In Defense of Advertising

Advertising is a part of capitalist culture that is much maligned. TV Commercials interrupt our favorite shows. Spam mail fills our email inboxes. Pop-up ads and banners slow down our favorite websites. Crazy hippie leftists complain that advertising causes materialism and drives a damaging workaholic consumer culture.

Even among the society of economists, the usual refuge of the weird and the outcast, advertising gets a bad rap. They call it “rent-seeking” or “an unproductive use of resources”. They insist we’d all be better off without it. Advertising doesn’t create wealth, it merely causes wealth to be shuffled around. In the process real resources are expended, resulting in a net loss to society. Even such libertarian-leaning luminaries such as John Lott and Gordon Tullock have spoken negatively of advertising.

The consensus on advertising is clear: the vile creature should be hung from the yardarm, as soon as the nearest ship with a yardarm is found! But, as often happens, the consensus is wrong. Advertising in itself is not a useful activity, but it has many positive side effects. It is a vitally important means of funding public goods on the free market.

If we transported a mainstream economist to a world that never had broadcast radio, he would claim that the medium could never exist without government funding. Once a radio signal is broadcast there is no means to force listeners to pay for it. A consumer cannot be prevented from listening if he refuses to pay; the signal must be provided for everyone in a given area or for noone. But in the real world advertising, which the mainstream economist rejects, is the magic ingredient. Instead of charging consumers for listening, producers of radio charge advertisers for access to their listener base. While the economist predicts “market failure” and an absence of radio, consumers are presented with dozens of radio stations to choose from, all free of charge.

Advertising is the force behind free radio, free television, and free periodicals like “The Onion”. Advertising is the reason local newspapers are sold for less than the cost of the paper they’re printed on. Advertising lowers the cost of magazine subscriptions. Most importantly, advertising is the driving force behind the information age. If I want to know the name of the band that wrote “Unchained Melody” Google will give me the answer in about 15 seconds with no charge. Why does Google do this for me? Is it just because they're swell chums up there at the Googleplex? Nope. Google gets paid by the few small ads they place at the top of my search results.

So put down that gun and back away from the marketing executive! Advertising is an important part of a free economy.