What the entire critique of advertising misses is the crucial and even decisive economic issue that is solved by the principle of marketing. How does a product or a service go from being a good idea or even a physical possibility to being available for people and available for consumption? Here is the major issue that has never been solved by any other system but capitalism. And capitalism solves it in a way that is wealth-generating and leads to constant improvements. FULL ARTICLE
Source link: http://blog.mises.org/6150/the-economics-of-here-to-there/
The Economics of Here to There
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***advertising is repellent to people of delicate feeling***
Not the choice of words I’d have used for myself, but I guess it fits.
I hate commercials. Insipid interruptions to what I am trying to concentrate on, a TV show or sporting event. But that’s the freight charge paid for the entertainment. Or was.
I have bought a mountain of DVD’s of my favorite shows and movies, and what time I have to devote to viewing, it is mostly off of these discs. What little is left on commercial television (football, baseball) I record on a DVR or watch on my media center computer and I can fast forward through the commercials. I have a whole library of music on my ipod and don’t need radio and it’s even more annoying commercials.
So perhaps being of slightly better means, I can use technology to bypass most commercials. The question I have is what the future going to bring? Is this technology going to become available easily for most everyone? Or are we going to have two classes, those who can afford to avoid commercials and those who can’t? I can only assume Mother Government won’t allow for such a economic brightline to exist.
A good posting.
Someone should not have to like a thing (or pretend to like it) in order to defend the freedom of others to do it.
Of course a company should be able to boast of the benefits of its products – and if a rival company wishes to expose these claimed benefits as false (by pointing to the research of some organization that depends on its reputation for honesty in order to exist)they should be free to that to.
And yes the style of ads will often be vulgar – if a lot of people like vulgar ads.
What people who complain about the taste of ads are really complaining about is the taste of the public (but they are too cowardly to say so) – this is correctly pointed out by Mises and yourself.
The private sale of guns and drugs is booming in this part of the country without T. V. advertising. The airways belong to the people and as such I would like it to be used for intellectual developement such as mathematics, physics, chess openings, honest debates and so forth. Who can be against this?
The best point in the essay, I think, is that nobody would spend tons of money on promotion and advertising if they didn’t have to.
They’re not trying to be annoying, they’re trying to sell something. To say that they shouldn’t be allowed to advertise is no different than saying how any other part of their business should be run.
Hey! I _like_ Gregorian Chant!
I also enjoy inventive and imaginative commercials. Gregorian Chant reminds me of the Xerox commercials that had a monk take his copywork to a place with Xerox colour copiers.
To someone Catholic, it may very well have been tasteless and crass. To me, it was a wonderful example of seeing connections between things that people hadn’t associated together before.
Seeing the show “Heros”, I am reminded that the vast sums spent on crass advertising can, indeed, enable the production of things more suited to those of “delicate feeling”. Finally, a show that is good enough to draw me back to commercial TV.
And not all commercial advertising is tasteless and crass. Some commercials are very enjoyable and funny in their own right, sometimes moreso than the program they’re being advertised on.
All good points, but there’s another interesting aspect of advertising, which is that it frequently results in a reduction of unit total costs of producing the item in question, and hence, at least potentially, a reduction in the price at which the manufacturer is willing to sell it.
To the extent that the costs of manufacture are a mixture of fixed costs (those that do not change with the volume of items produced) and variable costs (those that do vary with volume produced), and to a greater extent to the degree to which fixed costs are a larger component of the total cost, the greater the volume sold, the lower the unit cost. Therefore, if sales can be increased by advertising, the unit total cost will fall. Nothing sexy here–just basic arithmetic.
This is oversimplified, of course, but the point is that the consumer can benefit in dollars and cents terms. Then add in the fact that it’s all voluntary…Need we say more?
I have a strong suspicion that the copyright system combined with the FCC regulation of spectrum distorts the market in a way that wastes spectrum and promotes hype over substance and locks out small time participants. Without these it would probably be a lot more like a combination of PBS, and node to node spectrum communication like the internet.
Great article. I remember well the Mises quote from Human Action when I read the book last year. I admire Mises’ sublime humility; his ability to expose the falsity of snobism even when his own intellect would earn him status exceeding any mere mortal.
I agree with the point that you are trying to put across – the cost of promoting/marketig a product is often bigger than the cost of actually producing it – but I don’t consider blogging as a purely commercial activity that actually produces a product. I blog too, but I don’t intend to sell anything for $. I like the format of blogging because it offers functions that traditional journalling in a notebook or in a word document doesn’t have. So, I don’t think it’s a good example used to illustrate your point. It seems to me that there is no consensus on whether blogging is considered a “business activity.”
“Business propaganda must be obtrusive and blatant. It is its aim to attract the attention of slow people. . . .”
“Slow” means what to Mises? Stupid? Anyone else notice the most rediculous offers are made on “conservate talk radio” which claims to have the smartest listeners in the world. Compare commercials on talk radio with commercials on classical music stations and the difference is obvius.
The most shocking ads I find are always government ads. Advertisement for public regulation like the signs they put on cigarettes for instance: SMOKE KILLS! Soon they’ll force the tobacco companies to even post snapshots of sick lung fragments in full color on the European cigarette packs in fact (no joke). It’s a disgrace…
and an indication of the most repressive political power… displaying its subconscious love for crushing the addicted citizen minority. The authors of those concepts should be jailed for doing that I think.
This article though tends to suggest that shocking ads are the most effective.
On the contrary, you will often see that decent ads tend to please both, the producers who like to pay for something they can relate to and the customers who feel less silly buying the product very often.
Some very funny ads are even poor sellers. Some very shocking ads leave the public … just too shocked to buy too.
Moreover, creative minds in agencies sometimes tend to confuse their ads with an art work, with the sole purpose that it has to look “originalâ€. This however conflicts with the real purpose of the job… which is ultimately to communicate over the accessibility of a product.
On the other hand, think about perfume advertisement: no content, just aesthetics and a name… yet probably generating the greatest financial returns of the design industry at all.
Back to the blogging example, it’s worth mentioning Ford anyway (the car maker) saying: “One half of my advertisement budget was wasted money! The trouble is I’m still not sure which half that was.â€
Did I just write “jailedâ€? That doesn’t sound too libertarian… I meant expelled.
Frank, you are on the money.
I find it funny that people complain about the high cost of drugs, fuel, medical equipment, etc. hate the billions spent on advertising.
But, these suppliers and their billions spent on advertising attract more customers than they would have otherwise. Thus the fixed cost gets spread over more buyers. If the item is a drug then the fixed cost is hundreds of millions.
I spent 20 years in the sale and production of advertising for business-to-business and commercial/industrial clients. The purpose of advertising is to increase market share, not to lower unit production cost. This is, however, a by-product of increasing market share, but this argument falls short in the selling of services,
eg carpet cleaning. After giving considerable thought to the entire concept, I now believe that most consumer advertising has the overall effect of persuading people to buy products they really don’t need and can’t afford. Why do you think that most Americans have mounded up such vast personal debt? I’d like to see classes (at the high school level) that instruct students about the appeals designed into advertising and how to resist them. Yeah…fat chance!
Eric, without the easy, government-issued credit, most Americans would’t be able to buy what’s advertised. As it is, though, the allure of advertising and easy money are a match made in hell.
Which is precisely what we are going to pay, sooner or later.
This essay is very well done. Kudos.
One point that does seem to be missing is who controls the companies that are advertising, and who controls the companies that are airing them. Our worries about “net neutrality” stem from what happened to our media firms. It falls into a few hands, and then we’re stuck. Independent companies then are denied access because of the expense, while the “controlled” companies are simply passing dollars from one hand to the other. The same with our healthcare. I have tried to expose this control at the http://greatreddragon.com website. Only the serious need bother, as it’s not entertainment.
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