Change My Mind – Advertising is Bad for the Economy
I've had this lingering thought floating around in my head – that advertising is bad for the economy as a whole. The more I think about it, the more it makes sense to me. But maybe I haven't thought it out properly – so prove me wrong (or right)!
Here's the thought: a free market is supposed to thrive because it's a hyper-competitive landscape. Good products thrive and sub-par products wither away and die because consumers decide to buy good products over bad products.
But advertising seems to throw a wrench in things. It's very possible for a sub-par product to do well because it's marketed well. People buy what they see advertised, not necessarily what is the best value for their money. It seems like advertising is specifically trying to diminish the competitive landscape that an efficient economy requires.
Further, the more a company advertises, the more they have to pay for advertisements. To recoup these costs, they have to raise the price of their products. This makes their products an even worse value.
I imagine a simplified world where all companies advertise equally. What would be the point? All companies are spending a lot of money and have to raise their prices to pay for advertising, but no company gets an edge, because they're advertising equally. It's as if none of them are advertising, but they still need to raise prices. Surely this is an inefficient way for an economy to run.
On the other hand, I've heard the argument that if advertising increases sales, the marginal cost of making new products may be low enough to pay for the advertising (and then some) without raising prices. On the micro scale, this makes sense, but this also suggests that one large monopolistic company is the most efficient way to produce products (we all know this isn't true). And what if all companies are advertising? Then will advertising actually increase sales, or will all companies just steal sales from each other and net out somewhat equally?
Then, there's the argument that advertisements are good for the economy because they spread information to consumers about what products are available. I agree that spreading information about products is important. But isn't there a better way to do it? The information from advertisements is necessarily (for the most part) biased towards one specific product. Many people prefer to get information from unbiased sources who rank various products, such as Consumer Reports, CNET, etc, etc. This provides information about products while actually increasing the competitiveness of the market. Maybe these sources are enough (or could be enough) to spread the information?
So help me out. Is there anything I'm missing? Has anyone else had similar ideas? Prove me wrong!
Submitted September 30, 2018 at 01:50PM by outletbox
via reddit https://www.reddit.com/r/economy/comments/9k8czv/change_my_mind_advertising_is_bad_for_the_economy/?utm_source=ifttt