Wednesday, March 20, 2013

Critique of advertising

by Carl Stoll

Advertising is a stream of information directed by the seller of a good or service at prospective buyers of same, in order to persuade them to buy the product in question. The seller desires to sell. Consequently she is likely to conceal information that reduces  likelihood of a sale and invent false information that augments such likelihood. Consequently advertising is inherently faulty information. It tends to misinform consumers about the nature of the good in question. Thus if they buy the good they are less satisfied than they expected.

Furthermore advertising does not entertain the possibility that the consumer’s best choice is to buy nothing. If you compare ads for competing products of a certain type (say: shampoos), you try to decide which shampoo is best, in order to buy it. But perhaps you shouldn't buy any shampoo because there is some alternative.

Advertising is full of lies, either explicit or implicit. Accordingly in a society where advertising plays an important role, a certain cynicism may arise. Distrust is encouraged within the population, the habit of deceit becomes respectable. This causes additional transaction costs.

Finally, the virtue of a free market is presumably that goods and services compete for the consumer’s money, and that good prevails that supplies the greatest satisfaction. But advertising falsifies that choice and makes the consumer's decision be based not on the quality of the product but on irrelevant aspects introduced by advertising. Insofar, advertising reduces consumer’s surplus. Instead of spending money on trying to make a good product, manufacturers compete by spending more on advertising. Thus the quality of the product suffers.

How should the consumer be informed of which products are available? Nowadays, with the internet there should be no difficulty in having an organization like Consumer Reports being commissioned to inform consumers. It could be financed with a sales tax, the amount of which would be much less than what the consumer must currently pay for advertising.

There is a variant on this model: advertising continues. However there is only one advertising agency, which would be impartial like Consumer Reports. If the car manufacturers want to sell more cars, they pay the agency to design and place advertising. However the advertising is completely truthful and conceals nothing about the product being advertised. It does not use language and images suggestively to influence the consumer subconsciously. It is pleasant to look at or listen to but not particularly eye-catching. It does not intrude on the consumer’s consciousness. It downplays the brand name and stresses the qualities of the product and its price. The brand name is never shown alone without the product. It also advises the consumer of alternatives to the product, including the possibility of not buying this kind of product at all. 

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