Did Gary Becker prove that advertising is informative?

So claims a NYT obituary for John Kenneth GalbraithCrookedTimber and Brad DeLong question whether such models should be called "proofs."  Fair enough, but neither does the obituary correctly represent Becker’s theory of advertising.  As I understand Becker’s work (with Kevin Murphy) on the topic, individuals consume "social images" or "self-images."  Having Nike shoes gives you the "benefits of being cool" if a) you actually have Nikes, and b) the ad links Nikes to a cool image for your relevant peer group.  The standard economic theory of complements then applies for analyzing ads.  Under some conditions, advertising can be a "bad" for consumers, not a "good," and advertisers will pay consumers to watch ads.  Furthermore ads will present images and cultural linkages, rather than substantive information in the traditional sense.  This generates some Galbraithian results, but without requiring that consumers are "tricked" or even "persuaded" into a particular point of view.   This is not a proof; I think of it as an existence theorem that advertising can make corporate sense, and sometimes be socially welfare-improving, yet without being very informative.

Keep in mind that Becker titled his 1998 book Accounting for Tastes, a concession to the Galbraithian way of thinking.

Comments

I know the man died, so we should be nice to him, but that is no excuse for leftist to get away with their usual nonsence.

1. What empirical proof did Galbraight exactly give for his advertisement arguments? Or any of his arguments? It is mostly a question of logical reasoning, and Becker-Murphy certainly explain firm and induvidual behaviour better than Galbraight. Furthermore intro-spection alone lends support to the Becker-model (I certainly enjoy certain products more because of marketing, for example coke and popcorn toghether)

2. The core of Beckers argument is that advertisement for a good is a complement in it’s consumption. (This can but does not have to be based on a social equlibrium argument, I can start liking Coka cola more because I see ads that make me associate it with pleasant experiences.) The consumption-complementary view has plenty of empirical support.

3. There is even neurological evidence that tends to support Beckers view of advertising

http://www.eurekalert.org/pub_releases/2004-10/cp-cvp101204.php

(of course don’t mention this to Brad Delong, he tends to erase scintific arguments related with biologi and genetics on his blog).

If leftwingers belive adversitins is so powerfull let’t make a deal, give up legislagion on personal life and interference in the economy, just put a few billion a year advertising femenism and whatever else behaviour you like. It should work like a charm†¦

Didn't Yale Brozen and Julian Simon emphasize the informational effectiveness of advertising?

Here's a real wold example. I spent over $6,000, inclusing almost three hospital visits, since last November for a "respiratory illness" that wouln't quit - yet doctors could not help me out of a disabling period of the last three months. Until an old and in fact my cheapest doc - my allergist - suggested GERD (or acid reflux disease) could be the problem (accounting for accute and chronic chest pain, recurrent GI distress, and horrible headaches). He proved correct.

So much for the theory that "acid reflux" is a gratuitous cortporate invention (ala JKG's friends)! In my case, however, changing medical practices appear to blame. Less than five years ago, doctors would have kept prescribing anti-biotics again and again instead of just three times. Now that standard practice eliminates the promiscuous deployment of anti-biotics, I was left to suffer or pay thousands more ("another PET scan! it could be a lung clot!"), when in reality $10 in OTC meds would solve it.

Capitalist exploiters are way ahead of most "medical professionals." I pray that more exploitation continues.

I would say that current behavioral and experimental economics
favors the view of Galbraith more than of Becker-Murphy-Stigler,
in particular with regard to the stability of preferences. The
Chicago group argues that people know what their preferences are
and act on them. At most advertising simply reveals to them
aspects of their preferences they did not realize or understand.

Modern experimental economics suggests that people do not have
well formed preferences, are subject to all kinds of framing
effects and so forth and what not. This puts the ball rather
back much more into Galbraith's court. He is not so out of
date as the NY Times idiotic obit claimed.

Teller,

Um, I did not say that advertising is all powerful.
I would also say that you are way overselling what we
know from neuroeconomics. I would also suggest that you
tone down your personal insults. Some who are discussing
with you have read and know a lot more than you think
they do. I am fully aware of all the aspects of the
Becker et al theory that you mention. I would also
suggest that your (and Levitt's) claim that Becker
micro has been overwhelmingly proven is, well, overwhemingly
exaggerated.

Barkley:

Thank your for the summary, I do not accept much of what you write, but there is not much to say since you don’t cite any evidence, just your personal opinion. Let me just make three points:

1. Very little of government is involved with “public goods†. It is publicly finances private goods, and redistribution.

2. Again I repeat, the core of Becker-Murphy theory is very simple to verify, do you get more utility from products that are marketed to you? I am quite certain most people can readily understand this, by just thinking a moment. The car you drive often is a reflection of your personality, and it’s brand is produced by marketing.

The fact that consumers have access to

3. You don’t want me to be insulting, so I will say this in the softest way I can: Happiness “research† is the worst junk trend in economics today. No one can take this stuff seriously, you are not measuring anything close to happiness by asking people questions in a survery.

But hey I would love it if the happiness people would start taking this stuff seriously. The correlation between self-reported happiness/life satisfaction and income inequality is strongly positive. After all, Mexico and Porto Rico are the two most “happy† nations on earth (I am sure those who think this stuff is science have many excellent theories why).

I don’t make H-bombs (yet†¦) But I am glad Edward Teller did, against the will of the left-wing scientific community, so that Galbraith and Samuelson could see with their own eyes the fall of the Soviet union and it’s marvelous economy.

Teller,

Yeah, mostly just my opinions.

1. Of course this would reinforce Galbraith's public goods argument,
although I think we have less pollution and better roads than we did
in 1958 when he published The Affluent Society.

2. There are substantial portions of the Becker-Murphy and distinct
Stigler arguments that are reasonable. If someone cares about an image
or a lifestyle, then advertising that "informs" them that buying a given
product will help them achieve that may increase their utility. The old
lit on "informative advertising" tended to focus on advertising about prices
or product quality. That part of product quality is all its complementarities
is not a big deal.

I also accept parts of their model, also used in their "rational addiction"
model, that say we learn to like certain things by consuming them. My
current preference for snails, black fish eggs, and bloated duck liver was
due to learning, not my initial reactions to those items.

The problem really does get back to the fact that "utility" is not a uni
dimensional or stable or well defined concept (for stuff on experienced vs
remembered utilty, see the lead article by Krueger and Kahnemann in the latest
issue of the Journal of Economic Perspectives). So, someone may get a buzz
when they buy a pair of shoes they saw Carrie Bradshaw buy on "Sex and the
City." But, they may find the buzz is gone after wearing them once. They
may have becomne a "rational addict." They go back to buy more to get that
buzz again. Then they wake up and discover that they do not have enough
money to pay the rent next month.

The terms "buyer regret" and "hedonic treadmill" and "conspicuous consumption"
are not mirage myths (the last one from Galbraith's original mentor, Veblen).

3. To both Teller and dsquared. Well, one can dispute the happiness lit
all one wants, although I find it weird for someone to defend a "brain map"
study as "proving" what "utility" is but then dismiss what people say they
feel.

Personally I take most seriously panel studies that follow the same people
over time. I take least seriously these cross-country studies at a point in
time. In between are time series of a single country.

I am not aware of any regression that shows income inequality correlated
with happiness. Both of you interestingly have provided the offsetting
examples. So, roughly, the countries that come out happier than the US
on these surveys are the Nordic countries (all of them) and some Caribbean
and Central American countries. So, the former have lots of equality but
also have high suicide, divorce, and alcoholism rates (and high average
incomes). The latter have lots of inequality (and low average incomes)
but low suicide, alcoholism, and divorce rates. So what?

Panels in Russia so that people got a whole lot less happy on average
after the Soviet Union fell. They are picking up again, but have a long
way to go (and most peoples' real incomes collapsed also).

In the US, we have seen savings rates and reported happiness fall since
1956 while incomes, advertising, conspicuous consumption, and income
inequality have all risen. Hedonic treadmill anyone? Buyer regret
anyone? Robert Frank wrote about this in Luxury Fever. I don't think
Galbraith is looking too bad on his advertising arguments, and, again,
the boys in Chicago have certainly not "disproven" his arguments ,not
by several country miles.

Well, then, why do they match up so well with suicide rates, alcoholism, divorce and other indicators that give tangible, measurable outcomes out in the left tail of the distribution of happiness?

They don't. That's why one sees countries that are replete with murder, poverty, and squalor score high in happiness studies. There are people who claim that more terrorism means more happiness, and like you, they claimed that reams of empirical data show this to be true.

There is actually empirical evidence on how well questionnaires do in measuring tangible concomitants of happiness and the answer is "surprisngly well".

False.

They also said "Whether there is excessive or too little advertising depends on several variables: the effects on consumer utility, the degree of competition in the market for advertised goods, the induced changes in prices and outputs of advertised goods, and whether advertising is sold to consumers."
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