time drinking with advertising people and I can tell you you’re wrong.

There are a lot of other JKG bits that I like quoting too; I’ll try to write a proper article about him this week.

9

marek 04.30.06 at 9:39 am

He comes across as having been a surprisingly patrician character

As an undergraduate 25 years ago, I invited Galbraith to speak at a university society. We took him out to lunch afterwards, half a dozen of us struggling to impress and to imitate a profundity of conversation we had no chance of achieving. It must have been a painful experience for him, but he did not for a moment give any indication of boredom, irritation or (what would have been worst) amusement.

That lunch sticks in my mind for its display of courtesy, as well as of erudition. And for the fact that he towered over us not just intellectually, but physically too – and I am 6’4″.

10

Robert Vienneau 04.30.06 at 11:48 am

I put up an obituary on my blog. (I haven’t subscribed to the NY Times.)

11

Brendan 04.30.06 at 11:53 am

I don’t know WHAT you are talking about. I saw the Peugeot 407 ads and they informed me that, upon being played the faux House funk rhythms of Jacques lu Cont, the car would ressasemble itself into a 20 foot high robot and do a fancy little jig in time to the music. I cannot see how I would have gained this information without watching the advert.

12

JohnLopresti 04.30.06 at 12:11 pm

I think a measure of the man is his leaving me with a smile. Such was his art. Willing to scorn his own image if the exercise would mobilize conversation and energize thought. People who are very smart often find difficulty locating employment, as most employers consciously avoid hiring someone smarter than the proprietor.
I am not so sure his benign socialism was misguided; rather, he tempered it sufficiently to stay within bounds of the North American experiment in civilization.
Perhaps when I have a moment I will resume exploration of his authorship; he always had the capacity to frame the present confluence of societal forces in an exogenous theoretical framework, as is the wont of many in academia and other cerebral pursuits. And I, for one, thought his vantage especially sagacious.
The marcom rivalries he promulgated may have been his way of dealing with the stature of the man himself, even subconsciously, a kind of innate opponent in the lists of trying to see where it is that Western civilization is headed. There is some great self-effacing humor in the NPR sound archive, as he gave some great speeches.

13

Michael Dietz 04.30.06 at 12:34 pm

I’ve spent a considerable amount of time studying advertising at the graduate level.

Really. And in all that considerable time the term “branding” has never come up for discussion?

14

bob mcmanus 04.30.06 at 2:26 pm

That the Laputans and court accountants didn’t like him is to his credit. “A hero” is an accurate description.

15

jt 04.30.06 at 2:57 pm

I think that what the author meant by proofs is obvious, rather than “decidedly odd”; Becker and Stigler constructed models in which they literally proved that advertising is informative; it is possible to question the assumptions made in these models, and therefore the applicability of these proofs to reality, but this is not an odd use of the term “proof”, but rather one of the standard uses.

16

roger 04.30.06 at 3:12 pm

There is nobody like him at the moment. The Freakonomics guy is too zippy and feature article-ish — and then there are the avatars of greed from the Chicago school, of whom Becker, being the most extreme and lunatic (who else thinks that marriage is solely a way of cutting down the transaction costs of sex?) is, of course, the most influential — in fact, the Coalition government in Iraq tried its hardest to make Iraq a Beckerian paradise on earth.

Ah, it is a good day to drink a toast to the guy.

17

Lee A. Arnold 04.30.06 at 3:23 pm

What is the technical difference in Becker and Stigler between “information” and “manipulation”? I do not have access to their papers.

18

Walt 04.30.06 at 3:39 pm

jt: It’s “obvious”, only if you know what academic economists do all day. The average person reads “proofs showing that advertising is essentially informative rather than manipulative”, and they’re not going to think, “oh, they came up with a model where advertising is informative”.

19

Matt 04.30.06 at 3:51 pm

I’d go even further than Walt- They came up with a model in which something labled “advertising” that has some sort of vague relation to what we mean by “advertising” is informative. Since “advertising” isn’t in fact like actual advertising much at all, there is no way in which this is anything like a proof that advertising (what we mean) is informative.

20

Neel Krishnaswami 04.30.06 at 5:03 pm

Have any of you actually read Accounting for Tastes? It’s clear that the obit writer didn’t, because Becker and Murphy’s main result is in fact that noninformative advertising can exist in a market of rational actors. This means that you can’t immediately conclude — as Galbraith in fact argued — that consumers are being manipulated from the mere existence of noninformative ads.

Becker and Murphy even have a reasonable explanation of why television advertising is so painful. An ad can be a good or a bad, in the sense of people being willing to pay for a good, and requiring payment to accept a bad. TV ads are bads, because people need to be bribed with television programs to watch them. It nonetheless can make sense for companies to produce these ads, because advertisments can be complements to other goods. (Can any reasonable person doubt that part of what makes Nike shoes cool is all the Nike advertising in which famouse athletes endorse them?)

This is all pretty much of a piece with the rest of Becker’s efforts to push the standard tools economic analysis into places it normally doesn’t go. He could be wrong (and in fact, I think Becker does overestimate the reach of rationality), but he makes powerful arguments that can’t be dismissed with drive-by smears.

21

jt 04.30.06 at 5:14 pm

In response to Walt: I think if the average person–who doesn’t know what academic economists do all day–reads that economists “proved” that advertising is informative, this average person might not know exactly what the reporter is talking about, but the average person’s views on advertising will not change, so no one will have been misled. At best, you could say that the notion of proof in the quote is esoteric rather than odd, but if that’s so, it’s only because in general, the formal notion of proof is esoteric. In general, it’s hard to report on anything in a short newspaper about what scientists or social scientists do that will give an accurate impression to those who do not have experience with it. I also think that it was probably obvious to Henry, the author of the original post.

22

roger 04.30.06 at 6:38 pm

Neel, I read your comment twice, but I still don’t understand it. Isn’t the market, here, between two different goods – manipulative and informative ads? (However one defines informative). And isn’t Becker skirting around studying that market by making a model in which that competition is secondary? If that is so, than Galbraith’s point would stand — Becker and Stigler are simply setting the parameters so that informative ads would have to prevail over manipulative ones because they don’t compete with manipulative ones. In other words, this isn’t a market at all.

Unless, of course, you are saying something different. Your second paragraph seems to change the topic completely, and argue that manipulative ads can serve to benefit the consumer, which of course changes the question from what ads do — manipulate or inform.

23

roger 04.30.06 at 6:40 pm

ps — the last point is easy to illustrate. I might produce an ad that is so bad that people flee the theater from it, and it might be the case on one night that a fire burns down a theater that had previously been emptied by my ad. But that wouldn’t really justify my ad as a life saver, would it?

24

Neel Krishnaswami 04.30.06 at 7:49 pm

Hi Roger,

Informative advertising tells a viewer something about a product that they didn’t know. Likewise, noninformative advertising is advertising that doesn’t tell you anything about the characteristics of a product. A Nike ad where they explain how some new polymer they use reduces impact damage to your heel is informative. In constrast, a Nike ad where LeBron James does something amazing is noninformative, because you haven’t really learned anything about shoes.

If I understand him correctly, Galbraith argued that noninformative advertising would not arise in a market full of rational actors, because why would rational consumers heed ads with no product information, and knowing this, why would rational producers create noninformative ads? Instead, he argued (in The New Industrial State) that advertising was used to manipulate people so as to create new wants in them.

Becker and Murphy show that noninformative advertising can arise in a market full of perfectly rational actors. Advertising is modelled as a good which is complementary to the product it is advertising — increasing the consumption of advertising increases the consumption of the product. Some forms of advertising, like TV ads, are bads which reduce the viewers utility. To get people to consume them, the advertiser has to pay them (with TV programs, for example). Other kinds of advertising are goods, and people will pay to consume them — for example, the sports pages in a newspaper work as advertisements for the teams, but people will still happily pay to read them.

In their framework, noninformative advertising arises because it’s a product just like anything else on the market, and people like plenty of noninformative things — no one wonders why (say) science fiction movies are “noninformative”, after all.

If you’ve got access to JSTOR and don’t mind some calculus, I recommend “A Simple Theory of Advertising as a Good or a Bad” as an entertaining read.

25

Neel Krishnaswami 04.30.06 at 7:52 pm

I should add that my main point was that the NYT got Becker’s viewpoint 180 degrees wrong — he actually argued that noninformative advertising was real, existed, and that most economic models of advertising did a terrible job accounting for its existence.

26

John Quiggin 04.30.06 at 8:12 pm

Neel is correct at #27, at least as regards Becker and Murphy, though maybe not Stigler.

However, Becker and Murphy’s main result is not much more than a restatement of the fact (or at least widely held belief) that advertising sells goods. This fact can be restated in economese as “consumption of advertising is a complement to consumption of the goods advertised”.

27

Neel Krishnaswami 04.30.06 at 9:16 pm

I think the weirdest idea in Becker and Murphy’s paper arises from the fact that if you treat ads as a complementary product to a good, then the good will also be a complement to the advertising. So Becker and Murphy predict that people who buy a Lexus will be more interested in ads for Lexus cars.

They suggest that this is what psychologists find in experiments, but I don’t know if I can really believe that.

28

Z 05.01.06 at 1:33 am

To Neel 29,
Then again several research in sociology of taste indicate that one of the function of advertising is to reassure people that what they have already bought is valuable (or cool, or trendy, or what have you). If this is correct, then one should expect people who have bought a Lexus to be interested in ads for Lexus car.

29

Tom Scudder 05.01.06 at 4:22 am

z – think of how fans of a movie series (who are obviously already planning to “buy” the product) cheer, link, and so forth when a new trailer comes out.

This still seems like a very strange definition of “inform”.

30

Sharon 05.01.06 at 6:38 am

I can tell you what people who are responsible for showing concrete results for money spent on advertising believe: The primary goal of effective advertising is to inform the consumer; anything else is a waste of money.

Since their livelihoods rest on showing that advertising works and therefore they are not a waste of money, they would say that wouldn’t they?

31

Tim Worstall 05.01.06 at 6:42 am

From Hedge Fund Guy:
http://mahalanobis.twoday.net/stories/1898966/

“Galbraith saw most advertising as wasteful and manipulative. Marginal Revolutions and Brad Delong discuss whether Gary Becker “proved” otherwise, but it’s really Lee Benham seminal empirical work that’s relevant here. Contrary to the monopoly explanation of Galbraith, advertising often lowers prices. Benham documented that prices of eyeglasses were significantly higher in states banning advertising than in those that did not.”

32

Walt 05.01.06 at 8:06 am

I’m not an expert, but I don’t remember Galbraith standing up to the eyeglass monopoly.

33

Daniel 05.01.06 at 8:25 am

Neel: I read and liked Becker’s work on advertising, but I can’t see how it’s inconsistent with |Galbraith’s. If you produce advertising which is itself a bad but is a complement to Nike trainers, and then make people watch it by depriving them of television if they don’t, then how is that not manipulative?

34

Neel Krishnaswami 05.01.06 at 10:10 am

Daniel: I understood “manipulation” to mean that peoples’ preferences are being altered through advertising. Galbraith’s idea (sufficiently stupidized to fit in a blog comment) was that giant companies have enough money to use advertising to deliberately create and manage the level of demand for a product. Becker says, no, that’s not what’s happening — people have stable preferences, and you can use the usual theory of complements and bundling to model what’s going on. Some of Becker and Galbraith’s specific predictions, like the existence of noninformative advertising, agree with each other, but I think their models are in conflict.

WRT your specific example: “deprive people of television”? That’s a pretty weird way of phrasing things. It’s not like television is a basic human need or anything. Anyway, I don’t think that bundling products is inherently manipulative, so I don’t think bundling tv programs and ads is necessarily manipulative. If you’re really dead set against watching the ads, you can buy or rent the programs separately on videocassette or DVD, or even hit the mute button and have a conversation when the ads come on. :)

35

etat 05.01.06 at 10:28 am

re: 30 & 31
Anecdotally this makes sense. Think of a football team as a brand, and supporters as people who will follow not just the sporting fortunes of the team, but its ‘brand’ fortunes as well. Better yet, think of the way Apple’s fortunes is in some sense a barometer of its economic status. Watching adverts for wildly popular Apple products is a way of affirming both an allegiance and one’s own good taste/judgement.

36

Cian 05.01.06 at 12:31 pm

If I recall correctly, Galbraith’s point was that the informational model of advertising was insufficient. He didn’t argue that informational advertising didn’t exist.

Having like Daniel spent far more time around advertising types than is probably rational, I do find some of the arguments about advertising here a little odd. Many forms of advertising are explicitly created to increase demand for a certain class of product. A lot of money has been spent on research over the last 40 years to find out how to do this effectively.

One of the most obvious ways you increase demand is by associating a product with a certain lifestyle/class/aspiration in the viewers mind.

A different kind of advertising seeks to reinforce/strengthen demand. People Like Us advertising.

And some advertising tells you that ASDA is cheaper, or they have good quality products. Which may even be true (does anyone ever check?).

37

Anderson 05.01.06 at 12:58 pm

I’ve spent a considerable amount of time studying advertising at the graduate level. I can tell you what people who are responsible for showing concrete results for money spent on advertising believe: The primary goal of effective advertising is to inform the consumer; anything else is a waste of money.

What a damning indictment of one person’s graduate program.

38

Daniel 05.01.06 at 2:33 pm

Neel:

It’s not like television is a basic human need or anything

I think revealed preference would suggest otherwise; plenty of villages in India or Africa where you can see satellite dishes but no nearby wells (without even getting into the plasma-screen TVs beloved of welfare policy debates).

Also, does Becker or Galbraith’s theory fit corporate behaviour better? Companies do plan product cycles; they do plan advertising “campaigns” and they do it for a reason, that being because it works. You can make stable and independent preferences do the job of a sensible theory of advertising in the same way that you can make a butterknife do the job of a Phillips screwdriver, but that doesn’t mean that a butterknife is the best (because simplest) tool for the job, or that Phillips screws were designed by people who were thinking about butterknives.

39

Barkley Rosser 05.01.06 at 3:19 pm

The argument above that Becker (and Stigler also) emphasize the stability of peoples’ preferences versus Galbraith’s belief that people’s preferences can be manipulated by advertising is indeed a central issue. Although by and large, B and M (and S) assert the stability of preferences, to the extent they are willing to allow for their instability, they still argue for hardline methodological individualism, that people are free to pick their preferences and choose what they want.

This is ultimately ideological. It is not a “proof” in any sense as the NY Times ignorantly claimed in its embarrassingly shameful and error-filled obit. I would note that while these things are hard to prove empirically one way or the other, the current trend is to view tastes and preferences as very malleable and unstable, subject to context and all kinds of things. This is coming out of behavioral and experimental economics.

The traditional split between “informative” advertising and not is that supposedly the former moves one along a demand curve, it “informs” about prices, especially about sales when prices are especially low. Non-informative, or manipulative, supposedly moves peoples’ demand curves, either by changing their preferences, or by “informing” people that their product will fit in somehow with their preferences, satisfying an image or life style they seek to achieve or exhibit to get social approval and maybe even to get laid.

40

jake 05.01.06 at 3:27 pm

My economics professor in college once told an anecdote about Galbraith I rather enjoyed. He happened to have been at a conference with Galbraith and Milton Friedman, and all three were taking the same flight out of whatever city this was. They boarded the plane together, still chatting, but while he and Friedman walked back to coach, Galbraith left them, taking his seat in first class.

Ah, the free market . . . .

41

Daniel 05.01.06 at 3:33 pm

What was this anecdote meant to show? Galbraith was a very rich man; everyone knows that. He also wrote lots of books aimed at defending the capitalist system (although he, unlike many other economists, didn’t call it “the free market”).

In fact, as the example of Ryanair etc show us, the normal concept of first class air travel probably wouldn’t exist in a genuinely free airlines market (a genuinely free market in airlines is, as far as I am aware, an experiment that has not been attempted anywhere in the world ever).

42

PW 05.01.06 at 4:51 pm

If you’d known him or seen him, Jake, you’d know the poor guy’s legs were about as long as the aisle in first class! Even us shrimps (under 6’7″) have some trouble in the back of the plane!

43

H-Bob 05.01.06 at 5:08 pm

In response to #2, 4, 5, etc.: the following joke illustrates the relationship of economic theories to reality:

A physicist, a chemist & an economist are stranded on a desert island. A can of food washes up. The three discuss methods of opening the can:
the physicist says that if we drop the can from the top of the palm tree onto the rock, the can will puncture but not spill the contents;
the chemist says that if the can is heated to a specific temperature, the lid can be removed;
the economist says ‘assume a can-opener’. . . .

With respect to advertising, Galbraith claimed that advertising creates demand for unnecessary products: given that humans do not require caffeinated sugar-water, alcoholic beverages, or portable music players, etc., Galbraith’s contention seems unassailable.

Galbraith probably had to fly first-class due to his height.

44

dave heasman 05.01.06 at 5:15 pm

“What was this anecdote meant to show? Galbraith was a very rich man”

He was also a very tall man. Economy class would have been crippling.

45

roger 05.01.06 at 6:39 pm

The only time the right wing allows class resentment a place is if the resentment is aimed at some wealthy person who is not pursuing his self interest and an ideology slightly to the right of H.L. Hunt – some wealthy person who is , actually asking for greater investment in the public good. At that point, the rich (a class so sacred to the Forbes crowd that they believe in sacrificing more and more goods to em, and throwing in the climate of this planet as lagniappe) suddenly turn into a pack of unbearable snobs, soooo not populist like our millionaire Andover prez, and just not all right at all.

Well, I think it was Mandelstam who wrote a poem, in the stalinist years, that begins something like ‘raise a glass of champagne…’ just to provoke the pissants. I believe it might be time to raise a glass of champagne to the limousine liberals, to the Keynes-es that make buckets of money on Wall Street and have sense enough to call for national health care plans, to the wealthy who aren’t greedy, resentful pigs, nor furthering the ideology of greedy, resentful pigs – to the ones skiing in Gstaad who are calling for employment policies that don’t lead to mass layoffs to make CEO stock options more valuable, to the Kennedys, the Bernsteins, the Soroses, to all the ones who are too fucking haughty to endorse slimy warmongering schemes to cream money off the taxpayer using national security as a mask. God bless them every one.

46

Dan K 05.02.06 at 7:04 am

Roger, I second that.

47

DC 05.02.06 at 10:20 am

God bless them, sure, but I hope you don’t think the revolution should spare them. (Slavoj Zizek has a right go at Soros, Bono et al – “liberal communists” – in the present London Review of Books, by the way.)

48

jake 05.02.06 at 2:01 pm

My anecdote wasn’t meant as an attack on Galbraith or a suggestion that he was a hypocrite. I suspect Prof. Stevens was merely gently mocking the habit of stereotyping, something many of us may be prey to, even as undergraduates.

Hell, if I had the money, I’d fly first class.

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