Advertising, Part II

Dear Walter,

As always I admire your writings. I just saw this one on LRC about ads “conditioning” people to buy a product: https://www.lewrockwell.com/lrc-blog/is-laissez-faire-capitalism-evil-since-firms-condition-customers-to-buy-their-goods-no/

This reminds me of a conversation I had with Murray Rothbard many, many years ago on the subject.  He told me that there are three ways to view ads.

1: It “forces” people to buy something (Socialist view)

2: It “conditions” people to buy a product

3: It makes people aware of the option of the product (aka it tells them something they were not aware of).  (Austrian view)

2 and 3 are not completely opposite or exclusive of each other. However, I agree with Rothbard that 3 is more correct. Let me give an example: I drive down the highway and I see a Billboard sign saying “Does advertising work? It just did” … Well no. All it did was showing me an option to buy a billboard. It doesn’t mean I will.  Likewise with any other product they would put on the billboard. Commercials per se do not increase sales IMHO. Commercials as information on products might help customers to buy something they were not aware of in terms of brand. Like I might buy Gilette instead of BiC. I was already in the market for a shaver though. I just didn’t know about Gilette.

I hope I added a bit. Of course I’m aware you already knew this but the person asking you didn’t know ;o)

Thanks B

Dear B: Thanks for your kind words. Here’s a bibliography of Austrian, and some mainstream, views on advertising:

Descriptive:

Becker, 1990; Telser, 1966.

Becker, Gary S. 1990. “A simple theory of advertising as a good.” Chicago: Center for the Study of the Economy and the State, University of Chicago

Telser, Lester G. 1966. “Supply and Demand for Advertising Messages,” American Economic Review, Vol. 56, May.

Positive:

Benham, 1972; Block, 1976, 1979, 1997, 2003; Block, Barnett and Wood, 2002; Coase, 1977; Dyke, 2010; Ekelund and Sauman, 1988; Hayek, 1967; Kirzner, 1973; Ogilvy, 1985; Rothbard, 1978, 1993, 839-850;

Benham, Lee. 1972. “The Effect of Advertising on the Price of Eyeglasses,” 15 Journal of Law and Economics, October

Block, Walter E. 1976. “The Advertiser as Hero.” Defending the Undefendable, New York: Fox and Wilkes, pp.  68-79

Block, Walter E. 1979. “Billboards.” The Libertarian Forum. Vol. 12, No. 6, November-December, p. 8; http://www.mises.org/journals/lf/1979/1979_11-12.pdfhttp://64.233.167.104/u/Mises?q=cache:gFT18_ZusWoJ:www.mises.org/journals/lf/1979/1979_11-12.pdf+two+teeth+for+a+tooth&hl=en&ie=UTF-8

Block, Walter E. 1997. “Tobacco Advertising,” International Journal of Value Based Management, Vol. 10, No. 3, May, pp. 221-235.

Block, Walter E. 2003.  “Coordination Economies, Advertising and Search Behavior in Retail Markets by Bagwell and Ramey: A Comment,” Cross Cultural Management, Vol. 10, No. 1, pp. 80-86
Block, Walter E. William Barnett II and Stuart Wood. 2002. “Austrian Economics, Neoclassical Economics, Marketing and Finance,” Quarterly Journal of Austrian Economics, Summer, Vol. V, No. 2, pp. 51-66; http://www.mises.org/journals/qjae/pdf/qjae5_2_4.pdf

Coase, Ronald H. 1977. “Advertising in Free Speech,” Journal of Legal Studies, 6:1-34

Dyke, Jeremiah. 2010. “The Supposed Sham of Advertising” April 2; http://mises.org/daily/4207

Ekelund, Robert B. Jr., and David S. Sauman. 1988.  Advertising and the Market Process, San Francisco: Pacific Research Institute

Hayek, Friedrich A. 1967. “The Non Sequitur of the ‘Dependence Effect,'” in Studies in Philosophy, Politics and Economics, New York, Simon and Schuster

Kirzner, Israel M. 1973. Competition and Entrepreneurship, Chicago: University of Chicago Press

Ogilvy, David. 1985. Ogilvy on Advertising. New York: Vintage Books.

Reisman, George. 2006. “Galbraith’s Neo-Feudalism”

http://www.mises.org/web/2793

Rothbard, Murray N. 1978. “The Tarring and Feathering of John Kenneth Galbraith.”  The Mercury, January, pp. 25‑32.

Rothbard, Murray N. (1993 [1962]).  Man, Economy, and State, 2 vols., Auburn, AL: Ludwig von Mises Institute; http://www.mises.org/rothbard/mespm.pdf

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5:49 pm on March 7, 2019