Consumerism and Advertising

Kiron (in "Marketing Power") argues that advertising is a powerful force, particularly in the US.

Some facts about advertising in the US:

1. per capita spending on advertising quadrupled btw 1935 and 1994 (in real or nominal terms? - doesn't say)

2. 18 billion ads a day just in magazines and newspapers

3. economic research suggests that competition and advertising are inversely related

Is advertising spending 'wasteful'?

An even more extreme charge is that it is pernicious.

What are the advantages of advertising:

1. provides information

2. form of public service (sponsoring cultural events)

3. contributes to national unity?

4. enhances individualism?

According to Kiron, what are the possible disadvantages of advertising:

1. promotes consumerism

2. leads to dissatisfaction with current level of consumption

3. reshapes beliefs and desires and manipulates emotions

4. may lead to reconstruction of identity, and questions about one's status and self-esteem

5. the money could be spent on other, more productive items, such as research and development (although ironically both R and D and advertising are linked to non-competitive marketplaces)

6. may lead to increased prices, if ad costs passed on to consumers.

What is meant by term consumerism/consumer culture? The message that buying=happiness

Is this an accurate evaluation of the pros and cons of advertising?

(Compare this for instance with the textbook's analysis.)

What seems to be the author's larger agenda?

To critique consumerism.

Consumerism/the rise of television/easy credit/the decline in civic participation linked.

(Of course the decline in civic participation, or at least volunteerism, is also linked to women's increasing labor force participation.)

Television watching has been linked to changes in attitudes about the world.

What do our more simplistic models of economic choice assume about consumer tastes?

That these are exogenously determined or innate. In other words, tastes are internally determined, and do not change. In other words, they are not influenced by advertising (or social pressure more generally.)

Is this realistic?

Do firms simply provide goods which consumers already desire, or do they create desires?

As the book points out, advertising aims at both informing and persuading consumers, that they absolutely NEED a particular product.

Is it a problem if firms create desire? There can be both social and economic repercussions.

What happens when unattainable desires and images are created which few consumers can attain.

Limited because of physical body/income.

What is the impact of media images of female beauty for instance?

How does this in turn impact the economy?

How do the poor cope with the fact that they can rarely if ever attain the media ideal?

Should/can economists address these two major concerns? (1. construction of desire, 2. coping strategies of the poor.)

While the questions of how identity is shaped may be somewhat beyond the scope of economics, ignoring these factors means designing inaccurate theories. Also, there are some economic issues of concern to economist which are linked to consumerism and advertising. For instance, whether ads lead to increased or decreased efficiency is important. This in turn is linked to questions about market power. Finally, a more macro oriented question is whether the economic activity and prosperity we are witnessing in the US is sustainable, or whether it is all being built on a house of cards (credit cards) which can collapse at any moment.

Some statistics on credit:

The average credit card holder owes $2500 and pays $450 in interest a year.

Per capita consumption has doubled.

So has bankruptcy.

The economy and our prosperity are to a large degree based on debt.

Are our economic models capturing a reality of 'rational' informed consumers?

Can consumers differentiate between buying power based on income and based on credit?

What about the impact on the long term sustainability of our economy of the mantra consumption=happiness?

Solutions:

Reject consumerism

Is this even possible?

Although some have already embraced as individuals, this doesn't really address greater social issue.

Can we as a society reject consumerism?

What will the economic impact be?

The piece by Breslow builds on the same themes, pointing out how our lifestyle in the US leads to higher income needs.

These include: suburban living, a lack of public transportation, prepared foods, large houses, cell phones, higher education, etc.

Spending needs expand with income.

Time pressure has increased and so has the need for time saving devices.

He links this to consumerism, but also to social pressure in the US.

Again the question is raised, how do poor families who cannot live up to the economic ideal in

the US make it?

What should be considered subsistence living in a such a rich society?

Why are even middle class people struggling to get by in such a wealthy society?

1. expectations about consumerism are high

2. social pressure

3. life styles (living in suburbs and commuting, etc.) create additional costs

4. perception that the public space is unsafe

In addition there are some very real economic factors which contribute:

1. real wages have declined

2. inequality has increased (so while the poor are not necessarily absolutely worse off, they are relatively worse off.)

How is this linked to the above points?

3. The structure of development in the US also contributes (suburban living, lack of public transport)

4. people are living longer, but do not necessarily save for retirement

Finally and ironically, people maintain the myth of individualism throughout all this. They are influenced by social pressure to be like everyone else, but wrapped up in this consumerism is the myth that we are being individualistic by our consumption patterns. One example is our reliance on cars rather than public transportation. Cars are linked to individualism and 'freedom.'

Possible solutions which come out of Breslow's article:

1. move away from consumerism (cannot just be an individual choice)

2. better urban planning and more resources devoted to public goods

3. universal health care

4. continued support for social security or some form of public retirement

5. reduce inequality by raising wages for the those at the bottom of the distribution

6. more flexibility in employment

We also talked in class about more concrete economic solutions, based on our own analysis, the book and Breslow/Kiron:

1. tighter controls on debt/credit

2. tighter controls on advertising

3. better enforcement of anti-trust legislation

4. education of consumers