Issues in Advertising: The Economics of Persuasion

By David G. Tuerck | Go to book overview

ADVERTISING AND
LEGAL THEORY

Ralph K. Winter, Jr.


Advertising and Its Critics

Integral to many critiques of the private sector and particularly of American business are allegations that advertising inflicts injuries on consumers and that its overall role is harmful. Such charges are generally of three kinds.

The first allegation plays on what an American Bar Association study of the Federal Trade Commission called "a general conviction that marketing frauds against consumers are widespread in this country and constitute a problem of major national concern."1 Central to this charge is the view that advertising is by nature peculiarly useful if not essential to carrying out frauds, and is thus a prime source of consumer deception.

A second allegation is that advertising is a device by which "artificial" tastes are created. Consumers, it is argued, would be better off employing their income according to their own preferences, and would enjoy more leisure once released from the pressure of having to earn and buy more than they need. Professor John Kenneth Galbraith has stated that "advertising and salesmanship" are simply "the management of consumer demand" and are "vital for planning in the industrial system."2 His point is that, without advertising, persons would find a terminal satisfactory income and not continue on the treadmill of earning more and more income in order to purchase more and more presumably superfluous goods. He thus argues that the link between production and consumer desires is almost the opposite of that described in classical economics. Instead of production following consumer wants, the producer must create the want to justify the production. Galbraith argues:

____________________
1
Report of the American Bar Association Committee to Study the Federal Trade Commission, 1969, p. 36.
2
John K. Galbraith, The New Industrial State ( New York: Signet, 1967), p. 281.

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Issues in Advertising: The Economics of Persuasion
Table of contents

Table of contents

  • Title Page iii
  • Major Contributors v
  • Contents ix
  • Introduction 1
  • Acknowledgments 11
  • Part One Issues in Regulation 13
  • Advertising and Legal Theory 15
  • Advertising Regulation and the Consumer Movement 27
  • Commentaries 45
  • Part Two Advertising and the Firm 69
  • Towards a Theory of the Economics of Advertising 71
  • Introduction 71
  • Optimal Advertising: An Intra-Industry Approach 91
  • Conclusion 111
  • Technical Appendix 112
  • Commentaries 115
  • Part Three Advertising as Information 131
  • Advertising as Information Once More 133
  • Appendix A: Derivation of the Relationship Between a and P 156
  • Appendix B: Data Sources 158
  • Advertising, Information, and Product Differentiation 184
  • Commentaries 193
  • Four Part Advertising, Concentration, and Profits 215
  • Advertising Intensity and Industrial Concentration- an Empirical Inquiry, 1947-1967 217
  • Conclusions 249
  • Advertising and Oligopoly: Correlations in Search of Understanding 253
  • Appendix A 262
  • Appendix B 263
  • Commentaries 267
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