TANSTAAFL: What about “free” TV, radio and Internet content?

by John Quiggin on October 11, 2015

Another excerpt from my book in progress, Economics in Two Lessons. There’s a partial draft here if you want to read it in context. I could spend a lot more time on the topic of advertising, but much of the ground has been covered in Akerlof & Shiller’s latest Phishing for Phools. As always, both praise and useful criticism are very welcome.

TANSTAAFL and advertising
We saw in earlier that the ‘free lunch’ provided by saloons wasn’t really free in terms of opportunity cost. Rather, consuming the lunch involves forgoing the opportunity of buying cheaper beer at a saloon where lunch is charged for separately

The same point applies to ‘free’ services provided by governments and financed by taxation revenue. The opportunity cost is the private expenditure forgone to pay taxes. This is the point being made by drivers with TANSTAAFL bumper stickers, even if many of them might be unhappy about paying to use ‘free’ public roads.

There are, however, lots of other examples of services provided free of charge by for-profit corporations. These include radio and TV broadcasts, Internet services like Google, Facebook and Twitter and sponsorship for sporting and cultural events.

Obviously, TV and radio stations, like Google and Facebook, are funded mainly by the sale of advertising. Corporate sponsorship is based on the perception that it will create a favourable impression of the company concerned, which is a kind of advertising. How does our analysis apply to advertising?

In thinking about advertising in TV and similar media, we can easily dispense with the claim sometimes put forward by industry advocates, that such advertising provides consumers with useful information. If this were true, firms would not need to pay TV networks or Internet companies to broadcast the ads.

As is shown by the sales of specialist magazines of all kinds, consumers are willing to pay for useful information about consumer products. But no one will willingly consume ordinary ads unless they are packaged with a program they want to watch, or a webpage they want to view.

In fact, the original free lunch provides a much better analogy. Eating a meal or snack, particularly a salty one, increases the desirability of a cold drink, and the bar is there to provide it.

Similarly, advertisements work because watching an ad increases the desirability of buying the associated product. This may be because the ad attaches desirable qualities (such as sophistication or sex appeal) to the product or because it engenders dissatisfaction with the alternatives we are currently consuming.

In terms of opportunity cost, it does not matter whether an ad works positively or negatively. Either way, the opportunity cost of alternative products is increased relative to the value of the product being advertised. In the standard terminology of economics, a successful ad is complementary (in consumption) with the product being advertised.

In terms of our happiness, though, there’s a big difference. The net effect of advertising is almost certainly to reduce our satisfaction with the things we buy, because most of the ads we see are designed to make us switch to something else. And of course, the things that are not advertised, such as quiet leisure time with family and friends, where no goods and services are required and no money is spent, are downgraded even further.

Market prices tell us about the opportunity costs we face, although the cost, like that of the original free lunch, is hidden. We can choose not to watch the ads (and the programs with which they are bundled), and buy the advertised ‘brand name’ products. Alternatively, we can avoid the ads and buy cheaper alternatives, which don’t include the cost of advertising.

The third possibility is that of watching the ads, but buying the cheaper products anyway. If ads work as they are supposed to, this should induce a similar feeling similar to that of eating salty bar snacks but not buying a drink to go with them. That is, we should feel less satisfied with our choice than if we had not viewed the ads for the brand name product, perhaps so much so that we change our minds and buy the advertised product instead.

Many readers will (like the author) probably judge that they are too strong-minded to be swayed by advertising, particularly the uninformative puffery that we get from mass media. But the continued market dominance of advertised name brands suggests that this is an illusion, similar to the one that leads around 80 per cent of us to believe we are better than average drivers.

Opportunity cost is as relevant to advertisers as it is to consumers. In particular, opportunity cost explains why some kinds of goods and services are commonly bundled with advertising, while others are not. The opportunity cost of producing a TV show or an attractive website can be substantial. But once a given program or website has been produced, the opportunity cost of allowing access to it is small (often less than the cost of restricting access).

In these circumstances, bundling the program with advertising may be the only way to cover the fixed costs of production. If so, the availability of the package as a whole makes us better off compared to the alternative, at least on the (strong) assumption that we carefully consider the hidden cost of the ‘free lunch’ we are being offered.

The problem is more complicated when there are alternatives, such as public funding for broadcasting, which might be financed (as it was for a long time in the UK and Australia) by a license fee for television sets. Choice is maximised when both methods of funding are available, but as a matter of political practice, advertising-funded commercial broadcasters will lobby to have publicly funded alternatives shut down or forced to take ads.

The Internet has shown the power, and the limitations, of a third alternative, that of voluntary provision by individuals (as with blogs) or by large co-operative groups (as with Wikipedia). We’ll discuss this more in Lesson 2.

Finally, it’s worth considering the case when we are forced to consume the advertising whether we want to or not, and without receiving any benefit. The most obvious example is that of highway billboard advertising [as distinct from informative signs regarding the services available at a given exit].

The case where the right to put up a billboard is controlled by (for example) a highway authority, and advertisers have to pay is essentially the same as that of ‘free’ TV and radio. Road users pay part of the cost of providing the highway by consuming ads.

By contrast, in the case where neighbouring property owners can display billboards, neither the road users nor the providers get any benefit. In effect, the owner of the billboard is imposing a cost without any intervening market transaction. In the technical jargon of economics, this is a ‘negative externality’ (we’ll look more at this in Section …).

{ 121 comments }

1

Leigh Caldwell 10.11.15 at 11:13 am

There’s another possibility: that satisfaction is not a fixed quantity, and the amount of satisfaction we get from fulfilling a desire is a function of the intensity of that desire. Then, desires intensified by advertising would become more pleasurable to fulfil than other desires not so intensified. Advertising would itself provide us with greater “utility” (with all the usual caveats about that word).

Your objection about “information” applies here – if ads were in the consumer’s interest, media would run them for free – but I’m not sure I agree with it. If the media owner can act as a tollkeeper, enforcing its ownership of the airwaves/intertubes to require payment for access, why wouldn’t they? They do have an enforceable barrier to entry: the cost of producing editorial content. This bundled product works because even in the above hypothesis, advertising alone is not of sufficient consumer value to justify the attentional resources consumers spend to watch it (and also because consumers don’t know that it benefits them). It requires other content to complement it; indeed, perhaps the advertising plays the role of the salty meal just as well, with the editorial as the refreshing drink we need to consume to make it palatable.

I don’t claim this account is definitely true, but on psychological grounds it is plausible, and worth considering as a hypothesis alongside the others you outline.

2

Don John 10.11.15 at 11:34 am

John,
Drucker wrote that “the purpose of a business is to create a customer” but Sraffa (1926) made the point first. Gaining a new customer is expensive.

Ehrenburg established that people develop a favoured subset of products; marketing (including advertising) attempts to secure a trial for an unfamiliar product but costs more than the earned margin on the direct sales generated. It can cost more than the wholesale price (as with a sampling program).

If and only if the trial satisfies the targeted consumer and leads to repurchasing (for frequently consumed goods) and recommendations (for durable products and infrequently purchased services) is there any possibility of profit. Models that assume that advertising adds value to a product, making it appear relatively cheaper than its unadvertised rivals, are deeply misleading,

John M Legge

3

mw 10.11.15 at 12:58 pm

With respect to TV, isn’t this a fading issue? The main alternatives to advertiser-supported TV at this point aren’t license-fee supported public broadcasters, but rather paid services like Netflix, Amazon Prime and HBO Go as well as digital purchases and rentals. This seems a major improvement over the license fee model — with paid streaming services there’s no opportunity for free-riding and no need for coercion and criminal prosecution of scofflaws. And, of course, the legacy public broadcasters are free to participate in the model as well, selling content to existing services or launching their own (as the BBC is apparently about to do in the U.S.)

The transition to Netflix, etc, is far enough along that cable companies are in trouble, and it already feels a bit archaic to settle in to watch a show at any particular scheduled time and sit through the ads. With the sole exception of live sports, virtually all of our own ‘TV’ viewing is over ad-free streaming services. And even in the case of live sports, don’t most people spend commercial breaks checking in online with their phone or iPad?

4

hix 10.11.15 at 1:31 pm

By far the most anoying adds one cant escape are those at the University toilet! I suggest switching the example :-(.

5

Jim Harrison 10.11.15 at 3:27 pm

Ads don’t simply make it more likely you’ll choose a particular product. They increase consumption of all kinds of products. The ad for Doritos also sells potato chips. Food ads promote overeating (with obvious real world consequences), political ads also promote the pleasures of anger, and car ads promote pride. As an old fashion moralist might put it, the real sponsors of advertising aren’t corporations but the Seven Deadly Sins.

6

Bruce Wilder 10.11.15 at 4:25 pm

One thing advertising refutes is Hayek’s claim that price contains all the information necessary for coordinated economic cooperation.

7

Sandwichman 10.11.15 at 4:44 pm

“things that are not advertised, such as quiet leisure time with family and friends…”

This understates the problem. Advertising is speech — sponsored speech. Because it is financed by cost-shifting it is ultimately speech sponsored by people who do not have the intention of saying what the speech they are sponsoring says.

Sponsored speech — severed from ethical intention — comes to predominated public discourse. “Public opinion” is thus bought and paid for by people who don’t believe the claims made by the words and pictures they (incidentally) buy.

Fuck “quiet leisure time.” Community is usurped and obliterated by a cacophonic ethical void.

8

Omega Centauri 10.11.15 at 5:08 pm

One surprising result of advertising is that sometimes it promotes post purchase satisfaction. If you bought/own car X, you may enjoy watching advertising for it and it may increase your sense of satisfaction while driving it.

9

JFA 10.11.15 at 6:15 pm

“In thinking about advertising in TV and similar media, we can easily dispense with the claim sometimes put forward by industry advocates, that such advertising provides consumers with useful information. If this were true, firms would not need to pay TV networks or Internet companies to broadcast the ads.” This claim is dubious at best. Sure, consumers are willing to pay for information, but remember that consumers are budget constrained. The more they spend on information the less they can consume other things. So if more information is given to them for only the small cost of watching a commercial when they were already watching TV, there is no reason to think that the information in the TV ad is not useful information to the consumer.

“The net effect of advertising is almost certainly to reduce our satisfaction with the things we buy.” Also dubious. Let’s say I buy a bag of Doritos Cooler Ranch and consume it while watching an ad for Lay’s BBQ chips. I like BBQ chips, but seeing the ad does not make me less satisfied with my Cooler Ranch because I also like Cooler Ranch. On the other, what if I never new BBQ chips existed. I see people enjoying this product I have never had. I don’t enjoy my Cooler Ranch chips less. I say to myself, “I may just get those BBQ chips next time I’m at the store.” Chips may be too trivial an example. Let’s think about car commercials. Is seeing a BMW or Audi on TV going to make me regret buying a Toyota? Almost certainly not. I can’t afford a BMW or Audi, so I can’t regret my decision to not buy one of those. You may think a BMW or Audi ad makes me feel bad about not being able to afford a BMW or Audi. But this type of effect tends to be strongest when we see people we know (not some ad) with objects that we desire, so the ad really becomes almost a non-issue in terms of its contribution to how bad I feel about not being to get the things I like.

Also, if we see an ad and buy the cheaper product, we may have a sense joy at having gotten a bargain. Your claim about the diminishment of our happiness is too strong. Do you react like this often? If not, why would you think others do? If so, you should get ad-blocker and stop watching TV.

Also, if advertising is meant to sway us by making us want something that we never would have wanted if we hadn’t seen the ad, why do companies spend money on consumer research in developing their products.

10

Lord 10.11.15 at 7:02 pm

There are many uses of advertising, from awareness, image, reinforcement, to sales promotion, often the most effective as most like bargains and this can lower costs by leveling demand. Advertising and economies of scale can complement each other rather than lead to higher costs, though less common. Nor are the alternatives necessarily less expensive; sometimes they are higher quality lower volume. Advertising itself can be entertaining even without any desire for the product or even a dislike.

11

cassander 10.11.15 at 7:03 pm

>In thinking about advertising in TV and similar media, we can easily dispense with the claim sometimes put forward by industry advocates, that such advertising provides consumers with useful information. If this were true, firms would not need to pay TV networks or Internet companies to broadcast the ads.

This doesn’t follow. the information could be useful, but as long as viewers find other things more entertaining, the advertisers will still need to pay.

>In terms of our happiness, though, there’s a big difference. The net effect of advertising is almost certainly to reduce our satisfaction with the things we buy, because most of the ads we see are designed to make us switch to something else. And of course, the things that are not advertised, such as quiet leisure time with family and friends, where no goods and services are required and no money is spent, are downgraded even further.

Only if you assume ads deliver zero useful information, which is unlikely. I have no doubt you are happier with your cell phone than without it, but how did you learn about cell phones? Even if it was word of mouth, how did the person you heard about them from learn of them? Advertising is only a net negative if the quantity of manipulation exceeds that of useful information.

>The third possibility is that of watching the ads, but buying the cheaper products anyway. If ads work as they are supposed to, this should induce a similar feeling similar to that of eating salty bar snacks but not buying a drink to go with them. That is, we should feel less satisfied with our choice than if we had not viewed the ads for the brand name product, perhaps so much so that we change our minds and buy the advertised product instead.

For whatever reason, hulu loves showing me car insurance ads. I don’t own a car. I get no such feeling. Again, I think you are assuming a higher level of efficacy in ads than is warranted.

>Opportunity cost is as relevant to advertisers as it is to consumers. In particular, opportunity cost explains why some kinds of goods and services are commonly bundled with advertising, while others are not. The opportunity cost of producing a TV show or an attractive website can be substantial. But once a given program or website has been produced, the opportunity cost of allowing access to it is small (often less than the cost of restricting access).

Marginal cost would be a more apt term here. The cost of a website or tv show is high. the marginal cost of showing a few ads is low.

>The problem is more complicated when there are alternatives, such as public funding for broadcasting, which might be financed (as it was for a long time in the UK and Australia) by a license fee for television sets. Choice is maximised when both methods of funding are available,

Since you are forced to pay the TV tax, what choice is there? How is that business model any different from HBO’s, except that it’s backed by the power of the state?

>but as a matter of political practice, advertising-funded commercial broadcasters will lobby to have publicly funded alternatives shut down or forced to take ads.

You mean companies will lobby to eliminate their competition? Careful now, that’s getting dangerously close to public choice….

>Finally, it’s worth considering the case when we are forced to consume the advertising whether we want to or not, and without receiving any benefit. The most obvious example is that of highway billboard advertising [as distinct from informative signs regarding the services available at a given exit].

Are these categories really distinct? consider these two signs:

http://www.virginialogos.com/Portals/57ad7180-c5e7-49f5-b282-c6475cdb7ee7/GeneralServiceSign.jpg
http://threadtripping.boardingarea.com/wp-content/uploads/2014/07/2742316836_65682049e1_o.jpg

The second clearly has more advertising than the first, but it also indisputably provides more information. Where do you draw the line between informing and advertising?

And more philosophically, let’s assume you’re right and that because of the cumulative effect of years of conditioning by mcdonalds commercials seeing those those golden arches is likely to fire some impulse in my brain that might not otherwise fire which makes me crave a big mac. If those years of conditioning have actually changed my preferences, then have I actually lost anything by going to mcdonald’s instead of taco bell?

12

John Quiggin 10.11.15 at 9:00 pm

If so, you should get ad-blocker and stop watching TV.

Did both of these years ago

If those years of conditioning have actually changed my preferences, then have I actually lost anything by going to mcdonald’s instead of taco bell?

This was the kind of question I left up to Akerlof and Shiller. Of course, it plays merry hell with the consumer sovereignty case for free markets.

13

Bruce Wilder 10.11.15 at 9:25 pm

The prices we face as consumers help to define our opportunity costs as consumers, to the extent they correspond to actual alternatives on offer, but those prices are heavily mediated, and it would be wrong to suppose that they have a definite and transcendent relationship to resource costs, as the resources in use are themselves intermediate artifacts, produced by sunk cost investment and fixed cost commitments. The bar’s location has been leased, the bar has been built and the hours of operation posted; the barman is well-aware that the beer she serves costs much less at the margin than the price she charges, free lunch or no.

The first thing to notice about advertising as promotion or salesmanship is that it only makes sense in a world in which the marginal cost of unit production is much lower than price. (This is not incidentally also true of Keynesian stimulus spending, where that policy is effective; it presumes that there are lots people who want more business at current prices, which would not be true if current prices equalled marginal costs.)

The OP makes an argument that depends to a remarkable extent on a psychological theory of how advertising works; moreover, it is a strong version of a psychological theory that makes unverified assertions about how advertising affects our satisfaction with goods. And, at the same time, the OP seems to me to be inexplicably skirting the economics of industrial structure.

Because of the dynamics of sunk cost investments and fixed costs of operation, the economy has a structure. Costs are different, before and after a sunk-cost committment is made. Every logical possibility is not on offer. Every possible combination of production method and advertising is not going to find or sustain existence. It is only the ones that do find existence (and sustain it thru time by surviving), which are going present the opportunity to make a choice, and it is those actual choices, alone, that define opportunity costs. There’s no real sense in ” the availability of the package as a whole makes us better off compared to the alternative, at least on the (strong) assumption that we carefully consider the hidden cost of the ‘free lunch’ we are being offered”. No “assumption” strong or otherwise is applicable; it is a question of fact. Opportunity costs only exist to the extent that actual opportunities to choose exist. So, if the consumer can buy a six-pack at the supermarket and fix her own lunch at home, then that’s an opportunity — and a cost — that the consumer can consider. But, we cannot just assume that there’s a bar next door offering cheap beer sans lunch, but charging separately for lunch; that might be the case, and if it is, it will change the competitive dynamics because the manager of the bar with the free lunch will be at least as aware as the casual drinker. And, the mutual awareness of the competing bars will affect the strategic equilibrium within which the bars choose prices and menus.

The counter-factual should not be dismissed — carefully delineated, it helps us to understand the highly selected nature of the choices with which we are presented, and suggests how public policy might expand actual choice in ways that improve welfare. (It seem to me that the example of public policy funding public broadcasting from a license fee is a good example of how structure, and consumer choice, depends on institutional mechanisms.)

The fundamental problem with TANSTAAFL, to my mind, is that it tries to finesse the reality of structure, that arises from the fact of sunk cost investment and fixed costs of operation transforming costs into a before into an after. If offering a free lunch becomes a dominant strategy for bars, there may not be an opportunity to buy a cheap(er) cheap beer in a bar that does not offer a free lunch. And, given the cost structure of bars, and the strategic equilibrium of competition, the bundle of beer and lunch may be as cheap as it gets. There really may be a “free lunch” for the beer drinker, even if the lunch is not actually free for the bar. It is not that the cost is “hidden” from consumer; it is that cost is mediated by the firm in the organization of the production process; it is that, for the bar, given that many of the resources in use are sunk costs or fixed costs, and given the strategic equilibrium vis a vis competing bars (and supermarkets, liquor stores, etc), the best strategy and the one that realizes the lowest total cost of operation, may be to offer a free lunch.

The psychological argument for why advertising “works” seems to me to perform the same function as the argument that the bar salts the lunch: it introduces an incidental aspect that tends to obscure the more fundamental observation that the economy has a structure, because of sunk-costs and fixed costs and because both firms and consumers are acting strategically.

Several times in the OP the structural question is posed, but always as an aside. E.g. “bundling the program with advertising may be the only way to cover the fixed costs of production.” That assertion needs an explanation: it suggests a dominant strategy leading to structure. I don’t disagree that that appears to have been a dominant strategy for broadcast television and for print magazines (especially those featuring costly illustrations). I’m just saying that it is important to notice the “only way” cannot be justified as an a priori assertion — it is a matter of fact and experience.

In theory, you could have magazines that reviewed, say, cars, and which were not financed by car manufacturers’ advertising. “Motor Trend Car of the Year” doesn’t have to go to the highest bidder — at least it is not the only logical possibility considered a priori. The Consumers’ Union reviews cars. It is not completely unheard of. But, there’s been a clearly dominant strategy in magazine publishing, and someone, who knew the details of publishing history could tell you about failed attempts at alternative business models and editorial stances. The editorial quality of a Motor Trend is clearly shaped by the need to sell the magazine to automakers, before selling it to enthusiasts. People can only calculate the opportunity costs of choices they have, and I would not take the line of conservatives, who assert the magic of “the market” means that this is the best of all possible worlds. It is a very selected variation on all possible worlds.

There are economic theories of reputational advertising that relate industrial structure to business strategies that make use of heavy advertising. Those arguments do not explain why images of happy, sexy people sell soap, and they may be criticized for not taking due notice of the extent to which pushing emotional buttons to associate feelings with logos challenges economics’ spare notions of utility and social welfare, but they do say something about dominant strategies and economic structure. That Coke and Pepsi combine heavy advertising with the pursuit of scale and technical efficiency suggest that their strategies are dominant in a way that may exclude the possibility of a cheaper, higher-quality soft drink. You can argue about the direction of causality — about whether the sunk-cost investment in advertising creates an insurmountable barrier to entry, but I think the important point is coincidence: for reputational and personal identity advertising to “work” (in the sense of becoming associated with a firm and product that survives in competition), it has to be combined with compatible strategies for choosing and defending a product niche, choosing and developing a production technology and operational processes and systems. It matters that Coke and Pepsi are phenomenally cheap, after a long period of investment and organizational elaboration.

In some respects this point, in the paragraph just above, about coincidence is a long-winded way of saying what Lord @ 10 said succinctly. What I am emphasizing is that the coincidences underlying dominant business strategies create a world in which every logical possibility is not an actual possibility. It isn’t the case that the counterfactual opportunity cost of these non-existent possibilities is “hidden”; the opportunity cost of non-existent possibilities do not exist at all. That can be confusing to contemplate, I guess.

I would say that it is a manifestation of the pervasiveness of uncertainty. We don’t know everything, we cannot make every choice in a maximally decentralized fashion, whatever the wet dreams of a Hayek or a Friedman might suggest. We make commitments to sunk-cost investments and to hierarchical firms and public institutions, and those commitments affect costs and learning and management of production processes. The prices we face as consumers are contingent on that uncertainty; exchange is subject to all kinds of regulation and warranty and asymmetric information, and prices reflect that. We really do not know “the opportunity cost” of most products and services, at least not in a transcendent and global sense, and prices do not inform us beyond a first approximation, reinforced by implied warranties. The price we pay is not equal to marginal cost; it may not even be approximately proportional to marginal cost — it could not be in a world of uncertainty, where sunk costs and fixed costs have such dominance in highly efficient production processes, because the firm must be able to warranty the product and insure the incomes of factors in its structured organization of production. (E.g., the barman must be paid her wage, the landlord his rent, even when no one shows up to drink.)

That comment was way longer and way murkier than I intended it to be, but I have too much invested to just throw it away. ;-)

14

John Quiggin 10.11.15 at 9:52 pm

@JFA Obviously, you are one of the strongminded people I mention in the post. If everyone were like you, there would be no advertising.

@BW Lots of interesting points there, many of which I agree with. As I said, I could spend a lot more time on this. I’m planning to write more about industrial structure and uncertainty under Lesson 2. Hopefully, it will all fit together and also fit within a manageable/readable length.

15

Steve Williams 10.11.15 at 10:42 pm

‘Advertising itself can be entertaining even without any desire for the product or even a dislike.’

This point, from Lord @10, is a good one, and speaks in contradiction to this claim in the OP:

‘But no one will willingly consume ordinary ads unless they are packaged with a program they want to watch, or a webpage they want to view.’

I’m not sure exactly what an ‘ordinary ad’ is in this scheme, but clearly lots of people do go to YouTube or wherever and watch adverts of their own volition. I’ve done it myself – suddenly, for whatever reason, you remember an old advert, smile, and fire up the interwebs and watch it. Maybe ‘no one’ here should be ‘few people’, or ‘people will very rarely’ or something similar.

16

geo 10.11.15 at 11:10 pm

JFA@9: you should get ad-blocker and stop watching TV

Fair enough advice for JQ and most CT types. But as a recommendation for the large majority of the US population, it’s a bit obtuse — like suggesting that people should just stop eating junk food. Don’t you know how hard most people’s lives are, and how little useful medical and psychological information they get from their schooling, media, and peers? Do you actually think impulsive and addictive behavior are simply the result of a weak will? Do you think the volume and velocity of commercial messaging aimed at virtually everyone who can’t pay a fortune to isolate him/herself from it doesn’t amount to toxic hyperstimulation? Except for heroically strong-minded people like JFA and cassander, advertising makes you stupid.

Of all the many disgusting and destructive things about advertising, perhaps the worst is its undermining of trust and solidarity. Everyone knows you can’t believe anything you read or see in an ad, and everyone knows you can’t believe anything the government or a corporation says, and everyone knows you can’t believe what you see in the liberal or conservative media, and eventually everyone’s psychic defenses are up all the time. Caveat emptor inevitably morphs into caveat civis; cynicism becomes common sense.

And this atomism and demoralization suits the masters of the market perfectly. Collective action is impossible without solidarity, and solidarity is impossible when omnidirectional distrust is the only reasonable default position.

Sorry for the rant, but the libertarian defense of advertising and of “consumer sovereignty” makes me see red.

17

engels 10.11.15 at 11:13 pm

you should get ad-blocker and stop watching TV

…and cease any association with people who haven’t

18

Scott P. 10.11.15 at 11:16 pm

“And this atomism and demoralization suits the masters of the market perfectly. Collective action is impossible without solidarity, and solidarity is impossible when omnidirectional distrust is the only reasonable default position.”

Have you read Banfield’s The Moral Basis for a Backward Society?

19

John Quiggin 10.11.15 at 11:26 pm

@10 and @15 I thought I had dealt with this adequately in the OP, but I can see I will need to spell it out more. Advertising people actually want to watch can be put on YouTube and similar services at no cost. So, this kind of ad will not be seen on TV or in other places where the advertiser has to pay.

20

Matt 10.12.15 at 12:17 am

Many readers will (like the author) probably judge that they are too strong-minded to be swayed by advertising, particularly the uninformative puffery that we get from mass media. But the continued market dominance of advertised name brands suggests that this is an illusion, similar to the one that leads around 80 per cent of us to believe we are better than average drivers.

Does the continued market dominance of advertised name brands really suggest that most people are susceptible? Based on dominance of advertised name brands alone, can we distinguish between a world in which 90% of people are receptive to advertising persuasion and one in which only 45% are? It seems to me that in a zero sum Coke-vs-Pepsi kind of battle that advertising doesn’t need to be particularly effective on an absolute basis to persist. It only needs to be more effective than not-advertising.

The particularly annoying, illegal advertising propagated as spam email is spectacularly ineffective. Most people will never buy a product whose advertisement was spammed into their inbox. But the small minority that responds is enough to keep the spammers spamming and annoying the rest of us who are never persuaded. It would be depressing if a bunch of the comments on a post about spam were self-congratulatory anecdotes — “well I have never been so stupid as to buy from spammers” — and a bunch of other comments were devoted to faulty refutations of those anecdotes. “Spam keeps working, so most people who claim not to be influenced by spam are lying, unless they live in Lake Wobegon ha ha.”

21

engels 10.12.15 at 12:33 am

But no one will willingly consume ordinary ads

Ummm

22

John Quiggin 10.12.15 at 2:11 am

Based on dominance of advertised name brands alone, can we distinguish between a world in which 90% of people are receptive to advertising persuasion and one in which only 45% are? It seems to me that in a zero sum Coke-vs-Pepsi kind of battle that advertising doesn’t need to be particularly effective on an absolute basis to persist. It only needs to be more effective than not-advertising.

In the second world, NoName Cola should have 55 per cent of the market.

23

Matt 10.12.15 at 2:29 am

Do you know how much NoName Cola people drink? A few minutes of lazy searching turned up this admittedly 20 year old article with some interesting numbers:

Collectively, private labels in the United States command higher unit shares than the strongest national brand in 77 of 250 supermarket product categories. And they are collectively second or third in 100 of those categories.

Examples of big-name brand manufacturers under pressure from private labels and generics aren’t reassuring. What manager wouldn’t worry when faced with the success story of Classic Cola, a private label made by Cott Corporation for J. Sainsbury supermarkets in the United Kingdom? Classic Cola was launched in April 1994 at a price 28% lower than Coca-Cola’s. Today the private label accounts for 65% of total cola sales through Sainsbury’s and for 15% of the U.K. cola market.

24

Val 10.12.15 at 2:40 am

Many readers will (like the author) probably judge that they are too strong-minded to be swayed by advertising, particularly the uninformative puffery that we get from mass media. But the continued market dominance of advertised name brands suggests that this is an illusion, similar to the one that leads around 80 per cent of us to believe we are better than average drivers.

Sagarin, Brad J; Cialdini, Robert B.; Rice, William E.; Serna, Sherman B.
Dispelling the Illusion of Invulnerability: The Motivations and Mechanisms of Resistance to Persuasion
Journal of Personality and Social Psychology, Volume 83(3), September 2002, p 526–541

25

Val 10.12.15 at 2:41 am

Sorry posted before finished:
– people think they are less vulnerable to advertising than ‘others’
– this can actually make them more vulnerable

26

John Quiggin 10.12.15 at 3:03 am

Matt, this is very helpful. I don’t think it contradicts the OP, but it will help me flesh out the argument a bit. We have four possibilities
(i) People who watch ads and buy an advertised product
(ii) People who don’t watch ads and buy an advertised product
(iii) People who watch ads and buy a no-name product
(iv) People who don’t watch ads and buy a no-name product

I talk about (i), (iii) and (iv) in the OP. Category (ii) is problematic if it is applied strictly to mean that the buyers have no brand recognition, but buy the more expensive product anyway. Numerically, I’d guess its small. For products like cola, it’s just about impossible to avoid ads.

We can subdivide (iii) into (iiia) people who buy the cheaper product, but enjoy it less than if they hadn’t watched ads for name brands, and (iiib) the toughminded group represented by JFA, who consume the ad-subsidised bundle of media content, but are unaffected by the ads.

From your data, (i) and (ii) constitute the majority in most categories [the article doesn’t say if there are any categories where private labels collectively account for more than all name brands], but for a lot of products there are plenty of people in (iii) and (iv).

I’d say that people who don’t consume commercial TV and radio are in group (iv) for most supermarket categories. In the UK and Oz, where there’s good quality public broadcasting, that group would be quite large.

So, I’m still happy with my assertion that group (iiib) is a minority of the population, and that lots of people who imagine themselves to belong to it are mistaken.

27

John Quiggin 10.12.15 at 3:05 am

Val, thanks for this reference. Looks very useful.

28

Bruce Wilder 10.12.15 at 3:14 am

I just wanted to note my appreciation of the comments by Sandwichman and geo.

Advertising degrades and displaces useful and vital culture to an appalling degree. It is also grossly inefficient.

29

Lord 10.12.15 at 3:16 am

Advertising is often used for price discrimination to offer lower prices for the more price sensitive, capturing more of the consumer surplus from the less sensitive.

30

Bruce Wilder 10.12.15 at 4:19 am

One should be careful with claims that the store-brand or unadvertised product “costs” less. The price might be less, but the brand-name product may actually be cheaper to produce, and the brand-name producer will use its superior production and distribution capabilities to price-discriminate. Having a high-cost or low-capability producer set the basement price can be strategically useful, especially in a distribution context like supermarket, where some purchasers may be especially price sensitive. A highly advertised cheap product almost has to be positioned as a superior good, defined as one the demand for which increases with consumer incomes, but the investment in advertising can only be recovered from higher gross margins and price discrimination. Having the right relation relative to an inferior version of the product category, while maintaining dominance is a strategic necessity.

This kind of complex mediation of cost into administered prices is pretty standard practice, with significant deviations between production cost and consumer price being the rule.

Probably someone truly immune to advertising would never touch any cola.

31

Clay Shirky 10.12.15 at 7:29 am

Further to Sandwichman at #7, Naomi Wolf’s Beauty Myth includes a long discussion of the odd duality of women’s magazines, a space where female writers and readers are the assumed norms, but one where the possibility of a feminist public sphere is held at bay by the advertisers: “What editors are obliged to appear to say that men want from women is actually what their advertisers want from women.” (Emphasis Wolf’s.)

And about “most of the ads we see are designed to make us switch to something else”, this is not nearly as true as you might think, or Coke could make a profit reducing their advertising spending relative to Pepsi. Instead, much advertising for products where brand is highly salient acts to affirm existing choices, so that the customers don’t switch (or, less directly, to raise the value of ‘goodwill’ on the company’s books.) The Pepsi Challenge may make me feel bad about drinking Coke, but while Pepsi felt it necessary to attack Coke, Coke never mentioned Pepsi when it was teaching the world to sing etc etc.

I don’t think you want a diversion on the subject here, but I’d alter the claim that most advertising is designed to get people to switch. Given the mix of switching, loyalty, increased consumption, and goodwill, advertising will do different things for different firms at different times.

32

Zamfir 10.12.15 at 7:47 am

How important is advertising really? It’s clearly a crucial factor for a few industries that rely on advertising for income. For them, it shapes the entire production process. Advertising is a major issue for some product groups (cars, stuff you buy in supermarkets). It dominates their sales channel, with significant influences on the entire production chain.

But does that really add up to a major part of the economy? Advertised products have an outsized presence in our minds. Their advertising is an outsized part of our image of the products itself (especially if you don’t actually buy it). And advertisement-based industries are by their nature good at drawing attention to themselves.

That suggests that we would overestimate the importance of advertising.

33

Robespierre 10.12.15 at 8:19 am

Not directly relevant, but advertising is also, basically, zero-sum tugging away at a given amount of consumer spending, and overall represents a significant amount of wasted resources (some 1 – 1.5% of gdp in the USA, plus wasted time and stunted intelligence beyond measure).

34

John Quiggin 10.12.15 at 8:54 am

@32 and 33: It’s always hard to get intuition about economic problems that are serious enough to matter, but not big enough to have a noticeable impact on the economy as a whole. A mild recession (say, two quarters of negative growth at annual rate of -1 per cent) reduces GDP/national income by about 1.5 per cent relative to trend. So, the cost of advertising is comparable to a continuous mild recession.

35

John Quiggin 10.12.15 at 8:57 am

@Clay Shirky. This is one of the problems with thinking in terms of opportunity cost; you get in the habit of thinking counterfactually. Of course, the ads of a dominant brand like Coke are designed to *stop* you switching, and therefore don’t mention the opposition. But if the ads work, they result in a different choice then you would have made without the ads.

36

Don John 10.12.15 at 9:21 am

37

Don John 10.12.15 at 9:23 am

There are many places where economics and reality have only limited contact; but the gap between the economists’ view of marketing and reality is a yawning chasm.
http://www.johnmlegge.com/blog/economics-and-marketing/

Sorry for the previous post without text,

John

38

Peter T 10.12.15 at 11:08 am

Isn’t advertising just a sub-genre of marketing. Getting information (of whatever nature and however based) to the consumer includes the sales force, the appearance of the store and personnel, the design team and so on. In which case it is much much more than 1.5% of GDP. The hypothetical consumer, knowing what she wants and able to order her preferences in the light of this knowledge, does not arrive at this state by costless introspection. And any knowledge she has will be shaped by producers, even if all they do is conform to some standard of appearance.

The discussion in the post has the seeming of being moored to reality, but in fact floats free.

39

Lee A. Arnold 10.12.15 at 11:19 am

Advertising has other functions. Like any other form of communication becomes a method of sociality. You buy the newly advertised product to try it, and talk around the water cooler at work. People do this all the time. You reduce your opportunity cost of being a good co-worker, or a good new acquaintance.

In certain instances, advertising helps consumers to choose, by providing a comforting reputation. If you see a bunch of brands in a grocery store that you haven’t tried, but you are in a hurry or short on cash, you may choose the advertised one because it is “safe”: 1. if it were bad, you would have heard about it by now, and 2. if you get poisoned, maybe you have a better chance of finding someone to sue. You reduce your probability of future large opportunity costs.

40

ZM 10.12.15 at 2:24 pm

I don’t watch a lot of television, but there is a quite funny comedy on the public broadcaster in Australia about advertising

http://youtu.be/3hEdRENZyBA

Slightly off topic, I am still somewhat confused about the concept of opportunity cost. I want to use this for a discussion as I read about it as an addition to life cycle analysis costings, so the inputs that are counted over the time period could extend to counting opportunity costs.

This was in a paper on livestock, so the idea was about as well as counting GHG emissions over the life cycle of, say, cradle to farm gate, you could count opportunity costs of the key alternative land uses that were forgone by using the land for livestock. For example, growing crops, not clearing the land in the first place, re-forrestation or afforestation, keeping it for biodiversity habitat etc.

Are opportunity costs used in cost benefit analyses like this?

41

ZM 10.12.15 at 2:24 pm

42

Brett Dunbar 10.12.15 at 3:48 pm

One thing an advert says is that the advertiser expects the product to be around long enough for the advert to make back the money spent on it. A costly advertising campaign is a pretty credible high-cost commitment gesture. The seller is indicating in manner that cannot really be faked that they believe in the product.

43

Layman 10.12.15 at 4:30 pm

I’ve sat in on a lot of creative meetings in my time, and the purpose of advertising is to deceive the customer about the benefits of buying the product. That’s pretty much it.

44

A H 10.12.15 at 5:53 pm

The thesis is Price is determined by Opportunity Cost which is determined by Preferences, right?

It seems that the price of advertising is indeterminate in this model. How would advertising sellers know how to price an ad space given that the preferences of the population will change after the ad is displayed?

45

hix 10.12.15 at 7:39 pm

If only adblocker and no tv would be sufficient to get rid of all the marketing noise, oh how much nicer the world would be.

46

Billikin 10.12.15 at 11:09 pm

I don’t think that anybody has mentioned Animal Crackers, so I will. Animal Crackers. Not a no name brand, but no advertising, either. :)

47

Bruce Wilder 10.12.15 at 11:42 pm

48

js. 10.12.15 at 11:54 pm

1. I’d like to sign on to Peter T @38.

2. I have a question about how this theory of advertising’s (psychological) influence is supposed to work, because frankly I’m a little sceptical: Is it a necessary condition of an ad’s influencing a potential consumer of the product that the consumer actually *like* the ad, find something pleasing about it, or at least not actively view it as an annoyance/despise it? (To be clear, I’m not sceptical because I think I’m particularly hard-minded about these things; in fact, I know that I am rather soft-minded when it comes to cultural influences, ideas of coolness, etc. I’m just not convinced that the medium of advertising, strictly construed is a particularly effective means of influence.)

3. I think the opprobrium directed at ads is a little off. They’re an easy target, but I think we’re going to have capitalism anyway, advertising is definitely a plus point. It can at least be aesthetically pleasing.

4. (3) notwithstanding, I do think that advertising aimed at children (as so much of it is) is highly problematic. If it could be severely restricted, that would probably be all to the good.

3.

49

js. 10.12.15 at 11:58 pm

Advertising people actually want to watch can be put on YouTube and similar services at no cost. So, this kind of ad will not be seen on TV or in other places where the advertiser has to pay.

But this is just empirically false. People, including me, go on youtube to watch ads *that have aired on TV*.

50

js. 10.13.15 at 12:27 am

Sorry about the multiple posts, and I’ll stop after this, but:

If this argument works, couldn’t it be extended to resources spent on the design of products, where the design serves important aesthetic, i.e. not obviously utilitarian/functional purposes? For example, I am fairly certain that I have never seen a Braun commercial (if I have, I have no recollection of it), but I am very well disposed towards the brand because I have seen what their product lines looked like.

I probably have felt some loss of utility at some point in my life because I couldn’t go back in time and acquire a Braun transistor radio. Does this show that attention to design or aesthetic elements in consumer products is particularly baleful (i.e. beyond the sense in which one might think that social life mediated by market relations—or “market relations”—is itself baleful)?

51

pnee 10.13.15 at 1:09 am

In terms of advertising, as a means of paying for things like websites or televisions, it think the alternative perspective is useful.

The program or site is not the product, the viewers are. Their attention is being delivered to and paid for by the people who buy ads. The content is the means to the end.

This is why demographics, and not just raw numbers of viewers are important to advertisers, in terms of ad value and in terms of targeting the right ads to the right people.

It also explains why demographic considerations and not just have so much influence on content.

Ad supported media provides a valuable good (an audience) to people (advertisers) willing to pay for it. Business as usual.

52

Mike Huben 10.13.15 at 1:19 am

“the ad attaches desirable qualities (such as sophistication or sex appeal)”

That needs to be expanded to make two more points. (1) Whether the qualities are real. (2) Whether the appeal is subrational, ie. designed to subvert our attempts to make rational market decisions.

Along the lines of the second point, profit can generally be increased the more irrationally you can get the consumer to think about your product. In this respect, markets are adversarial between buyers and sellers, and the sellers will attempt to fool you in every way possible, including advertising.

I really like the point about direct externalities of advertising that is inflicted upon us. We all need to use ad blockers, we recorded tv shows to be able to skip the ads, etc. And that’s not even considering the value of our time wasted suffering through ads.

The estimates of the size of the advertising industry are also useful indicators of waste.

All of your points could be stated somewhat more clearly and with simple examples. Subheadings would also help. The libertarian/economics propaganda you are countering has had many decades of polishing to make it really simple to understand. This article required quite a bit of focus for me.

I think David Hume had something to say about advertising:

“Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Consign it then to the flames: For it can contain nothing but sophistry and illusion.”

53

Peter T 10.13.15 at 2:49 am

“That needs to be expanded to make two more points. (1) Whether the qualities are real. (2) Whether the appeal is subrational, ie. designed to subvert our attempts to make rational market decisions.”

What’s “rational” here? If I am convinced that a certain car or clothes will add an air of sophistication or give me more sex appeal, then that belief is as good a basis for buying the item as any. There’s no hard and fast distinction between a false claim (“this will make you healthier!” when the evidence is that it will not) and a possibly true one (“this car will tell people you are wealthy and sophisticated!”). The post’s framing of the issue as one of meeting individual utilities precludes such a distinction.

54

notsneaky 10.13.15 at 4:20 am

“In thinking about advertising in TV and similar media, we can easily dispense with the claim sometimes put forward by industry advocates, that such advertising provides consumers with useful information. If this were true, firms would not need to pay TV networks or Internet companies to broadcast the ads.”

I have to join in with the others above who note that this is a very dubious claim. “Useful information” benefits both the consumer and the firm. The fact that it’s useful to consumers means that consumers would be willing to pay a positive amount to obtain it (ceteris the paribus mentioned below). The fact that it’s useful to firms means that firms will be willing to pay a positive amount to provide it. So just based on that, all we know is the cost will wind up somewhere in between. Given that any one particular good represents only a small fraction of an overall budget it’s not surprising that sellers bear most of the cost.

This is amplified by the fact – supposing for the moment that advertising is a “good” not a “bad” – that a lot of advertising has a public goods aspect to it; it’s non-rival and non-excludable. Why should I buy (useful) advertising if I can free ride on its provision by the firm to someone else?

(Having said that, it’s still probably true that you get too much and not-the-right-mix of advertising in equilibrium, but this has more to do with the fact that it’s optimal to cater to the median consumer rather than the average consumer (much less the kind of educated sophisticates which populate the comments section of this blog who are obviously in the awesome tail of the taste distribution), rather than that it provides no benefits/information)

55

Kiwanda 10.13.15 at 4:25 am

In thinking about advertising in TV and similar media, we can easily dispense with the claim sometimes put forward by industry advocates, that such advertising provides consumers with useful information.

Amazon’s “people who bought X also bought Y” is advertising, but in my experience is often quite helpful. In the limiting case where google or amazon knows everything about me, the advertising they show me will be so well targeted that I might well regard it as a service. “Your search patterns this evening indicate that you need a good cry. ‘The Notebook’ is playing at the Bijou in twenty minutes; you’ll want to pick up some jujubes at the quickie mart on the way.” Although I suppose, on the other hand, it could be: “As a sports fan, alcoholic, and gambling addict, you’ll want to buy some Wild Turkey before settling in for some fantasy football.”

I think that for some products, a large fraction of their sale price is the cost of advertising; for movies, for example, in general the budget for advertising is about half the budget for making the movie. About a quarter of drug revenue is marketing. I think there are products where the majority of the cost is marketing: you are paying the company to get you to pay the company. This seems like a poor allocation of resources.

56

notsneaky 10.13.15 at 4:36 am

Also, the “advertising provides useful information” and the “advertising creates previously non-existing wants and makes us less happy” theories of advertising are not mutually exclusive. It’s really the knowledge that something desirable exists which cannot be had (or not had in sufficient quantity) that causes unhappiness not advertising per se. If I don’t know shrimp exist then I can live a perfectly happy life in the World Without Shrimp. But then one day an inter-dimensional portal opens up and I get a glimpse of the World With Shrimp. Now I am unhappy because I cannot have shrimp (or not enough of them). At that point any advertising which reminds me of the fact that shrimp exist is pretty much redundant, an annoyance at best, but not really the thing to blame for my unfulfilled desires.

I’m pretty sure any immigrant from a lower income country to a higher income country can relate to this.

57

notsneaky 10.13.15 at 4:52 am

#5 says “Ads don’t simply make it more likely you’ll choose a particular product. They increase consumption of all kinds of products.”

but #33 says “advertising is also, basically, zero-sum tugging away at a given amount of consumer spending”

so which is it? Does advertising create new desires or does it just cause you switch brands given the level of spending on a particular category of a good you have settled on anyway (with the net effect possibly being a wash and thus not directly observable)?

One way to test this would be to look at what happens in cases where advertising gets banned. If it’s mostly the “create new desires, increase overall consumption” effect then you’d expect that profits would fall if advertising for a particular category of product falls. People don’t get advertised at, they buy less, less profits. If it’s mostly the “switch between products” effect then you’d expect profits to increase. People don’t get advertised at, they buy the same thing, same revenue but profits are higher because now firms are not caught in a Prisoner’s Dilemma game where each one’s advertising cancels out the effect of the other’s.

There aren’t that many instances of advertising bans. But there is one big one, which John should be familiar with – the ban on tobacco adds. And, at least according to Dixit and Nalebuff’s “Thinking Strategically” tobacco company profits actually went up after the tobacco ad ban.

58

Robespierre 10.13.15 at 5:37 am

“If I am convinced that a certain car or clothes will add an air of sophistication or give me more sex appeal”

Fere libenter homines id quod volunt, credunt.

59

John Quiggin 10.13.15 at 6:04 am

@49 OK, I’ll try to fix this.

Clearly, advertisers try to produce ads that will appeal to people. In rare cases, they are so successful that people will voluntarily watch the ads on places like YouTube. But mostly, they can only persuade people to watch the ads by packaging with something that’s actually appealing.

60

C Trombley 10.13.15 at 6:04 am

It’s already been mentioned, but the effectiveness of advertising has big implications on market structure, as covered in John Sutton’s _Sunk Costs & Market Structure_ (which I mention ’cause I like the book). Punchline:

“If it is possible to enhance consumer’s willingness to pay for a given product by way of a proportionate increase of *fixed* cost (with either no increase or only a small increase in unit variable costs), then the industry will not converge to a fragmented structure, however large the market becomes.”

That means that a cola ad is _not_ like a free lunch in an important way, because a free lunch alters unit variable costs, not a fixed Ad Campaign cost. That is why bars are owned by individuals and Coca-Cola is a giant corporation. I think it’s worth mentioning anyway.

61

John Quiggin 10.13.15 at 6:07 am

@48 “advertising is definitely a plus point. It can at least be aesthetically pleasing.”

Does this mean you would willingly watch a TV broadcast with the program content removed and only the ads remaining? It’s as easy to do this as the other way around, but I’ve never heard of anyone doing it.

62

John Quiggin 10.13.15 at 6:10 am

“Amazon’s “people who bought X also bought Y” is advertising, but in my experience is often quite helpful”

Which is why you don’t need to be bribed (with a TV show or similar) to look at it.

63

John Quiggin 10.13.15 at 6:14 am

“And, at least according to Dixit and Nalebuff’s “Thinking Strategically” tobacco company profits actually went up after the tobacco ad ban.”

Almost certainly, that would be the short run effect. As you discuss, there are two effects going on here, a zero sum switching effect and an increase in total consumption. In the case of tobacco, the increase comes almost entirely from recruiting new long-term addicts and keeping old ones hooked

The ban on ads wiped out the switching effect, saving money in the short run, but (as least contributed to) the observed long-term decline in smoking rates.

64

Don John 10.13.15 at 11:54 am

JQ, you and most of the comments are focussing on the pathological end of marketing: advertising intended to attract consumers to addictive products. Advertising cigarettes, or heroin, will always by socially negative.

Advertising is only part of marketing and most advertising and marketing is intended to maintain or build market share for products that at worst are no more damaging than their direct alternatives.

Some marketing is intended to build market share for innovative products, and without this economic growth would stall. Running in the background of nearly all of your examples is the assumption of instantaneous and costless transmission of information. If pub A offers bar snacks but charges more for its beer (not necessarily if the bar snacks attract more drinkers) and pub B offers no snacks and cheaper beer you assume that all of pub A’s patrons will instantaneously learn that they will be better off drinking at pub B even if pub B spends no money telling them so.

Not in this world,

John

65

Layman 10.13.15 at 2:00 pm

Peter T: “If I am convinced that a certain car or clothes will add an air of sophistication or give me more sex appeal, then that belief is as good a basis for buying the item as any.”

Isn’t this the basis of all cons? That you’re convinced of some benefit which is not true, and give your money to the convincer? Sure, now you’ve got the car or the shirt, but you’ve overpaid for it, and it doesn’t actually do what you thought it did.

66

reason 10.13.15 at 2:22 pm

Don John @2
“Models that assume that advertising adds value to a product, making it appear relatively cheaper than its unadvertised rivals, are deeply misleading,”

I don’t think your view is generally correct either. Much advertising today is not selling a “product” at all, but a brand (i.e. a self-image). You can’t explain Nike or Apple with your point of view.

67

engels 10.13.15 at 2:35 pm

Isn’t this the basis of all cons?

I think the point is that if you are concerned (as econonists are) with subjective satisfaction then as long as the Emperor is pleased with his new suit then he’s made a good purchase. Adopting this framework makes real criticsm of advertising rather diffficult.

68

Kiwanda 10.13.15 at 2:50 pm

John Quiggin: “…we can easily dispense with the claim … that such advertising provides consumers with useful information.”

me: “Amazon’s “people who bought X also bought Y” is advertising, but in my experience is often quite helpful”

John Quiggin: “Which is why you don’t need to be bribed (with a TV show or similar) to look at it.”

I don’t see this as responsive: you haven’t “easily dispensed”, unless the argument that amazon’s “People who bought X…”, and other highly targeted advertising, is no true advertising.

69

notsneaky 10.13.15 at 2:57 pm

“The ban on ads wiped out the switching effect, saving money in the short run, but (as least contributed to) the observed long-term decline in smoking rates.” – yes but that aspect might be particular to tobacco which is an addictive good. If the same kind of effect could be observed for non-addictive goods we’d have a clean experiment.

70

CJColucci 10.13.15 at 3:15 pm

What I have never understood is television advertising of products that consumers can’t buy–like manufacturing inputs and business services that the responsible decision-maker had damned well better be making without being influenced by an ad for a business insurer or a railroad or a steel company aired during a football game.

71

Trader Joe 10.13.15 at 3:19 pm

Most of the comments and the OP deal directly with consumer products oriented advertisement such as soda and cars, and to that I don’t have anything to add.

However there is a large budget of ‘advertising’ which you most commonly see for business to business companies that isn’t necessarily designed to fool a customer into consumption or induce switching behavior. DuPont, BASF, Archer-Daniels Midland are a few that come to mind that advertise that stuff they sell is inside of stuff you buy.

Its been explained to me that the value of this advertising comes back to the company in the form of greater share price valuations (i.e. lowers cost of capital) and/or employee morale and pride which creates a more efficient workforce and lower cost of production. DuPont in particular espouses this – for a long-time they sponsored Jeff Gordon in the NASCAR racing series – they felt the ‘ad’ and their association with a ‘winner’ had value with customers and distributors but also generated pride amongst employees, improved workplace safety, provided unique rewards such as race tickets which haver different paybacks that traditional wages or benefits.

In these examples – it might not be quite a ‘free lunch’ but there maybe a sense in which the advertising pays for itself via not readily quantifiable intangibles.

72

Omega Centauri 10.13.15 at 4:21 pm

“Does this mean you would willingly watch a TV broadcast with the program content removed and only the ads remaining?”
A case in point, though I haven’t done it. I dodn’t care a hoot about American football, but having watched Superbowl adds is practically a cultural requirement. Getting a feed with only the adds would in fact be useful.

73

Matt 10.13.15 at 5:33 pm

“The ban on ads wiped out the switching effect, saving money in the short run, but (as least contributed to) the observed long-term decline in smoking rates.” – yes but that aspect might be particular to tobacco which is an addictive good. If the same kind of effect could be observed for non-addictive goods we’d have a clean experiment.

We have a time-reversed version of the experiment with direct-to-consumer pharmaceutical advertising. It was prohibited before 1981 in New Zealand and 1997 in the United States. Is there a trend change around those dates WRT total spending on prescription drugs? We have two different experimental groups and multiple controls in the form of every other country that has never allowed DTC pharma ads.

There are admittedly some addictive prescription drugs out there, but most ads I can recall seeing are for things like cholesterol treatments, diabetes drugs, and autoimmune disease treatments. A quick glance at the highest-revenue drugs of 2014 confirms my impression that habit forming drugs like opiate painkillers, stimulants, and short term anxiolytics don’t contribute much to the fortunes of the industry. So I think it’s a pretty good experimental setup involving mostly-nonaddictive products.

74

Bruce Wilder 10.13.15 at 6:36 pm

Matt @ 73

Of course, I immediately thought of restless leg syndrome, and its treatment using prescription pharmaceuticals. Consider what geo @ 16 said, and consider also the consequences of Big Pharma funding, say, the Restless Leg Syndrome Foundation.

No, “addictive” doesn’t figure in the way prescription pharmaceuticals are marketed, in contrast to cheap, highly advertised over-the-counter laxatives and aspirin (and variations).

But, making everyone stupider and more ignorant does seem to be a central part of the program. Quiggin’s subjective utility theory seems to me to miss that central and defining feature of broadcast advertising: it operates by making everyone dumb and dumber.

Restless leg syndrome is a cluster of symptoms that arises in the course of any number of complex disease and aging processes. There are a lot of those: complex disease and aging processes, that is. They are difficult to understand, difficult to manage, and can only be managed, for the most part — not “cured”. Chronic is always a money-maker. And, complex is a challenge that professional management rarely meets adequately.

75

Matt 10.13.15 at 6:52 pm

@BW: My instinct is to leap to agree that advertising makes recipients dumber. I suspect that things like Restless Leg Syndrome promotion will show up in collective drug spending trends. I still want to see empirical data before I assert it. Even obvious truths should be tested empirically, and sometimes they turn out not to be truths at all.

76

Bruce Wilder 10.13.15 at 7:35 pm

Matt @ 75: “Even obvious truths should be tested empirically . . . ”

Hard to disagree with that. (I am not a fan of ritualistic statistics used to “investigate” natural experiments, though.)

77

John Quiggin 10.13.15 at 10:25 pm

@Kiwandi I’ll try to be more fully responsive. As you can see if you re-read the OP, the excerpt I’ve posted isn’t meant as a comprehensive theory of advertising and marketing, let alone determine what is “true advertising”. It’s meant to answer the question “Why do for-profit markets provide valuable things like TV programs free of charge?”. I’ve changed the title to reflect this.

78

John Quiggin 10.13.15 at 10:47 pm

@72 I’m aware that Super Bowl ads are a big deal, but I don’t know much more. A couple of questions:

Do the ads run just for one day, or are they launched during the Super Bowl, and then used in the regular rotation?

How common is it for Super Bowl ads to command a substantial audience in places like YouTube?

79

js. 10.13.15 at 11:00 pm

How exactly do ads make people “dumber”? I’m genuinely curious about this: what’s the mechanism? And also, what exactly are we imagining in the hypothetical ad-free world such that the mere absence of ads renders people smarter?

80

engels 10.13.15 at 11:33 pm

How exactly do ads make people “dumber”?

Off the top of my head:

Aim to bypass critical judgment by creating false, overly positive associations for the product advertised
Focus mind on immediate gratification of basic needs (eg eating, fucking) or instill insecurity about eg social/sexual attractiveness or illness
Overriding aim is to grab attention and at expense of other thoughts / information sources

I’m sure other could do better

81

Joseph Brenner 10.13.15 at 11:34 pm

cassander 10.11.15 at 7:03 pm:

> >In terms of our happiness, though, there’s a big difference. The net effect of advertising is almost certainly to reduce our satisfaction with the things we buy …

> Only if you assume ads deliver zero useful information, which is unlikely. I have no doubt you are happier with your cell phone than without it, but how did you learn about cell phones?

Why wouldn’t you doubt that? You’re making the presumption that consumers are rational, and only buy products that increase happiness. I think people are quite capable of jumping on fads because they think they’re supposed to, and sticking with them even if they’re net effects are negative (increased stress, distraction from more important things, etc).

> Advertising is only a net negative if the quantity of manipulation exceeds that of useful information.

For some definition of “useful”. If it steers you in the Right Direction it’s useful, if not, it’s not.

82

js. 10.13.15 at 11:40 pm

Does this mean you would willingly watch a TV broadcast with the program content removed and only the ads remaining?

Of course not! Though for the most part, I wouldn’t watch the TV show while skipping the ads either, and if you had a set of ads as analogously good as one of the rare TV shows I’d willingly watch, then sure, I might do. The point is, the “can be” in my original claim is crucial—obviously, most advertising is highly annoying and total shit.* In fact this was the point of my question in (2) @48. I still don’t really understand how the theory of influence is supposed to work, or rather, I’m sceptical that it does.

In any case, the more important point is this: if the argument in the OP works, I don’t see how you would prevent it from straightforwardly generalizing to all aspects of marketing: packaging, design, company logos, store signs, etc. Each of these things has opportunity costs associated with it, and each of them can lead desire/loss of utility/feelings of inadequacy, etc. (Maybe they’re all making us dumber too!) That, presumably, is what they’re meant to do, at least on the kind of view you’re forwarding. But in the OP, you seem to be arguing not against marketing in general, but against advertising in particular. And unless I’m radically misunderstanding the argument, I seriously doubt that it can work in that limited way: it either doesn’t show what it’s meant to, or it shows way too much. (But on the other hand, if you’re arguing against marketing per se, it would help if that were more clear—and in that case, also what you include under “marketing”.)

*But then, isn’t this true of all cultural production?

83

engels 10.13.15 at 11:51 pm

Is it a necessary condition of an ad’s influencing a potential consumer of the product that the consumer actually *like* the ad, find something pleasing about it, or at least not actively view it as an annoyance/despise it?

‘No,’ I’m pretty sure is the widely agreed on answer.

84

js. 10.14.15 at 12:38 am

engels @80:

Part of the problem is that this, as so much of the discussion here, assumes the effectiveness of advertising, which I am to some extent doubting. So it’s question begging. The problem is more acute in the context of this discussion because again, if the view is that advertising is particularly baleful, then it must be more effective than other forms of marketing, which I’m seriously inclined to doubt. (And the problem’s made even worse by @83, because now I really don’t understand how the influencing is supposed to happen. It seems like we need a theory of the subconscious or something, because the normal means of influence/creation of desire is blocked off.)

The bigger problem, possibly, is that there’s so much of what we (“we” being any group of humans, really), encounter in life that aims to “bypass critical thought”—from social and cultural influences (esp. traditional ones) to other people to our own fears and desires, which would continue to exist in a world without advertising. And there’s really so little that encourages critical thought. So if advertising “makes us dumber” in this relatively banal sense, I’m willing to concede the point (assuming its effectiveness). But I’m not convinced that a world without advertising is a world in which we’re smarter simply by virtue of there being no advertising.

85

js. 10.14.15 at 12:48 am

Sorry, last comment for a while:

How common is it for Super Bowl ads to command a substantial audience in places like YouTube?

I was actually going to mention Super Bowl ads earlier, but Omega Centauri beat me to it. Usually, the day after the game, blogs/websites, including high-profile ones, will do roundups (this is representative). The embedded videos are generally ones hosted on youtube, so I imagine they get a lot of hits.

And, JQ, ads are generally introduced during the Super Bowl but continue to air on TV (and online) afterwards, though usually in abridged form.

86

Don John 10.14.15 at 1:07 am

Reason, regarding your comment on John #2

Brand advertising is always intended to boost or at least support sales of the branded products, not necessarily directly. Apple and Nike use branding to create a sense of membership: users of their products imagine themselves mixing with exciting people.

None of this would work if the products didn’t.

87

Bruce Wilder 10.14.15 at 1:39 am

js. @ 79, 84: How exactly do ads make people “dumber”? . . . I’m not convinced that a world without advertising is a world in which we’re smarter simply by virtue of there being no advertising.

Opportunity cost, no? The argument would be that advertising, and marketing in general, shapes cultural production, learning and communication in ways that displace alternatives.

Just the fact that broadcast television was so cheap for consumers displaced other activities.

The arguments for banning cigarette advertising and severely limiting related marketing activity, while promoting scary messages about the medical consequences of smoking, would seem to revolve around the substitution of other communication. Are people “smarter” about smoking? Well, fewer people become addicted to smoking.

I could go on and on, but I won’t, because I don’t see how such obvious points could have escaped your notice, and so I feel I do not understand the point of your expressed skepticism.

88

engels 10.14.15 at 1:41 am

now I really don’t understand how the influencing is supposed to happen. It seems like we need a theory of the subconscious or something,

Like I said,. creating positive associations for the product mainly. It’s not rocket science – think Pavlov’s dogs.

The bigger problem, possibly, is that there’s so much of what we (“we” being any group of humans, really), encounter in life that aims to “bypass critical thought”—from social and cultural influences (esp. traditional ones) to other people to our own fears and desires, which would continue to exist in a world without advertising. And there’s really so little that encourages critical thought.

A world without advertising wouldn’t be a perfectly rational world. It would be a world in which a vast source of bullshit, misinformation, unwanted distraction, emotional manipulation, suggestion and other forms of insincere communication motivated by profit were removed from the world of human discourse.

89

John Quiggin 10.14.15 at 1:43 am

@js If advertising is ineffective, we have a really big problem in explaining the continued success (market dominance in most cases, as discussed above) of advertised brands, as against alternatives that sell for less, in part because they don’t bear the cost of advertising.

If advertising is effective, it must be leading us to make choices different from those we would otherwise make. Since TV/radio/Internet advertising is, in general, unwanted (otherwise no need to provide a costly package of content), we don’t actively seek the changes, as we would in the case of useful product information. Whether you choose to call this “making us dumber” is a matter of semantics.

Accepting the “dumber” terminology for a moment, your final para suggests that we are already so “dumb” for social-cultural reasons that ads can’t make things any worse. I guess if I thought that I wouldn’t bother with blogging or commenting.

90

Peter T 10.14.15 at 2:54 am

JQ @89

“we don’t actively seek the changes, as we would in the case of useful product information”. Isn’t the background assumption here the autonomous individual? One where “useful” is restricted to the individual? If “being with the cool crowd” or “displaying status” or even just “enjoying a quiet beer with friends in a congenial atmosphere” are valuable to people, then much advertising is part selling value, part creating it.

91

js. 10.14.15 at 3:49 am

It’s not rocket science – think Pavlov’s dogs.

Yes, and my point is that we’re not that Pavlovian. Simply asserting over and over again that we are isn’t going to convince me. (This isn’t to say that the world around us doesn’t affect us, nor that the mechanisms of marketing, more particularly don’t affect us. But what I’m mostly seeing here is some rather crude psychology that I find unconvincing.)

This goes for JQ @89 too: my point wasn’t that we’re already so dumb—you could run the argument the other way with equal justice. (“We’re too savvy to be taken in by advertising”—except I think that’s just as crude and false as the position being forwarded by most here.)

But ultimately, I still want to know about how this argument applies to other aspects of marketing like, again, packaging, design, logos, etc. All of these also are things that we “don’t actively seek”—they’re basically forced upon us by the owners and designers of commercial products.

92

js. 10.14.15 at 3:58 am

BW @87: Well, ok, but you’re actually extending the argument to marketing beyond advertising. That’s good, and I’m sympathetic, but where does the argument stop, exactly?

Let me put the point rather elliptically. I’m thinking, when you have markets, you have hawking (give or take); when you have “markets”, you have marketing (of which advertising is a proper subset). A rather strong suspicion I have is that if you want to let this sort of argument run, it’s going to reach back all the way to the very existence of “markets” (or markets). If we want to go there, I’m OK with it, but I didn’t think that was quite JQ’s point. (Apologies if this is horribly obscure.)

93

js. 10.14.15 at 4:13 am

Sorry, I’d just like to stress: BW’s comment @87 is so much more radical than anything in the OP, esp. the implied baleful effects of broadcast television itself! (Unless I’m radically misunderstanding either BW or JQ.) If I had been responding to _that_ sort of argument from the beginning, I would probably not having been making the sorts of arguments I have been making in this thread.

94

engels 10.14.15 at 11:20 am

we’re not that Pavlovian. Simply asserting over and over again that we are isn’t going to convince me

I haven’t been asserting it over and over again. You said you didn’t understand howit was possible for people to be influenced non-rationally and I tried to point you in the right direction. If you want evidence humans are receptive to stimulus-response conditioning or to advertising in particular or detailed tgheorirs of the psychological mechanisms involved I can google studies etc but really these aren’t shockingly radical opinions. As John says, given the resources corporate capitalism devotes to advertising it would be quite remarkable if it was as pointless as you seem to think. What is your reason for holding this?

95

Trader Joe 10.14.15 at 12:33 pm

Some of the criticisms of advertising are not giving the consumer nearly enough credit in how buying decisions are actually made. Good advertising provides a reason to consider a product, not the final decision to buy. If opportunity cost is the only embedded difference, it means price is the only arbiter of the customer decision. Few purchases are so clear cut. If Product A costs $9 and Product B costs $10 the customer usually doesn’t readily know whether the difference is solely advertising (as the OP implies) or if there is some qualitative aspect of the materials involved that in fact makes Product B a superior good that fully justifies the additional $1 of price.

Anyone who has ever gone to a hardware store looking for some type of replacement part has probably had this experience. You know you need Part X, and there are two choices a cheaper one and a less expensive one. The cheaper one is almost always unbranded, the more expensive one has a brand (that maybe you know or maybe you don’t) but the packaging is less plain and maybe it has some otherwise useless cue like “improved” or “long-lasting” which is suggestive of quality.

A fairly classic example is salt. It’s essentially a chemical and undifferentiated, yet every day someone will chose to buy Morton’s “when it rains it pours” for $0.59 a container rather than generic store brand for $0.49. At the chemical level, the buyer gets nothing for the extra $0.10. At the emotional level they are buying confidence that the product is of a certain quality, maybe the psychic income that others know they buy branded goods, maybe it is just a wee bit better. Obviously not all agree, but presuming that the buyer gains “nothing” seems a bit harsh when few purchases are as straight forward as salt.

Another classic is wine. Two bottles of merlot sit in front of you, and you’ve never had either one. One costs $10 the other costs $20. At least part of the $20 bottle is that its – say – Robert Mondavi a well known brand with some track record of quality. How much of the $10 difference is just opportunity cost simply because of advertising and branding and how much is the price a signal of quality and the brand (and advertising) an affirmation of quality. There are ample studies that show people prefer a more expensive bottle when they know the price and may prefer the less expensive when they don’t – but before the fact of tasting, a buyer has to rely on something and advertising and branding is what helps make that decision.

I think these examples are contra to JQs assertion that “The net effect of advertising is almost certainly to reduce our satisfaction with the things we buy, because most of the ads we see are designed to make us switch to something else.”

Ads may or may not make us ‘dumber’ (I think plenty of ads can be usefully informative, albeit not usually on a stand alone basis), but they may make us happier with decisions in absence of data.

96

reason 10.14.15 at 1:24 pm

Don John @86
“None of this would work if the products didn’t.”

Just working is lowering the bar considerably, isn’t it.

97

reason 10.14.15 at 1:26 pm

js.
“Yes, and my point is that we’re not that Pavlovian.”
But of course we are. This can’t possibly be in dispute. Humans are trainable.

98

Layman 10.14.15 at 1:38 pm

“Two bottles of merlot sit in front of you, and you’ve never had either one. One costs $10 the other costs $20. At least part of the $20 bottle is that its – say – Robert Mondavi a well known brand with some track record of quality.”

Please allow me to choose the next bottle.

99

engels 10.14.15 at 1:47 pm

I can google studies

This one is pretty awesome
https://en.wikipedia.org/wiki/Little_Albert_experiment

100

Lynne 10.14.15 at 2:16 pm

JQ: ” But mostly, they can only persuade people to watch the ads by packaging with something that’s actually appealing.”

Advertisers on TV only get people to watch ads by tricking them, IMO, by making them resemble the program they are embedded in, or some such thing. Now that people can record programs before watching (it’s been years since I’ve watched anything without recording it first) you can just speed through the ads. Sometimes you get hooked because you think the show has started again. Another way to trick people into seeing your ad is by product placement. It’s all, to use js’s term, really baleful!

(js, you don’t watch tv at all? Wow.)

101

Lynne 10.14.15 at 2:23 pm

Also, js, my understanding is that advertising works by making us familiar with brands, so it doesn’t matter how irritating a commercial is, if it gets the brand name into our brains.

102

Layman 10.14.15 at 2:32 pm

Lynne @ 101, this is correct – brand recognition & consideration are everything, thus the trend toward shorter and shorter ad spots, run more frequently. The ads can’t tell you anything about the product, it’s just about repeating the brand and logo as frequently as possible.

Of course, once you’ve achieved 90+ brand recognition and are in your target customers’ consideration set, then what? Watching marketing heads and their creative-agency-of-the-moment finesse that situation for more marketing budget was first-class entertainment. I’d have watched it even with commercials.

103

Bloix 10.14.15 at 2:39 pm

“Morton’s “when it rains it pours””

This is an interesting example. When the slogan was written in 1911 it meant something. Table salt tended to cake in humid weather. Morton’s added magnesium carbonate to keep its salt free-flowing, so it was a better product. Thus the slogan, a clever bit of oxymoronic punning: even when it’s raining, our brand of salt pours freely. The advertising conveyed accurate and useful information in a memorable way.

Nowadays all table salt has anti-caking agents (usually calcium silicate), and with central heat and air it’s unusual for homes to become humid enough to cause salt to cake. Once when I was refilling our salt shakers with Morton’s salt, I asked my adult son if he knew what the slogan meant. He had no idea.

I suspect that most people under 50 don’t have a clue what “when it rains it pours” means, and today Morton’s is no better than the store brand. But in my cupboard, we have Morton’s! Maybe because it’s the salt I grew up with and the price differential isn’t enough to move me off my nostalgic attachment to it. I like the little girl with the salt carton.

104

Sandwichman 10.14.15 at 7:23 pm

Toward the end of an August 24 New Yorker article on Joan Didion, Louis Menard writes two paragraphs about her 1988 coverage of the Dukakis campaign. The first paragraph recalls how Dukakis tried to close the “regular guy” gap with a “playing catch” photo-op stunt at every campaign stop. The next paragraph continues:

She thinks that this is how what she calls “the permanent political class” — the press, the talk-show experts, the campaign strategists, the political parties, even the candidates themselves — has rigged the game. Everyone knows that what you see in politics is fake or confected, but everyone’s O.K. with that, because it’s all been focus-grouped.

The Sunday morning talk shows (etcetera) are the supposed “content” brought to you by the ads. Everyone knows that every thing you see on TV and in the press is fake. It’s not only that the free lunch is not really free. It’s not even lunch.

That’s how it goes. Everybody knows.

https://youtu.be/Lin-a2lTelg

105

Nine 10.15.15 at 12:22 am

Kiwanda@53 – “Amazon’s “people who bought X also bought Y” is advertising, but in my experience is often quite helpful.”

It is more than “quite helpful” – in certain domains & with certain input data it is bang-0n accurate – but is it “advertising” ? Amazon’s recommender modules would probably function equally well if applied to a library catalog (AFAIK, there’s nothing unique there, it’s all textbook algorithms all the way down) – would the library then be “advertising” its wares ? Advertising , Madmen style, is when an attractive pitchperson talks up the quality of the product and makes claims on behalf of the “brand”. Is it really “advertising” if a product or service does what it is supposed to do anyway or if it does it better than the competition ? For instance, Google is threatened because (iirc) more people now rely on Amazon for product search since the results are more precise. I suppose this qualifies as a certain kind of brand building in the same way that superior fuel efficiency “advertises” the quality of a car. But it’s not advertising as commonly understood.

106

js. 10.15.15 at 1:28 am

Some quick responses, and then I’m done. (I hope!)

1. If advertising works simply by creating brand awareness and recognition (if they’re “everything”), then advertising doesn’t work by creating desire/loss of utility/feelings of inadequacy, etc. These are totally different mechanisms. So, which is it? For what it’s worth, I think the brand awareness idea is quite plausible, but again, that wasn’t JQ’s argument, and it wasn’t what I was responding to. (Also, the brand awareness view makes the “advertising makes us dumber” view more difficult to hold, I’d think.)

2. Look, let’s just say I grant that we’re Pavlovian, for the sake of argument. The argument, as applied to annoying or otherwise displeasing ads, still doesn’t make sense to me. Ex hypothesi, my reaction to an ad that is annoying or otherwise displeasing is negative. So where’s the positive association coming from? (I mean, if some store’s soundtrack exactly replicates the sound of my alarm clock, the jolt of recognition doesn’t make want to spend more time browsing the store’s products; it makes me want to run the fuck away!)

3. And for the last time, here is what is to me the actually important point. All of these arguments (including brand awareness, Pavlovian associations, etc.) apply not just to advertising strictly speaking, but to marketing as a whole. As I’ve mentioned above, this includes things like the design and packaging of products, company logos, stores signs, store and website design, window displays, etc. Do the people arguing against advertising want to extend their argument to marketing per se? If yes, what is the alternative you’re imagining? Seriously, what is the alternative? In this ad-free/marketing-free world, do we still have markets in anything like the modern sense? Do we have commerce? Do we have private ownership of the means of the means of production?

To repeat myself once again, advertising is an easy target (obviously!) But if we’re going to have capitalism anyway, advertising on balance is a plus point (it still seems to me).

107

js. 10.15.15 at 3:38 am

Having massively derailed this thread (sorry, JQ!), and in light of the rewritten title, I suppose I should say the following: I quite agree with JQ that a licensing fee model is superior to an advertising/sponsorship-based one. But I would base that argument not on the effect of advertising on (potential) consumers, but on possible and sometimes real effects of sponsorship on the content of what’s being sponsored, whether that’s editorial content or otherwise. _That_, to me at least, is the “lunch” that’s being compromised (at least potentially).

108

engels 10.15.15 at 10:19 am

let’s just say I grant that we’re Pavlovian, for the sake of argument. The argument, as applied to annoying or otherwise displeasing ads, still doesn’t make sense to me

There are two points being made to you by different people. Annoying ads aren’t designed to associate positive ideas with the brand, just to generate brand recognition, so it’s in consumer’s ‘consideration set’ when purchasing (but this also relies on conditioning).

109

engels 10.15.15 at 10:30 am

Seriously, what is the alternative? In this ad-free/marketing-free world, do we still have markets in anything like the modern sense? Do we have commerce? Do we have private ownership of the means of the means of production?

No, no and no’s my preference but you don’t have share it to want to scale back dominance of advertising in US and elsewhere today

110

Lynne 10.15.15 at 12:28 pm

js: “I quite agree with JQ that a licensing fee model is superior to an advertising/sponsorship-based one. But I would base that argument not on the effect of advertising on (potential) consumers, but on possible and sometimes real effects of sponsorship on the content of what’s being sponsored, whether that’s editorial content or otherwise.”

I agree.

Engels @ 109. Exactly.

There are already limits on advertising: in Canada a beer commercial can’t show the beer actually being drunk. There are no advertisements for cigarettes on TV, and the packaging includes grisly pictures of lung damage. There could and should be much more stringent limits on advertising because as it is we are turned from citizens into consumers almost everywhere we go.

111

Trader Joe 10.15.15 at 1:26 pm

“There could and should be much more stringent limits on advertising because as it is we are turned from citizens into consumers almost everywhere we go.”

This is a key point. At least for TV and Radio advertisements, the advertiser is just taking a stab, based usually on content demographics, about what advertising might be effective – beer ads during sports, Cadillac ads during golf etc.

Mobile and internet ads are 10x more informed and are massively targeted directly towards your interests, browsing history etc. The advertisers obviously see this as a positive, as it makes it much more likely the ads might get click through and have the ad actually drive sales – few actual consumers seem to see it this way. Most everyone has had the experience of having casually (or maybe not so casually) searched something like the French Revolution, and then get bombarded with ads for French vacations and Paris hotel deals. Wouldn’t mind seeing this sort of thing be a bit more controlled.

112

JanieM 10.15.15 at 2:39 pm

I would add to Lynne’s list in 110 the banning of billboards. I live in one of the four U.S. states where they are illegal except within a certain short distance of the business being advertised, and lo and behold, we get to enjoy the sight of our beautiful landscape without the polluting interference of commercial messages.

113

js. 10.16.15 at 4:16 am

Yeah, I’m actually totally okay with greater restrictions on advertising. After all, most good things in life are restricted! (I kid, I kid.) I actually mentioned restricting advertising aimed at kids in my first comment, I think. Anyway, sorry for the derail, but it’s been fun!

114

js. 10.16.15 at 4:25 am

Lynne @100:

I’d missed your parenthetical comment, but yeah, I don’t own a TV. I’ve watched The Wire and Breaking Bad and a couple of other celebrated shows. And once in a while, I’ll go to a bar to watch a sporting event, but basically yeah, I don’t really watch TV. It’s the only way I have time to comment on CT!

115

engels 10.16.15 at 6:38 am

116

engels 10.16.15 at 7:25 am

Full disclosure (as the kids say): I don’t have a TV

117

Lynne 10.16.15 at 1:19 pm

If you are interested in celebrated shows, I just have to mention these stellar Canadian series that you may not have heard of (at the risk of cutting into your CT-commenting time). All three series are written by Chris Haddock and produced by CBC (Canada’s national broadcaster). There’s DaVinci’s Inquest, about Dominic DaVinci, who is a coroner in Vancouver. Gets into all sorts of topical issues. It was followed by DaVinci’s City Hall, ditto. And then there was Intelligence, which is a searing look at US-Canada relations from a POV you won’t see Stateside. Rumour has it that Intelligence was cancelled because the US govt leaned on the Canadian govt. At any rate, Haddock was so pissed when it was cancelled that he went and wrote for Boardwalk Empire for awhile.

One of the things I loved about all these shows, especially the DaVinci ones with Nicholas Campbell in the lead role, is the pure pleasure of hearing my own accent on TV. :)

118

Sandwichman 10.16.15 at 3:05 pm

I don’t watch TV either but Chris Haddock is an old friend.

119

Lynne 10.16.15 at 4:09 pm

Sandwichman, if having Chris Haddock as a friend hasn’t turned you into a TV watcher, nothing will! I’m really looking forward to his newest. I’ve taped the first episode but haven’t watched it yet.

120

js. 10.17.15 at 12:06 am

Lynne — Thanks! I’ll try to find one of them to stream.

engels — “constantly” = once? In any case, it’s not a point of pride, I think about buying one every so often and always end up finding something else to spend the money on. But someday!

121

engels 10.17.15 at 10:06 am

Always been an admirer of Dan Aykroyd’s work

Comments on this entry are closed.