Wednesday, December 9, 2015

The Extreme Importance of Capitalist Advertising and Marketing

By Donald J. Boudreaux

Quotation of the Day…is from page 162 of Israel Kirzner’s pioneering 1973 book, Competition and Entrepreneurship (original emphasis):
[T]he product itself simply does not exist for the consumer until its existence and usefulness have been brought to his attention.  It follows that the entrepreneur’s task is not completed when he makes information available to the consumer.  He must also get the consumer to notice and absorb that information.
Advertising and other marketing processes are crucial not only for informing consumers about product features, but also for informing consumers about products’ very existence.  This reality – one in which consumers have information that isn’t remotely close to being full – means that advertising and marketing play a crucial role in helping to form consumers’ tastes.
More fundamentally, consumers’ tastes are not exogenous or “given” to the market system.  (What would have been your ‘taste’ or ‘preference’ for smart phones had you lived in the 12th century?)  Consumers’ tastes are very much a product of not only the society and culture of which they are a part but also of the economy in which they participate.  Yet contrary to people on the left (and to many on the right), this ‘endogeneity’ of consumers’ tastes and preferences is not a bug of the entrepreneurial market, it is a feature.
It is not a bug because no one forces consumers to have those tastes or these preferences; consumers voluntarily choose which tastes and preferences to adopt as entrepreneurs compete to offer different ‘tastes and preferences.’  And it is a feature because there’s no reason to believe that the lone, isolated individual is capable on his or her own of forming well-defined tastes and preferences.  The competitive market offers the service of helping each consumer perform this ‘forming’ of his or her tastes and preferences – not only by creating goods and services that the isolated individual could never have dreamed of, but, importantly, also by making the individual aware of the existence of the many options open to him or her on the market.
It’s curious and telling that today a disproportionate amount of the skepticism to capitalist advertising and marketing comes from people on the political left.  It’s curious and telling because this skepticism implies that each individual somehow has ‘real’ tastes and preferences that are independent of society – tastes and preferences that the individual, as such, possesses ‘naturally.’  A large chunk of the ‘real’ individual, in this mistaken view, exists independently of society.  Society, therefore, can only support or distort the individual’s ‘true’ preferences and goals.
In contrast to this leftist view, those of us who are steeped in the Smithian-Austrian-Hayekian-Buchananite tradition understand that people are creations of society.  And so we don’t sound the alarm the moment we discover that this taste or that preference has been ‘sparked’ or ‘changed’ by some activity of entrepreneurs.

The above originally appeared at Cafe Hayek.


  1. The left hates average people and hates their preferences and lifestyles. The Democrats have officially come out for express repeal of the 1st Amendment. I am always seeing Facebook ads supporting a constitutional amendment to overturn “Citizens United”. If they hate political speech, they must really hate commercial speech. One should start with the premise that all leftists hate average people and want to either control or eliminate them. They certainly can’t stand or tolerate a consumer society. Facts and arguments will have no impact upon such people. Indeed, facts and arguments also need to be restricted and abolished.

  2. Actually, the Internet changed the nature of advertising. First of all, it reduced the need for a product to be brought to attention of the consumers - when I need something, I just go ahead and Google it, and then buy whatever product/brand which seems to best fit my needs at the best price. I do not buy products because they are advertised - and try to ignore all ads. Advertisement stopped being a vehicle for reducing transaction costs and became mostly manipulation: it no longer informs, it tries to seduce and manipulate people into buying stuff they don't want or need.