P.S. Analogous reasoning would argue for public funding of advertising as leading to “more informed” consumers who could make better choices about what to buy X-D
I definitely agree with the line of argument that advertising is a public good, because it leads to more informed consumers, and I am highly sceptical of knee-jerk claims that it is a negative-sum arms race. So at least we’re both consistent!
However, I don’t think that advertising (whether commercial or political) should be subsidised, because I think the government is very bad at encouraging public goods. My point was merely that HonoreDB’s charity, although no doubt well intentioned, appears to me to be destroying value, rather than creating it...
Consider your own analogy to commercial advertising. Suppose Coke and Pepsi signed a compact to reduce their advertising expenditures by a specified amount; would you suppose that to be good or bad for the consumer?
I don’t think that agitprop and/or advertising leads to more informed voters/consumers because its purpose is not to inform. Its purpose is to manipulate, to force the subject to a certain opinion by all means necessary. Any “informing” that happens is entirely coincidental and, depending on the circumstances, could be considered a feature or a bug.
In local terminology, advertising tries to change the map in your head and the main feature of the one it wants to install is that it shows all paths leading to the same place, the one conclusion that it wants you to make. An accurate map is bad from the advertising point of view and needs to be replaced. In the service of this goal the advertisers can and do use biases and fallacies, they spin, mislead, and obfuscate, and on occasion just lie.
Suppose Coke and Pepsi signed a compact to reduce their advertising expenditures by a specified amount; would you suppose that to be good or bad for the consumer?
Economically—good. Psychologically—I don’t know. People like to be told what to prefer :-/
Suppose Coke and Pepsi signed a compact to reduce their advertising expenditures by a specified amount; would you suppose that to be good or bad for the consumer?
Economically—good.
Wow. Let’s just say we’re very far apart on this.
There’s a wealth of law and economics literature about the effect of advertising, which demonstrates that advertising bans hurt consumers and help producers—see for example this classic. An agreement within a cartel isn’t the same as a legal ban, but we should surely expect it to have a similar effect—especially given that many real-world advertising bans were lobbied for by major incumbents. Do you have any rationale for why you think consumers would actually benefit?
I was inviting you to consider what I considered an obvious cartel behaviour aimed at suppressing consumer ability to get the best deal. But bravo on biting the bullet!
which demonstrates that advertising bans hurt consumers and help producers
First, we were not talking about legal bans (which I am generally not in favor of).
Second, you have to be quite careful here not to confuse “advertising” and “intensity of competition”. I have no doubts that reducing the competition hurts consumers, but I am not convinced that reducing advertising expenditures necessarily leads to reduced competition. I suspect that these two things are often conflated (and the causation flipped).
In this particular case, do you think that if both Coke and Pepsi reduce their advertising budgets by, say, $10m each, the consumer will be hurt economically? What is the mechanism for that?
Third, are you implicitly claiming that the current level of advertising expenses is optimal? If we accept your thesis and start to increase advertising, will there be some point when the curve bends—the advertising becomes excessive? Presumably so. Where are we with respect to this point? How do you know?
Do you have any rationale for why you think consumers would actually benefit?
Plain-vanilla cost savings some which will be passed on to consumers.
obvious cartel behaviour aimed at suppressing consumer ability to get the best deal.
Huh? I walk into a supermarket and look at the prices of Coke and Pepsi which are there side by side. I know from experience to which degree I prefer one over another. How will advertising help me get the best deal?
First, we were not talking about legal bans (which I am generally not in favor of).
Glad to hear it. Do you agree with the wealth of literature showing that bans on advertising are bad for the consumer? And do you agree that a binding agreement within a duopoly would have a similar effect to a legal ban?
In this particular case, do you think that if both Coke and Pepsi reduce their advertising budgets by, say, $10m each, the consumer will be hurt economically? What is the mechanism for that?… I walk into a supermarket and look at the prices of Coke and Pepsi which are there side by side. I know from experience to which degree I prefer one over another. How will advertising help me get the best deal?
Yes, I think the consumer would be hurt. Advertising alerts us to new products, changes to existing products, and changes in the terms (eg price) under which those products are sold. Let me give you two examples of Coke/Pepsi advertising and how it affects me.
Where I live, Coke produces a wide variety of products, and is constantly adding more. Currently, they are heavily advertising their new “Coke Life” product, which has a different kind of sweetener, and a slightly different taste. If Coke had a smaller advertising budget, fewer consumers would be aware of this new product and what it’s about, resulting in loss of the potential consumer surplus from drinking the new product among those who prefer it to other Coke or Pepsi products.
In addition, Coke frequently has promotional offers on. Just walking into the supermarket and look at the prices is inadequate, I specifically go there to buy Coke because of the promotional offer. Otherwise I might miss out. And I know about the promotional offer because of advertising. In the absence of this, consumers would have to go to the supermarket on a much-more-frequent basis, just to check the price of Coke. This would be a loss.
Third, are you implicitly claiming that the current level of advertising expenses is optimal?
I am claiming that, given that the current level of Coke vs Pepsi advertising is the result of adversarial competition in a free market, I think there’s a very heavy burden on people who claim it’s “too high” (or “too low”). I am not claiming that it’s “optimal” by everyone’s idiosyncratic criteria.
Plain-vanilla cost savings some which will be passed on to consumers.
Why on earth would the cost savings be passed on to consumers? Do you think Coke or Pepsi is sold at marginal cost? This is a market with unique products and partial substitution, so these companies are price-setters, not price-takers. This saving would just increase their profits.
You seem to be making a fundamental assumption which I disagree with. You are assuming that what is best for the producer is best for the consumer and that increased consumption is a public good. You are assuming that we are dealing with homo economus who decides correctly and for whom more information is always a good thing. We are dealing however with homo sapiens, who can be easily led into things against his best interest. I do not think your basic assumption holds and I point to the massive increases in obesity which have benefited producers (more demand) but not consumers (die sooner) as evidence. To use the specific example you’ve been using, coke is rather unhealthy, being mainly simple sugars which have been proven to lead to obesity in sufficient quantities. Its consumption is kept well above the normal set point by advertising and I think this is a negative thing on the whole.
However, the issue has become sidetracked in economic minutiae. The real question is this: Is campaign funding a greater or lesser good than effective altruism. $1000 to Malaria Foundation provides 20-100 DALY, as Yvain said higher up. I find it spectacularly unlikely that $1000 spent on TV adverts extolling the virtues of a candidate and lawn signs showing his face can provide a similar benefit or even one within the same order of magnitude. This is especially relevant when half comes from each candidate.
I honestly couldn’t say. In the borderline cases you would presumably need some kind of impartial observer with sufficient specialist knowledge. Luckily, I don’t have to worry about borderline cases because the three cases we have here are fairly obvious. For an example of an obvious case of homo sapiens being led into things against his best interest consider smoking. It is extremely rare that smoking is in anyone’s best interest given the high cost in both money and years of life such a habit entails.
For an example of an obvious case of homo sapiens being led into things against his best interest consider smoking.
Sure. People have smoked a variety of dried plants (including but not limited to tobacco and marijuana) for a very long time. Much, much longer than advertising has been around. So, what’s the “best interest” here, who decides what it is, and who “leads” people into something against their best interest?
Note, by the way, that if you honestly can’t say who decides what’s in a person’s best interest (other than herself, of course) then the phrase “It is extremely rare that smoking is in anyone’s best interest” doesn’t mean anything.
Ideally I would measure best interest compared to the human utility function, but we do not have the luxury of a fully unpacked utility function. In the mean time I’ll just go with (length of life x happiness) - (very large number x atrocities committed). As to who leads someone against their best interest, that would be advertisers as the agents of companies who wish to sell people things. Some advertisers also move people towards their best interest. The point is that the best interest of the buyer and the best interest of the seller are rather disconnected and intersect rather randomly. The best interests of the people being sold to are far less relevant to the people doing the selling than the amount of money a person can be persuaded to spend.
Edit: I feel like this would be a good place to put a chart of cigarette usage by % of population over the years. At current time, 42% of people smoking have tried to quit over the last year. I feel like this is fairly conclusive: these people are acting against their own self interest
Have you read any behavioural economics? These are rather central things to the theory and there are books out there that can explain this a lot better than me.
Also, we’re getting sidetracked again. I thought the whole advertising thing was just a useful example to talk about the original disagreement about charity vs giving to political parties.
As to who leads someone against their best interest, that would be advertisers
It doesn’t look like you’ve read my post. Who leads this guy, for example? People like him have been doing this for hundreds of years at least.
Have you read any behavioural economics?
Yes, I have. I understand how people can be influenced. I still don’t understand how someone is going to decide what is in, for example, my best interest.
No-one decides what is in the best interest of a singular person except that person. This kind of stuff is only really applicable to large populations where you can shift the conditions to raise or lower usage by 10% by raising barriers against harmful activities and lowering them for beneficial activities. By raising barriers I mean for example increasing the cost of cigarettes through taxes while increasing knowledge by printing cancer statistics on packaging, an effective strategy that the UK has been using for a while now. Applying it to singular people involves far more direct intervention than most people are willing to deal with and tends to cause problems. I am essentially espousing soft paternalism.
That guy is smoking a tobacco cigar in India I assume? He is influenced by the people around him who don’t know how much damage is done by smoking, by the ready and cheap availability of the thing he wants to smoke, by the physical addictiveness of the plant, by the status change associated with smoking (positive or negative) and by his own state of knowledge about the effects of his actions. People like him have been doing this for hundreds of years and it was a reasonable choice given the knowledge they had because no-one knew that it was dangerous and caused cancer. Now the knowledge exists, and it has become clear that it is a bad choice. It has negative utility.
I did read your post. I couldn’t figure out where what you were getting at. I was honestly wondering if you were trying to use Socratic method on me or something. Your point was not clear to me, it still isn’t. Could you clarify?
No-one decides what is in the best interest of a singular person except that person.
Empirically that’s not true. There is a large number of laws and regulations, for example, which claim to exist in my best interest—from the seat-belt laws to the FDA.
Applying it to singular people involves far more direct intervention than most people are willing to deal with and tends to cause problems. I am essentially espousing soft paternalism.
So are the, ahem, implementation difficulties are the only reason why you espouse soft paternalism and not hard? If applying “this kind of stuff” to individual people didn’t cause problems, would you have issues with it?
Your point was not clear to me, it still isn’t.
My point, stated bluntly, is that no one is qualified to judge what is in a person’s best interest except for that very person. And given that it fails on the individual level, it fails on the aggregate level as well.
A side theme here is that I highly value autonomy and am quite suspicious of paternalism.
Ah, right you’re talking about the specific practical implementation of these things. My bad. I don’t have a better model than the current one kicking about, that’s for sure. The ideal of the current model in my country (the UK) is that the scientific community figures out what things are unambiguously helpful and unambiguously harmful and legislation is enacted to maximise and minimise those activities. More ambiguous things don’t tend to get legislation enacted. That the actual implementation of the model falls short in a number of ways is obvious and unfortunate, but I don’t know enough about the subject to propose a better solution. If you have one I would be interested to hear it.
If applying “this kind of stuff” to individual people didn’t cause problems, would you have issues with it?
For it not to cause problems people would have to be fine with an outside force making a large number of their decisions for them. It appears to be an inherent human trait to dislike excess meddling by any outside force so I’m not entirely sure that such a population exists. This may simply reflect a western view of looking at things though, my knowledge of the mindset of Chinese people for example is obviously insufficient.
I would still have one issue with it even if people didn’t mind being meddled with. Hard paternalism implies bans on things, hard rules that are not allowed to be broken. There are almost always situations where the reasons behind a rule do not apply. With hard paternalism a person would be prohibited from doing something even when it made sense in that specific situation.
no one is qualified to judge what is in a person’s best interest except for that very person.
You’ve been blunt with me so I’ll do you the same courtesy. People are bad at judging what actions maximise their own best interest. I believe that a majority of people are highly effected by the environment in which they make their decisions and can be induced to make different decisions, good or bad, through clever manipulation. Most people do not have the knowledge to deal with manipulation like this in an effective manner. It is an asymmetrical fight, because advertisers can apply whole departments of people and the latest knowledge of neuroscience to manipulating the inherent biases of the human brain while normal people devote very little or no time to countermeasures. As the knowledge and money base of advertising increases I would expect people to be more and more swayed.
I will give some specific examples and predictions to bring this back to earth. If healthy food was cheaper and as easy to prepare as unhealthy food, a country would have a healthier populace of a lower weight and live longer. If soft drinks high in fructose and other simple sugars were advertised less, diabetes rates would drop. Some examples of things known to work: When cigarettes were made expensive and the health effects well known such that people who decided to smoke were regarded as silly, cigarette use decreased so did lung cancer (after an appropriate time lag). If pension payments are made automatic as part of a pay cheque and employees simply have to check a box to opt out, employee pensions savings increase.
The idea of soft paternalism is to discourage bad decisions while still allowing them to be made. It is to make the right thing to do, the easy thing to do. The barriers against bad decisions are intentionally low such that anyone with a good reason can circumvent them. This allows policy makers to improve people’s lives en mass without actually curtailing any specific person’s autonomy very much. This has the useful side effect that if a bad decision is made by the government people can route around it with comparative ease.
By the way, that pattern of highly valuing autonomy and intense suspicion of government intrusion is something I find extremely common in US Americans, but is comparatively rare in my country the UK. I would be interested to talk to you about possible causes if you’re up for it. My immediate thought is that the US government has given people more reasons to distrust it but I would much rather know your thinking, seeing as you live there.
We don’t live in an idealized environment where our society is ruled by benevolent philosopher-kings or run by bodhisattva mandarins. The government consists of elected politicians and unelected bureaucracy of civil servants—all of them human, always prone to mistakes, not always having the best intentions, corruptible by power, having their own incentives, etc. etc. The question of the appropriateness of soft paternalism has to be evaluated in the context of real political systems where the chances of the paternalistic tools being misused or abused are high.
Yes, people are bad at judging what’s in their best interests, but there’s no one who is better. There are lots and lots of examples, historical and more recent, of situations where some authority decides it knows what’s better for the people—and then it turns out that isn’t the case at all. So the next authority (or even the same one) says sorry, carts out the corpses, cleans up the mess a bit, and then says “ah, but now we certainly now what is best for you!”. Rinse and repeat...
In the same vein you posit that regular people are defenceless against advertisers, but they are defenceless in the same way against government propagandists as well. In fact, paternalism legitimises the idea that people are sheep in need of a leader, they cannot be trusted to arrange their own affairs. Infantilising the populace is a very seductive political technique.
pattern of highly valuing autonomy and intense suspicion of government intrusion is something I find extremely common in US Americans, but is comparatively rare in my country the UK.
You can probably google up discussions of this topic, it’s not an uncommon one. Off the top of my head I can come up with:
Genetics: the subset of the population that had… difficulties with the King and the Parliament actually left the UK—and a large part of these rabble-rousers landed in the US.
More genetics: the US is a country of immigrants—almost all Americans descend from ancestors who decided to leave their country and their government. That is indicative of high autonomy and not trusting your (former) government much :-)
Population density: the higher it is, the more unity and cohesion the country needs and enforces. If you have family homesteads situated miles from each other, they don’t need to agree on much.
History and traditions: the UK had centuries to instill obedience to authority into its population, the US started as a colony which didn’t like its metropolis much :-/
The US political elite hasn’t been able to perfect that patronising look that goes so well with the proper upper-crust accent :-P
My immediate thought is that the US government has given people more reasons to distrust it
From the American perspective, the situation over the pond looks like an unmitigated disaster. Between the ever-present cameras, the ASBOs, the terrorist-sympathisers legislation, etc. things are looking bloody awful over there...
To be quite honest I’d trust my government to do soft paternalism but not yours.
Do you know what’s fascinating? We have an almost identical view of your country from over here, what with the rampant abuse of power among policemen, the massive online data mining, the gun crime, the bizarre and aggressive politics where shouting louder seems to be considered legitimate. And the tv news, it’s just astounding. I’ve watched Fox and it is just bizarre, with people actually shouting at guests, belittling respected experts who were asked onto the show, cutting their mike when they start to disagree. Anyone who tried that here would be out of a job in short order. CNN may be better but they are still hilarious in a number of ways. That filibustering doesn’t get a politician voted out instantly was originally shocking to me.
I could go on for a long long time. Suffice to say, the UK is actually doing pretty good. We have a few problems but they aren’t the ones you’ve head about in the news. The ever present cameras have not been abused and are generally only used when a crime happens to have been committed in front of them (assault, burglary ect). The ASBOs are no worse than the worse rednecks or people from the ghettos. Also, terrorist-sympathiser legislation? I don’t remember that.
We have a few problems but they aren’t the ones you’ve head about in the news.
Tell that to the girls from Rotherham. Or does that not count as “in the news” since your news media refused to report on it while is was happening? Not to mention the people attempting to blow the whistle on this back in 2001, were promptly prosecuted for hate speech.
the massive online data mining [by the US],
(..)
The ever present cameras have not been abused and are generally only used when a crime happens to have been committed in front of them (assault, burglary ect).
I was not trying to say that the idea I had of the US was an accurate one, nor that the UK was some sort of paradise where nothing wrong happens. I was pointing out the general distortion one can expect by relying on news media for an idea of a country. Rotherham for example is a highly charged emotional subject. Trying to get an accurate idea of the actual situation just from exceptions like that is a bit pointless. It works about as well as using the situation in Detroit to judge a whole country
One is a recording in a public place where there is no expectation of privacy, the other is the cataloguing of everyone’s entire backlog of conversations on the internet, including private ones and in some cases encrypted ones. Aside from both fitting the emotional impression of overreaching security state I don’t see that the two are particularly comparable. The potential for abuse is certainly different. Unless there is some abuse case of the cameras that i’m not aware of?
Edit: The US data mining is a lot more comparable to the UK data mining. I believe they are similar. It may just be a failure of my creativity, but I can’t actually think of a situation where cctv footage could be abused to convict an innocent man. Conversely, abuse cases abound for largescale data mining.
I can’t actually think of a situation where cctv footage could be abused to convict an innocent man.
A couple of ideas come to mind immediately:
-- Just like reading all your email is likely to turn up something that sounds bad, tracking all your movements is likely, just by chance, to turn up something that looks suspicious; you may have been seen near a known drug dealers’ den, or bordello, or you often visit a person who has been convicted of a crime, or you have been seen near children’s playgrounds too much.
-- Use of the CCTV footage to catch you in a lie—bearing in mind that everyday human life involves telling necessary lies every so often. This can make you look really bad—oh, no, he lied to his wife about where he was, maybe he had an affair. He lied in his political speech—who knows what he was doing in back alleys back then?
-- Using the CCTV to capture images of something that would be embarrassing in public. Of course, you would have to make a mistake to show something private in public, but CCTV has the effect of greatly expanding the effect of such mistakes. Imagine someone caught on camera in bondage gear, or kissing a member of the same sex (or just cheating on their spouse). Or wearing a symbol of a sports team that is accused of being racist.
-- Taking a CCTV image out of context
Of course, you’re being too narrow by asking for a conviction; these can be used to damage someone without convicting him of anything. Driving a politician out of office or blackmailing someone is not convicting him, after all.
I was not trying to say that the idea I had of the US was an accurate one, nor that the UK was some sort of paradise where nothing wrong happens. I was pointing out the general distortion one can expect by relying on news media for an idea of a country. Rotherham for example is a highly charged emotional subject. Trying to get an accurate idea of the actual situation just from exceptions like that is a bit pointless. It works about as well as using the situation in Detroit to judge a whole country
You seem to be arguing that the UK is much better than the US in this regard. In fact similar forces are involved in creating both Detroit and Rotherham. On the other hand, the US wasn’t covering up Detroit’s crime statistics and prosecuting people who tried to blow the whistle.
The potential for abuse is certainly different. Unless there is some abuse case of the cameras that i’m not aware of?
How so. I can’t think of an abuse case for email reading that doesn’t also apply to the CCTV cameras.
Well I’m not arguing that. The UK doesn’t seem to be structurally much better than the US, I’m no even sure how I’d go about measuring that. Although it is a bit naive to say that the US (or rather the Detroit police force) isn’t covering up some of Detroit’s crime statistics. So far as I’m aware almost any metric used to allocate reward and punishment will eventually be gamed.
Jiro has some nice CCTV camera abuse cases. Online information gathering takes all those abuse cases quite a bit further. Instead of possibly one lie or falsehood or case of wrong/politically damaging information you can probably choose from dozens if you have access to a politician’s online data. Same abuse cases, more ammunition against an average person.
Suffice to say, the UK is actually doing pretty good.
Does it, now? Ignoring the minor matters like recent riots or how you managed to drop considerably below Ireland in GDP per capita, didn’t you recently almost lose a large chunk of the country? And while the scurrying at Downing the week before the referendum when the poll results came out gets full marks for amusement value, it does seem that a bit less than half of all Scots have a problem with trusting Whitehall to do what’s best for them.
terrorist-sympathiser legislation?
Evidently in the UK it’s a crime to write bad poetry about martyrdom.
Consider the probability of almost any other country allowing a free and uninhibited referendum for a section of that country to split off. Texas for example, or Sicily. Consider what it implies about the health of the democratic process that the Scots could vote an independence movement into majority of their government, then have a free and unmolested referendum without one bullet fired and only a modicum of political fuckery. I think that’s a pretty good showing all things considered. Don’t a lot of countries have some ethic group that distrusts the central government? It’s hardly an exceptional situation.
Regardless, the point was not to start a cross Atlantic pissing match over whose country is worse. The point is to show you that the picture you have of the UK is likely so distorted as to be essentially useless. Consider the picture I painted of the US, consider how inaccurate it likely was. That is at least the scale of the mismatch between your map and the territory of the UK. To call the 6th largest economy in the world an unmitigated disaster is plain wrong, the place comes up near the top in nearly any objective measure you care to name.
The point is to show you that the picture you have of the UK is likely so distorted as to be essentially useless.
That’s interesting. Are you quite sure my map is distorted or maybe I just have a different baseline and different framework to look through? How would one tell the difference?
It could be a different framework or baseline, but I find it more likely that you’ve been given incomplete data. I’m assuming you’ve gotten most of your information from news stories and articles? Unfortunately I can’t think of a way to fully check without physically visiting the country to see if it matches or not. The next best thing would be watching some boring bbc news coverage, but even that would be mildly sensationalist by comparison to normal life. You can’t go by my experience because I’m not a fully trustworthy source, despite my attempts at rationality.
Comparative statistics maybe? Figure out what objective measures you’d expect the UK to do well or poorly on based on your current map then look them up. See if there are any US cities you do know that turn out to have similar measures then use the comparison to update based on the new information. Seems like the best bet anyway.
The next best thing would be watching some boring bbc news coverage, but even that would be mildly sensationalist by comparison to normal life.
The same is true of the US. The difference is that Americans have a lower tolerance for “government doing bad things to other Americans”, whereas your attitude seems to be “it doesn’t count unless it happens to someone I personally know”.
There’s a difference in the magnitude of the sensationalism and the professionalism of the news between the two countries. The UK is rather lucky in that regard.
My attitude is that the magnitude of the individual wrong has to be multiplied by the number of times it actually happened to be properly understood. The actual physical threat of terrorism, for example, is largely irrelevant in my reckoning of the country. Last time I did the math it turned out to kill less than 10 people a year on average in the UK. I had a look down the NHS data for death rates and found multiple diseases I’d never even heard of that killed more people, so I decided that terrorism itself was largely unimportant. The reaction to terrorism is the only part that has relevance. I have a similar attitude about most overblown societal problems. The news may be attempting to convince my lizard brain that the world is spectacularly unsafe but the actual statistics suggest I live in one of the safest countries in the safest period of human history.
Edit: Forgot to specify that it was the TV news that was good. The papers can be pretty variable, from good to terrible.
A variety of bits, Midlands is the major area where I haven’t been.
Unmitigated disaster or just kind of average?
See, that’s what I mean by different baselines. It looks like to you life is fine as long as you or your friends aren’t dragged off in chains and sent to the salt mines. Of course UK is a first-world Western European country with all that it implies. It’s not Zimbabwe. But then by similar criteria places like, say, post-Stalin Russia were also “kind of average”. For the great majority of people life just went on and nothing terrible happened. Unless you were part of specific social groups, things looked fine.
I’m not saying that the UK is on the verge of tranforming into an Ingsoc society, but from the individual freedoms and civil rights point of view, it has considerably degraded and is looking pretty bad. Of course if you don’t care about such things much, well, you don’t care about such things much.
I do care about such things, about as much as I care about the total prosperity of the group. In my utility function they are approximately equal. I am worried about the erosion of civil rights, not because they are being misused much now or because of any inherent beliefs about human rights but because of the potential for abuse later down the line. The way I see it laws that give a particular position unrestricted power without independent checks and counterbalances are problematic in the long term. As time increases to infinity the probability that such power will be abused tends to 100%. That is, eventually a particularly misguided or sociopathic or mentally ill person will eventually end up in that position.
It’s also why I think large scale data mining is more dangerous than CCTV cameras. To abuse CCTV you need to change the laws to make new things illegal, you can’t do it as one person. To abuse data mining all that is required is for the head (or sub head) of intelligence to get the records of every current and prospective politician then threaten to leak certain uncomfortable details at key times. Most people have something online that would interfere with political election. Too much power in one person with too little oversight. The potential for abuse is huge.
Apologies about my manner this past while. I’m still getting used to people attacking my ideas without attacking me. Historically the two have been correlated in other webforums and I’ve not yet convinced my brain to give up the link. You know, I’m curious about what your favoured policy is. You don’t like soft paternalism, what system do you go in for?
because of the potential for abuse later down the line.
I think we are in agreement about that.
It’s also why I think large scale data mining is more dangerous than CCTV cameras.
It’s a false dilemma, there is absolutely no reason why we must have one or the other and so must choose the lesser evil. We can choose none. Of course, in reality it seems we will get both.
I don’t expect there is significant difference in large scale data mining between the US and the UK. The NSA and MI5 are best buddies :-/
To abuse CCTV you need to change the laws to make new things illegal
Nope. You only need to to see compromising (not necessarily illegal) information. If you capture footage of a minister going to visit his mistress, that’s not illegal but that’s useful blackmail material.
Apologies about my manner this past while.
No apologies necessary, that has been a pretty polite debate (by the internet standards, at least :-/) so far.
You don’t like soft paternalism, what system do you go in for?
I hesitate to declare allegiance to a particular system, but my favoured direction is allowing people to do stupid things and then reap the consequences. I think autonomy trumps optimality.
I agree with every point you just made, good catch on the false dilemma. Apart from the last one, I hold small reductions in autonomy which give medium sized or greater increases in optimality to be allowable. I suspect this difference may stem from a divergence in upbringing and culture.
Out of curiosity, how does allowing people to do stupid things work exactly? Zero tax on alcohol? Cigarettes advertised openly and sold at market rate? What does the implementation look like and what consequences do you expect?
Haha, oh you rapscallion. But seriously, freedom can be used to argue for almost every angle of any possible debate. Freedom from taxes, freedom from bandits (by way of increased taxes) ect. I can’t really model it except as a cross between an applause light and a mental category masquerading as something implicit. In a very real sense I never knew what freedom looked like in the first place. It is a chimera.
One should not miss an opportunity to properly use a pithy phrase :-P
Your question is way too broad, though—I’m sure you’re capable of imagining a world with zero taxes on alcohol, for example. What do you mean? To foreclose unproductive avenues, I’m neither an anarchist nor a big-L libertarian—I do not seek to do away with the state.
Um. Allowing people to go climb mountains just because they are there? Allowing people to marry who they damn well please? Allowing people to play or avoid lotteries?
Huh, I was expecting no speed limits on certain roads or shops that sold dangerous drugs legally or even just the reversal of what I was saying about cigarettes earlier. Without a tax on cigarettes you necessarily end up with packs of cigarettes for 80p. Then again you did say you were hesitant to declare allegiance so I’ll not push you about it. It is kind of puzzling to have an idea torn down but not be told what the tearer would rather replace it with though, normally they go hand in hand. I am not used to that.
It is kind of puzzling to have an idea torn down but not be told what the tearer would rather replace it
Future is uncertain and I am not wedded to ideological absolutes. I have a good idea of the direction I want to go, but not so much about the place where I would stop.
For example, I want a smaller, weaker government compared to what we currently have, but I don’t know how small and weak until we try some experiments and see how they turn out (not that I’m holding my breath). Testing by reality is paramount and I see little use in imagining grand social structures—that killed enough people already.
You have chosen examples where the status quo is a restriction. Lumifer has chosen examples where the status quo is no restriction. That is, you have both chosen examples that point in your respectively favoured directions.
I’m not sure I have on all the examples. Cigarette price hikes are status quo, as are (kinda) soft drinks but the rest don’t seem to be. The no speed limits for example is illegal in most countries apart from Germany with the Autobahn. Interfering with food prices and availability to massively favour healthiness is not done in any country that I’m aware of. It certainly couldn’t be called status quo or else crisps would cost £3.50 while healthy microwavable meals would be £1.
“Intentionally low” barriers have this way of expanding when the people who put the barriers in place either find they don’t work to keep people away, or stand to benefit from making the barrier stronger.
Also, you’re still forcing your decision on people who are poor enough that they can’t afford to get across the barrier easily. (Whether that happens, of course, depends on the exact barrier used.)
You’re right and yes, I am. That’s the downside really. Policy debates should not appear one sided and all that. The upsides appear to outweigh the downsides from where I’m sitting. I just haven’t come across a better system yet and I don’t plan on waiting generations for AI to find an answer for these questions.
I measure a slightly reduced autonomy in areas of obvious harm to be a lesser downside than increased death rates.
My immediate thought is that the US government has given people more reasons to distrust it but I would much rather know your thinking, seeing as you live there.
It goes back too far for that. I would suggest it goes back to distrust of the British colonial government. A country formed by rebelling against the government is going to end up distrusting government more.
I was thinking more about events during the lifetimes of people actually alive today. Being taught about the struggle against the British from a young age would count.
However, I’ve just realised that this entire line of reasoning is extremely speculative and my probability of being right is small. Probably best to scrap the line of discussion.
I am not sufficiently familiar with it and, frankly, I don’t care enough about the topic to go read a bunch of economics papers and then fisk them. My data-less suspicion is that bans on advertising are a consequence of reduced competition and/or near-monopoly behavior by incumbents, just a harm to consumers is also a consequence of the same thing, and people misinterpret the correlation between “less advertising” and “harm to consumers”.
fewer consumers would be aware of this new product and what it’s about, resulting in loss of the potential consumer surplus from drinking the new product
So, you pointed out the benefits. What about costs? Why do you believe the benefits are higher than costs?
Also, you’re ignoring the advertising for established products, as well as for failed products (e.g. the New Coke).
Note that I’m not saying that all advertising is harmful and that zero advertising is the desired state. I am saying that my best guess at the “optimal” point (which balances costs against public benefits) is such that I think the current levels of commercial advertising are above that point. Reducing advertising would get us closer to that optimum—though, obviously, I don’t know where exactly it is.
Of course the optimal point which balances costs against public benefits is different from the optimal point which balances costs against the firm’s benefits.
In the absence of this, consumers would have to go to the supermarket on a much-more-frequent basis, just to check the price of Coke.
Let’s not get quite this ridiculous X-)
I think there’s a very heavy burden on people who claim it’s “too high” (or “too low”)
That’s a cop-out :-) Besides, adversarial competition in a free market optimizes for the firm’s benefits from advertising, not for the public benefits.
Why on earth would the cost savings be passed on to consumers?
Because, as you mentioned, there is “adversarial competition in a free market”. That includes price wars, promotional coupons, etc. By your logic, there should never be promotions for a product—why lessen your profits for no good reason?
So, you pointed out the benefits. What about costs? Why do you believe the benefits are higher than costs?
But I don’t see costs to consumers here. Savings would not be passed on to consumers (see below), so what is the problem? That some people find the adverts annoying? Sure, but others find them entertaining. Coke in particular has had many adverts that have entered public consciousness.
I am saying that my best guess at the “optimal” point (which balances costs against public benefits) is such that I think the current levels of commercial advertising are above that point. Reducing advertising would get us closer to that optimum—though, obviously, I don’t know where exactly it is.
This is exactly the kind of claim that I think should have to face a very heavy burden. Your WAG (which you cheerfully admit is not based on a careful reading of the literature) is that the public costs of advertising (which you do not specify) are greater than the (equally unspecified) public benefits. Because you can’t specify or quantify any costs or benefits, you can’t say how much you’d like to reduce advertising by, but it’s just got to be reduced, dag nabbit!
Why on earth would the cost savings be passed on to consumers?
Because, as you mentioned, there is “adversarial competition in a free market”
So? That only implies that firms pass on cost savings if we have perfect competition (driving price down to marginal cost). If you have imperfect competition, firms are (at least partially) price-setters, not price-takers, and set price based on demand, to maximise profits. For an extreme example of imperfect competition, a Damien Hirst artwork that was cheap to make doesn’t necessarily sell for any less than one that was expensive to make. For a standard example of (pseudo-)perfect competition, see petrol—it’s an essentially indistinguishable commodity, so all petrol stations sell it at basically the same price (small changes based on location), and cost rises/falls are passed on to the consumer.
By your logic, there should never be promotions for a product—why lessen your profits for no good reason?
On the contrary, promotions for a product are an excellent sign that you don’t have perfect competition—that’s why you never see a sale on petrol (see above). Companies run promotions because they are selling well above marginal cost, but they want to be able to price-discriminate to make additional profits. For example, suppose I am selling Coke, and there are two people, Alan and Bob. Coke costs me 10p per litre to produce. Alan values Coke at £2.50 per litre, and would like to buy 1 litre per day. Bob values Coke at 60p per litre, and would like to buy 1 litre per day. So I price the Coke at £2 per litre, and make £1.90 (Alan pockets 50p consumer surplus, Bob doesn’t buy). That’s more profitable to me than pricing the Coke at 50p per litre, because although I’d make an additional profitable sale to Bob, it would reduce my profits from the Alan transaction by more. What I really want to do is sell Coke to Alan at £2 per litre, but Bob at 50p per litre, and that is where promotions etc come into play. Ideally I will find a way to advertise my promotion to Bob, without letting Alan find out.
In the absence of this, consumers would have to go to the supermarket on a much-more-frequent basis, just to check the price of Coke.
Let’s not get quite this ridiculous X-)
I don’t know what you mean by ridiculous. I buy a lot of Coke, but I am a thrifty shopper. I carefully collect coupons etc for discounted products (not just Coke) to take advantage of the cost savings, and buy staple products like Coke only when they are on promotion. In the absence of advertising for discounts etc, I definitely would go to the supermarket more often to check for offers. This would be an annoying waste of my time. There are plenty of other people like me.
I feel there’s some disconnect here. Advertising costs are effectively paid for by consumers so of course the magnitude of these costs impacts the consumers. Imagine them doubled or quadrupled—you don’t think this would result in higher prices? Or do you believe the prices to be a ratchet going one way only so that reduced costs never lead to reduced prices?
Your WAG (which you cheerfully admit is not based on a careful reading of the literature) is that the public costs of advertising (which you do not specify) are greater than the (equally unspecified) public benefits.
Since it’s the consumers who pay for advertising, the direct public costs of advertising are pretty easy to estimate: that’s the revenue of the advertising industry. You can, of course, then start adjusting this number is a variety of ways.
Public benefits, I have no good estimate for.
My WAG is, of course, a WAG, but I don’t see why your position that the level of advertising expenses happens to be optimal for the public benefit should enjoy the advantages of being the default baseline.
The reasoning behind my estimate is pretty simple. Firms set the levels of advertising expenditure based on their estimates of the benefits to the firm. My assumption is that any advertisement brings more benefit to the firm which places it than to the public at large. Given this, the market-determined level of advertising is going to be too high from the public benefit point of view.
If you have imperfect competition, firms are (at least partially) price-setters, not price-takers, and set price based on demand, to maximise profits.
Yes, of course, and it’s a very complicated process which depends a lot on the particular details of the industry. However I find the blank assertion that the firms will not pass any cost savings onto the consumer (especially in a highly competitive industry like soft drinks) to be not tenable. There is the market force pushing prices towards the average (not marginal) cost and while it may be counterbalanced by many things it’s still there. Look at, say, electronics—as the costs drop so do prices.
but they want to be able to price-discriminate to make additional profits.
I understand price discrimination, but that’s irrelevant for the subject under discussion which is whether the consumer will ever see part of the cost savings.
I don’t know what you mean by ridiculous.
Going to the supermarket “on a much-more-frequent basis, just to check the price of Coke” implies a ridiculously low value of your time. I don’t know of anyone who goes to the supermarket just to check prices on soft drinks. And in this particular example we’re talking much more about information rather than advertising. To illustrate the difference, if you subscribe to receive emails about Coke promotions that would get you all you need. Expensive video clips showing attractive women orgasming as Coke touches their lips are pretty useless for your purposes.
Advertising costs are effectively paid for by consumers
You keep asserting this. You provide no evidence or argument that it’s true. I agree that advertising costs are likely to be paid for by consumers in (say) the petrol market, although given that market is complicated by franchises, even there it may not be true. I think they are very unlikely to be paid for by consumers in markets featuring (partial) monopolies, such as Coke/Pepsi. So no, I don’t think that if Coke quadrupled its advertising budget it would be able to pass on the cost to consumers.
You seem to think the soft drink market is “highly competitive.” And you’re right, in the sense that everyone is trying to bring the best products to market, to make a profit. But you’re wrong, in the sense that the products are not direct substitutes in terms of consumer experience. Coke does not taste the same as Pepsi, and only the Coca-Cola Corporation knows how to make Coke. This is why Coke can sell their product for twice the price of some supermarket own-brand cola; they are earning rents on their intellectual property. The same goes, to a lesser extent, for Pepsi. This is a partially-monopolistic market, very different from the market for electronics, where the products are functional substitutes, and so are close to commodities, and indeed, cost savings are passed on.
And note that we see the most advertising precisely in partially monopolistic markets, and very little in commodity markets, precisely because of the effect on prices.
You keep asserting this. You provide no evidence or argument that it’s true.
I am sorry, but what other options are there? The advertising costs are paid out of interest on the firm’s bank balances? Out of tax subsidies? Out of charity donations?
The firm’s costs are paid out of the firm’s revenues. If the firm’s revenues come from selling things to consumers, the consumers are paying for the firm’s costs—all of them, including production, distribution, advertising, office space, janitors, and executives’ membership in the golf club. The consumers get the product in exchange, of course.
But you’re wrong, in the sense that the products are not direct substitutes in terms of consumer experience.
As you mentioned, “You keep asserting this. You provide no evidence or argument that it’s true.” Let me provide a counterexample.
Many fast-food chains have exclusive contracts with Coke or Pepsi. McDonalds, for example, serves only Coke. Given this, you can directly observe whether Coke is accepted as a substitute for Pepsi: often enough at the counter you can hear the following exchange:
-- What’s your drink? -- Pepsi (automatic answer as that’s what the person is used to drinking) -- Sorry, we have only Coke.
And at this point the customer can either accept the substitution (and say “Coke is fine”) or decline it (and say “I’ll have X instead”). I don’t have actual data, but I’ve seen this case happen many times and the number of people who will accept Coke is much higher than the number of people who will refuse it.
very different from the market for electronics, where the products are functional substitutes
Coke and Pepsi are functional substitutes. They don’t taste exactly the same, but then Samsung’s and HTC’s phones don’t look and behave exactly the same either.
note that we see the most advertising precisely in partially monopolistic markets, and very little in commodity markets, precisely because of the effect on prices.
Citation needed. Advertising is basically buying market share. I would argue that we see most advertising in highly competitive markets where you can buy market share. That means that you can differentiate your product and convince part of the public that the product is better than the other guy’s and not just because it’s cheaper. And I’m not willing to call all markets with differentiable products “partially monopolistic”.
Your ability to persuade an average bloke that petrol of brand X is better than petrol of brand Y is limited. Therefore your ability to buy market share is limited. Therefore you don’t spend much money on advertising. But you ability to persuade the same bloke that beer X is better than beer Y is much higher. Thus you can buy market share and advertising beer is worth it (for the firm, of course).
I am sorry, but what other options are there? The advertising costs are paid out of interest on the firm’s bank balances? Out of tax subsidies? Out of charity donations?
Out of the firm’s profits.
The firm’s costs are paid out of the firm’s revenues. If the firm’s revenues come from selling things to consumers, the consumers are paying for the firm’s costs—all of them
Yes, this is true, in a sense. But it says nothing about what changes when one of these costs change. If the cost of office space increases, does that raise prices for consumers, or does it mean the firm has less to spend on golf club membership, or a mixture, or what?
Consider the toy example I gave above when I’m selling Coke to Alan and Bob—if you recall, I set the price at £2 per litre, and am making £1.90 in profit. Now suppose I start spending £1 in advertising. Do I raise the price to £3? Nope; I already set my price at the level that would maximise my revenues. It just means my profits are now only 90p.
Regarding substitutability: yes, Coke and Pepsi are partial substitutes, and electronic goods are not completely commodities. But Colas are much less substitutable than Samsung and HTC, or Dell and HP. The question is one of degree.
So try a model where all cola costs 10p a litre to produce, Alan values Coke and Pepsi equally at £3 a litre, Bob and Chris value Coke at £3 a litre, Pepsi at £1 a litre, and Dave and Edward value Coke at £1 a litre, Pepsi at £3 a litre. In equilibrium, how much will Coke sell for? How much will Pepsi sell for? Now suppose Coke and Pepsi each spend £1 on advertising. How much will Coke sell for? How much will Pepsi sell for?
Advertising is basically buying market share. I would argue that we see most advertising in highly competitive markets where you can buy market share. That means that you can differentiate your product and convince part of the public that the product is better than the other guy’s and not just because it’s cheaper. And I’m not willing to call all markets with differentiable products “partially monopolistic”.
Yes, we see advertising in “competitive” markets in the sense you are using (which appears to be something akin to “contested”), but not in the economic sense of “perfect competition” i.e. commodities. You are not disagreeing with me there. You may not be willing to call markets with differentiable products “partially monopolistic”, but I’m afraid I’m using standard usage. See e.g. Wikipedia:
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes.
You should also note that as advertising is a fixed cost, not a marginal cost, so it wouldn’t affect the marginal cost anyway...
Unfortunately I feel like I’ve reached the end of the line trying to explain this to you.
Bollocks. Profits = revenues—costs. You can’t pay costs out of profits.
I already set my price at the level that would maximise my revenues.
The whole point of advertising is to change that level. You’re spending a pound per litre in order to change the equation which determines the proper price.
If you expect your advertising to reduce your profits why would you advertise in the first place?
Hi you two (Lumifer and Salemicus). A are you aware that you are having a wordy public conversation on a somewhat political topic more than two times deeper than the LW comment thread depth? I had trouble even finding the start of your conversion due to the limits. No one will vote on you and you clutter the recent comments. I recommend to both of you to discuss this as a privat conversation.
Thank you for taking the time to giving feedback this deep in the thread (hurray LW notification system). I reconsider my recommendation now. And will look away next time.
I am aware that we are having a wordy public conversation. I don’t consider microeconomics to be political, even “somewhat”. I don’t care whether anyone will vote on these posts or not. As to “cluttering” recent comments, all posts do that. If you don’t want to read this subthread, avert your eyes.
Hi you two (Lumifer and Salemicus). A are you aware that you are having a wordy public conversation on a somewhat political topic more than two times deeper than the LW comment thread depth? I had trouble even finding the start of your conversion due to the limits. No one will vote on you and you clutter the recent comments. I recommend to both of you to discuss this as a privat conversation.
Yeah, I think so. Maybe this is a culture-bubble thing, but I don’t think I know anyone who would notice, much less care, if there were more or fewer advertisements for one particular product or another (ad space, keep in mind, is fungible).
If it becomes effective at signaling status by being advertised, then the only people who would be disadvantaged by reducing the advertisements would be people who already had iPhones. People with the money to consistently own the newest iPhone surely have other ways of purchasing status, anyway, and would continue to do so even if that status wasn’t assigned specifically through the medium of advertising.
I definitely agree with the line of argument that advertising is a public good, because it leads to more informed consumers, and I am highly sceptical of knee-jerk claims that it is a negative-sum arms race. So at least we’re both consistent!
Even if political advertising produces a little more informat voters, I find it unlikely that the money is as well spent as money on a GiveWell recommended charity.
Furthermore a lot of TV ads don’t really inform and aren’t completely honest. Watching a news show is more likely to inform than watching a campaign ad.
Polling that interrupts people also steals them valuable time and many people are too polite to simply put down the telephone. Less money spent on pollsters that optimize advertising messages is a net gain.
Even if political advertising produces a little more informat voters, I find it unlikely that the money is as well spent as money on a GiveWell recommended charity.
GiveWell’s top recommended charity is giving direct aid to poor Africans. This may make their lives more pleasant, but is very unlikely to have any long-term effect—Africa is poor because it has bad institutions, not inadequate consumption. In 30 years time, GiveWell will still be trying to find ways to alleviate African “poverty,” but will that word mean near-starvation, or something akin to the lives of poor Westerners today? That will be determined by the rates of economic and technological growth for the world as a whole, which in turn are critically influenced by public policy in the First World. Public policy in (broadly-defined) Western countries is the most important issue facing mankind today, and even small improvements are therefore worth vast sums. My own altruistic giving is entirely to a domestic political party for just this reason.
Furthermore a lot of TV ads don’t really inform and aren’t completely honest. Watching a news show is more likely to inform than watching a campaign ad.
But a lot of news shows don’t really inform and aren’t completely honest, so your conclusion doesn’t follow. Campaign adverts allow politicians to get their message out unfiltered by the news media—which has its own agenda. This is particularly important for anti-incumbent politicians. Advertising turns information presentation around elections into a properly adversarial process. If information only goes through the news media, that crucial element is often lost, and with it much of the accountability of elections.
Polling that interrupts people also steals them valuable time and many people are too polite to simply put down the telephone.
Oh come on, this is marginal at best. Did you object to the census on the same grounds, or is this just mood affiliation?
Less money spent on pollsters that optimize advertising messages is a net gain.
Well yes, ceteris paribus. But presenting election information in a way that doesn’t speak to the electorate is a net loss, ceteris paribus. I complained the other day that you can make anything look good under “benefit analysis”—here we have the converse, a “cost analysis.” We do both sides of the cost-benefit analysis for a reason.
GiveWell’s top recommended charity is giving direct aid to poor Africans. This may make their lives more pleasant, but is very unlikely to have any long-term effect—Africa is poor because it has bad institutions, not inadequate consumption.
Have you looked at the actual arguments put forth by GiveWell? The money isn’t mainly used for consumption but often used by people to start businesses that they otherwise couldn’t start.
Empowering individuals to start businesses has advantages over funneling money into bad existing institutions.
Campaign adverts allow politicians to get their message out unfiltered by the news media—which has its own agenda.
I do value checks and balance and I don’t want unfiltered lies.
But presenting election information in a way that doesn’t speak to the electorate is a net loss, ceteris paribus.
The problem is that the value of the time of the person answering the phone isn’t priced into the calculations of the person running the query.
Oh come on, this is marginal at best. Did you object to the census on the same grounds, or is this just mood affiliation?
I think the census does provide valuable data. More targeted political ads don’t provide much value.
Consider your own analogy to commercial advertising. Suppose Coke and Pepsi signed a compact to reduce their advertising expenditures by a specified amount; would you suppose that to be good or bad for the consumer?
I’m not sure whether all the advertising is just about choosing between the two brands. A costumer might drink many different beverages besides Coke and Pepsi.
I definitely agree with the line of argument that advertising is a public good, because it leads to more informed consumers, and I am highly sceptical of knee-jerk claims that it is a negative-sum arms race. So at least we’re both consistent!
However, I don’t think that advertising (whether commercial or political) should be subsidised, because I think the government is very bad at encouraging public goods. My point was merely that HonoreDB’s charity, although no doubt well intentioned, appears to me to be destroying value, rather than creating it...
Consider your own analogy to commercial advertising. Suppose Coke and Pepsi signed a compact to reduce their advertising expenditures by a specified amount; would you suppose that to be good or bad for the consumer?
I don’t think that agitprop and/or advertising leads to more informed voters/consumers because its purpose is not to inform. Its purpose is to manipulate, to force the subject to a certain opinion by all means necessary. Any “informing” that happens is entirely coincidental and, depending on the circumstances, could be considered a feature or a bug.
In local terminology, advertising tries to change the map in your head and the main feature of the one it wants to install is that it shows all paths leading to the same place, the one conclusion that it wants you to make. An accurate map is bad from the advertising point of view and needs to be replaced. In the service of this goal the advertisers can and do use biases and fallacies, they spin, mislead, and obfuscate, and on occasion just lie.
Economically—good. Psychologically—I don’t know. People like to be told what to prefer :-/
Wow. Let’s just say we’re very far apart on this.
There’s a wealth of law and economics literature about the effect of advertising, which demonstrates that advertising bans hurt consumers and help producers—see for example this classic. An agreement within a cartel isn’t the same as a legal ban, but we should surely expect it to have a similar effect—especially given that many real-world advertising bans were lobbied for by major incumbents. Do you have any rationale for why you think consumers would actually benefit?
I was inviting you to consider what I considered an obvious cartel behaviour aimed at suppressing consumer ability to get the best deal. But bravo on biting the bullet!
First, we were not talking about legal bans (which I am generally not in favor of).
Second, you have to be quite careful here not to confuse “advertising” and “intensity of competition”. I have no doubts that reducing the competition hurts consumers, but I am not convinced that reducing advertising expenditures necessarily leads to reduced competition. I suspect that these two things are often conflated (and the causation flipped).
In this particular case, do you think that if both Coke and Pepsi reduce their advertising budgets by, say, $10m each, the consumer will be hurt economically? What is the mechanism for that?
Third, are you implicitly claiming that the current level of advertising expenses is optimal? If we accept your thesis and start to increase advertising, will there be some point when the curve bends—the advertising becomes excessive? Presumably so. Where are we with respect to this point? How do you know?
Plain-vanilla cost savings some which will be passed on to consumers.
Huh? I walk into a supermarket and look at the prices of Coke and Pepsi which are there side by side. I know from experience to which degree I prefer one over another. How will advertising help me get the best deal?
Glad to hear it. Do you agree with the wealth of literature showing that bans on advertising are bad for the consumer? And do you agree that a binding agreement within a duopoly would have a similar effect to a legal ban?
Yes, I think the consumer would be hurt. Advertising alerts us to new products, changes to existing products, and changes in the terms (eg price) under which those products are sold. Let me give you two examples of Coke/Pepsi advertising and how it affects me.
Where I live, Coke produces a wide variety of products, and is constantly adding more. Currently, they are heavily advertising their new “Coke Life” product, which has a different kind of sweetener, and a slightly different taste. If Coke had a smaller advertising budget, fewer consumers would be aware of this new product and what it’s about, resulting in loss of the potential consumer surplus from drinking the new product among those who prefer it to other Coke or Pepsi products.
In addition, Coke frequently has promotional offers on. Just walking into the supermarket and look at the prices is inadequate, I specifically go there to buy Coke because of the promotional offer. Otherwise I might miss out. And I know about the promotional offer because of advertising. In the absence of this, consumers would have to go to the supermarket on a much-more-frequent basis, just to check the price of Coke. This would be a loss.
I am claiming that, given that the current level of Coke vs Pepsi advertising is the result of adversarial competition in a free market, I think there’s a very heavy burden on people who claim it’s “too high” (or “too low”). I am not claiming that it’s “optimal” by everyone’s idiosyncratic criteria.
Why on earth would the cost savings be passed on to consumers? Do you think Coke or Pepsi is sold at marginal cost? This is a market with unique products and partial substitution, so these companies are price-setters, not price-takers. This saving would just increase their profits.
You seem to be making a fundamental assumption which I disagree with. You are assuming that what is best for the producer is best for the consumer and that increased consumption is a public good. You are assuming that we are dealing with homo economus who decides correctly and for whom more information is always a good thing. We are dealing however with homo sapiens, who can be easily led into things against his best interest. I do not think your basic assumption holds and I point to the massive increases in obesity which have benefited producers (more demand) but not consumers (die sooner) as evidence. To use the specific example you’ve been using, coke is rather unhealthy, being mainly simple sugars which have been proven to lead to obesity in sufficient quantities. Its consumption is kept well above the normal set point by advertising and I think this is a negative thing on the whole.
However, the issue has become sidetracked in economic minutiae. The real question is this: Is campaign funding a greater or lesser good than effective altruism. $1000 to Malaria Foundation provides 20-100 DALY, as Yvain said higher up. I find it spectacularly unlikely that $1000 spent on TV adverts extolling the virtues of a candidate and lawn signs showing his face can provide a similar benefit or even one within the same order of magnitude. This is especially relevant when half comes from each candidate.
So, the ball is in your court.
Who decides what the “best interest” is?
I honestly couldn’t say. In the borderline cases you would presumably need some kind of impartial observer with sufficient specialist knowledge. Luckily, I don’t have to worry about borderline cases because the three cases we have here are fairly obvious. For an example of an obvious case of homo sapiens being led into things against his best interest consider smoking. It is extremely rare that smoking is in anyone’s best interest given the high cost in both money and years of life such a habit entails.
I feel that’s a major issue you’ll have to face.
Sure. People have smoked a variety of dried plants (including but not limited to tobacco and marijuana) for a very long time. Much, much longer than advertising has been around. So, what’s the “best interest” here, who decides what it is, and who “leads” people into something against their best interest?
Note, by the way, that if you honestly can’t say who decides what’s in a person’s best interest (other than herself, of course) then the phrase “It is extremely rare that smoking is in anyone’s best interest” doesn’t mean anything.
Ideally I would measure best interest compared to the human utility function, but we do not have the luxury of a fully unpacked utility function. In the mean time I’ll just go with (length of life x happiness) - (very large number x atrocities committed). As to who leads someone against their best interest, that would be advertisers as the agents of companies who wish to sell people things. Some advertisers also move people towards their best interest. The point is that the best interest of the buyer and the best interest of the seller are rather disconnected and intersect rather randomly. The best interests of the people being sold to are far less relevant to the people doing the selling than the amount of money a person can be persuaded to spend.
Edit: I feel like this would be a good place to put a chart of cigarette usage by % of population over the years. At current time, 42% of people smoking have tried to quit over the last year. I feel like this is fairly conclusive: these people are acting against their own self interest
Have you read any behavioural economics? These are rather central things to the theory and there are books out there that can explain this a lot better than me.
Also, we’re getting sidetracked again. I thought the whole advertising thing was just a useful example to talk about the original disagreement about charity vs giving to political parties.
It doesn’t look like you’ve read my post. Who leads this guy, for example? People like him have been doing this for hundreds of years at least.
Yes, I have. I understand how people can be influenced. I still don’t understand how someone is going to decide what is in, for example, my best interest.
No-one decides what is in the best interest of a singular person except that person. This kind of stuff is only really applicable to large populations where you can shift the conditions to raise or lower usage by 10% by raising barriers against harmful activities and lowering them for beneficial activities. By raising barriers I mean for example increasing the cost of cigarettes through taxes while increasing knowledge by printing cancer statistics on packaging, an effective strategy that the UK has been using for a while now. Applying it to singular people involves far more direct intervention than most people are willing to deal with and tends to cause problems. I am essentially espousing soft paternalism.
That guy is smoking a tobacco cigar in India I assume? He is influenced by the people around him who don’t know how much damage is done by smoking, by the ready and cheap availability of the thing he wants to smoke, by the physical addictiveness of the plant, by the status change associated with smoking (positive or negative) and by his own state of knowledge about the effects of his actions. People like him have been doing this for hundreds of years and it was a reasonable choice given the knowledge they had because no-one knew that it was dangerous and caused cancer. Now the knowledge exists, and it has become clear that it is a bad choice. It has negative utility.
I did read your post. I couldn’t figure out where what you were getting at. I was honestly wondering if you were trying to use Socratic method on me or something. Your point was not clear to me, it still isn’t. Could you clarify?
Empirically that’s not true. There is a large number of laws and regulations, for example, which claim to exist in my best interest—from the seat-belt laws to the FDA.
So are the, ahem, implementation difficulties are the only reason why you espouse soft paternalism and not hard? If applying “this kind of stuff” to individual people didn’t cause problems, would you have issues with it?
My point, stated bluntly, is that no one is qualified to judge what is in a person’s best interest except for that very person. And given that it fails on the individual level, it fails on the aggregate level as well.
A side theme here is that I highly value autonomy and am quite suspicious of paternalism.
Ah, right you’re talking about the specific practical implementation of these things. My bad. I don’t have a better model than the current one kicking about, that’s for sure. The ideal of the current model in my country (the UK) is that the scientific community figures out what things are unambiguously helpful and unambiguously harmful and legislation is enacted to maximise and minimise those activities. More ambiguous things don’t tend to get legislation enacted. That the actual implementation of the model falls short in a number of ways is obvious and unfortunate, but I don’t know enough about the subject to propose a better solution. If you have one I would be interested to hear it.
For it not to cause problems people would have to be fine with an outside force making a large number of their decisions for them. It appears to be an inherent human trait to dislike excess meddling by any outside force so I’m not entirely sure that such a population exists. This may simply reflect a western view of looking at things though, my knowledge of the mindset of Chinese people for example is obviously insufficient.
I would still have one issue with it even if people didn’t mind being meddled with. Hard paternalism implies bans on things, hard rules that are not allowed to be broken. There are almost always situations where the reasons behind a rule do not apply. With hard paternalism a person would be prohibited from doing something even when it made sense in that specific situation.
You’ve been blunt with me so I’ll do you the same courtesy. People are bad at judging what actions maximise their own best interest. I believe that a majority of people are highly effected by the environment in which they make their decisions and can be induced to make different decisions, good or bad, through clever manipulation. Most people do not have the knowledge to deal with manipulation like this in an effective manner. It is an asymmetrical fight, because advertisers can apply whole departments of people and the latest knowledge of neuroscience to manipulating the inherent biases of the human brain while normal people devote very little or no time to countermeasures. As the knowledge and money base of advertising increases I would expect people to be more and more swayed.
I will give some specific examples and predictions to bring this back to earth. If healthy food was cheaper and as easy to prepare as unhealthy food, a country would have a healthier populace of a lower weight and live longer. If soft drinks high in fructose and other simple sugars were advertised less, diabetes rates would drop. Some examples of things known to work: When cigarettes were made expensive and the health effects well known such that people who decided to smoke were regarded as silly, cigarette use decreased so did lung cancer (after an appropriate time lag). If pension payments are made automatic as part of a pay cheque and employees simply have to check a box to opt out, employee pensions savings increase.
The idea of soft paternalism is to discourage bad decisions while still allowing them to be made. It is to make the right thing to do, the easy thing to do. The barriers against bad decisions are intentionally low such that anyone with a good reason can circumvent them. This allows policy makers to improve people’s lives en mass without actually curtailing any specific person’s autonomy very much. This has the useful side effect that if a bad decision is made by the government people can route around it with comparative ease.
By the way, that pattern of highly valuing autonomy and intense suspicion of government intrusion is something I find extremely common in US Americans, but is comparatively rare in my country the UK. I would be interested to talk to you about possible causes if you’re up for it. My immediate thought is that the US government has given people more reasons to distrust it but I would much rather know your thinking, seeing as you live there.
A few general points.
We don’t live in an idealized environment where our society is ruled by benevolent philosopher-kings or run by bodhisattva mandarins. The government consists of elected politicians and unelected bureaucracy of civil servants—all of them human, always prone to mistakes, not always having the best intentions, corruptible by power, having their own incentives, etc. etc. The question of the appropriateness of soft paternalism has to be evaluated in the context of real political systems where the chances of the paternalistic tools being misused or abused are high.
Yes, people are bad at judging what’s in their best interests, but there’s no one who is better. There are lots and lots of examples, historical and more recent, of situations where some authority decides it knows what’s better for the people—and then it turns out that isn’t the case at all. So the next authority (or even the same one) says sorry, carts out the corpses, cleans up the mess a bit, and then says “ah, but now we certainly now what is best for you!”. Rinse and repeat...
In the same vein you posit that regular people are defenceless against advertisers, but they are defenceless in the same way against government propagandists as well. In fact, paternalism legitimises the idea that people are sheep in need of a leader, they cannot be trusted to arrange their own affairs. Infantilising the populace is a very seductive political technique.
You can probably google up discussions of this topic, it’s not an uncommon one. Off the top of my head I can come up with:
Genetics: the subset of the population that had… difficulties with the King and the Parliament actually left the UK—and a large part of these rabble-rousers landed in the US.
More genetics: the US is a country of immigrants—almost all Americans descend from ancestors who decided to leave their country and their government. That is indicative of high autonomy and not trusting your (former) government much :-)
Population density: the higher it is, the more unity and cohesion the country needs and enforces. If you have family homesteads situated miles from each other, they don’t need to agree on much.
History and traditions: the UK had centuries to instill obedience to authority into its population, the US started as a colony which didn’t like its metropolis much :-/
The US political elite hasn’t been able to perfect that patronising look that goes so well with the proper upper-crust accent :-P
From the American perspective, the situation over the pond looks like an unmitigated disaster. Between the ever-present cameras, the ASBOs, the terrorist-sympathisers legislation, etc. things are looking bloody awful over there...
To be quite honest I’d trust my government to do soft paternalism but not yours.
Do you know what’s fascinating? We have an almost identical view of your country from over here, what with the rampant abuse of power among policemen, the massive online data mining, the gun crime, the bizarre and aggressive politics where shouting louder seems to be considered legitimate. And the tv news, it’s just astounding. I’ve watched Fox and it is just bizarre, with people actually shouting at guests, belittling respected experts who were asked onto the show, cutting their mike when they start to disagree. Anyone who tried that here would be out of a job in short order. CNN may be better but they are still hilarious in a number of ways. That filibustering doesn’t get a politician voted out instantly was originally shocking to me.
I could go on for a long long time. Suffice to say, the UK is actually doing pretty good. We have a few problems but they aren’t the ones you’ve head about in the news. The ever present cameras have not been abused and are generally only used when a crime happens to have been committed in front of them (assault, burglary ect). The ASBOs are no worse than the worse rednecks or people from the ghettos. Also, terrorist-sympathiser legislation? I don’t remember that.
Tell that to the girls from Rotherham. Or does that not count as “in the news” since your news media refused to report on it while is was happening? Not to mention the people attempting to blow the whistle on this back in 2001, were promptly prosecuted for hate speech.
Do you see the problem with this juxtaposition?
I was not trying to say that the idea I had of the US was an accurate one, nor that the UK was some sort of paradise where nothing wrong happens. I was pointing out the general distortion one can expect by relying on news media for an idea of a country. Rotherham for example is a highly charged emotional subject. Trying to get an accurate idea of the actual situation just from exceptions like that is a bit pointless. It works about as well as using the situation in Detroit to judge a whole country
One is a recording in a public place where there is no expectation of privacy, the other is the cataloguing of everyone’s entire backlog of conversations on the internet, including private ones and in some cases encrypted ones. Aside from both fitting the emotional impression of overreaching security state I don’t see that the two are particularly comparable. The potential for abuse is certainly different. Unless there is some abuse case of the cameras that i’m not aware of?
Edit: The US data mining is a lot more comparable to the UK data mining. I believe they are similar. It may just be a failure of my creativity, but I can’t actually think of a situation where cctv footage could be abused to convict an innocent man. Conversely, abuse cases abound for largescale data mining.
A couple of ideas come to mind immediately:
-- Just like reading all your email is likely to turn up something that sounds bad, tracking all your movements is likely, just by chance, to turn up something that looks suspicious; you may have been seen near a known drug dealers’ den, or bordello, or you often visit a person who has been convicted of a crime, or you have been seen near children’s playgrounds too much.
-- Use of the CCTV footage to catch you in a lie—bearing in mind that everyday human life involves telling necessary lies every so often. This can make you look really bad—oh, no, he lied to his wife about where he was, maybe he had an affair. He lied in his political speech—who knows what he was doing in back alleys back then?
-- Using the CCTV to capture images of something that would be embarrassing in public. Of course, you would have to make a mistake to show something private in public, but CCTV has the effect of greatly expanding the effect of such mistakes. Imagine someone caught on camera in bondage gear, or kissing a member of the same sex (or just cheating on their spouse). Or wearing a symbol of a sports team that is accused of being racist.
-- Taking a CCTV image out of context
Of course, you’re being too narrow by asking for a conviction; these can be used to damage someone without convicting him of anything. Driving a politician out of office or blackmailing someone is not convicting him, after all.
Ah, I see it was a failure of my creativity, cheers.
You seem to be arguing that the UK is much better than the US in this regard. In fact similar forces are involved in creating both Detroit and Rotherham. On the other hand, the US wasn’t covering up Detroit’s crime statistics and prosecuting people who tried to blow the whistle.
How so. I can’t think of an abuse case for email reading that doesn’t also apply to the CCTV cameras.
Well I’m not arguing that. The UK doesn’t seem to be structurally much better than the US, I’m no even sure how I’d go about measuring that. Although it is a bit naive to say that the US (or rather the Detroit police force) isn’t covering up some of Detroit’s crime statistics. So far as I’m aware almost any metric used to allocate reward and punishment will eventually be gamed.
Jiro has some nice CCTV camera abuse cases. Online information gathering takes all those abuse cases quite a bit further. Instead of possibly one lie or falsehood or case of wrong/politically damaging information you can probably choose from dozens if you have access to a politician’s online data. Same abuse cases, more ammunition against an average person.
Does it, now? Ignoring the minor matters like recent riots or how you managed to drop considerably below Ireland in GDP per capita, didn’t you recently almost lose a large chunk of the country? And while the scurrying at Downing the week before the referendum when the poll results came out gets full marks for amusement value, it does seem that a bit less than half of all Scots have a problem with trusting Whitehall to do what’s best for them.
Evidently in the UK it’s a crime to write bad poetry about martyrdom.
Consider the probability of almost any other country allowing a free and uninhibited referendum for a section of that country to split off. Texas for example, or Sicily. Consider what it implies about the health of the democratic process that the Scots could vote an independence movement into majority of their government, then have a free and unmolested referendum without one bullet fired and only a modicum of political fuckery. I think that’s a pretty good showing all things considered. Don’t a lot of countries have some ethic group that distrusts the central government? It’s hardly an exceptional situation.
Regardless, the point was not to start a cross Atlantic pissing match over whose country is worse. The point is to show you that the picture you have of the UK is likely so distorted as to be essentially useless. Consider the picture I painted of the US, consider how inaccurate it likely was. That is at least the scale of the mismatch between your map and the territory of the UK. To call the 6th largest economy in the world an unmitigated disaster is plain wrong, the place comes up near the top in nearly any objective measure you care to name.
That’s interesting. Are you quite sure my map is distorted or maybe I just have a different baseline and different framework to look through? How would one tell the difference?
It could be a different framework or baseline, but I find it more likely that you’ve been given incomplete data. I’m assuming you’ve gotten most of your information from news stories and articles? Unfortunately I can’t think of a way to fully check without physically visiting the country to see if it matches or not. The next best thing would be watching some boring bbc news coverage, but even that would be mildly sensationalist by comparison to normal life. You can’t go by my experience because I’m not a fully trustworthy source, despite my attempts at rationality.
Comparative statistics maybe? Figure out what objective measures you’d expect the UK to do well or poorly on based on your current map then look them up. See if there are any US cities you do know that turn out to have similar measures then use the comparison to update based on the new information. Seems like the best bet anyway.
The same is true of the US. The difference is that Americans have a lower tolerance for “government doing bad things to other Americans”, whereas your attitude seems to be “it doesn’t count unless it happens to someone I personally know”.
There’s a difference in the magnitude of the sensationalism and the professionalism of the news between the two countries. The UK is rather lucky in that regard.
My attitude is that the magnitude of the individual wrong has to be multiplied by the number of times it actually happened to be properly understood. The actual physical threat of terrorism, for example, is largely irrelevant in my reckoning of the country. Last time I did the math it turned out to kill less than 10 people a year on average in the UK. I had a look down the NHS data for death rates and found multiple diseases I’d never even heard of that killed more people, so I decided that terrorism itself was largely unimportant. The reaction to terrorism is the only part that has relevance. I have a similar attitude about most overblown societal problems. The news may be attempting to convince my lizard brain that the world is spectacularly unsafe but the actual statistics suggest I live in one of the safest countries in the safest period of human history.
Edit: Forgot to specify that it was the TV news that was good. The papers can be pretty variable, from good to terrible.
Is there, really?
Apologies, I meant the TV news. The papers can be pretty terrible
Um, I’ve been to the UK multiple times and some of my relatives lived there for a while :-/
Which bits did you visit? How did things seem while you were there? Unmitigated disaster or just kind of average?
A variety of bits, Midlands is the major area where I haven’t been.
See, that’s what I mean by different baselines. It looks like to you life is fine as long as you or your friends aren’t dragged off in chains and sent to the salt mines. Of course UK is a first-world Western European country with all that it implies. It’s not Zimbabwe. But then by similar criteria places like, say, post-Stalin Russia were also “kind of average”. For the great majority of people life just went on and nothing terrible happened. Unless you were part of specific social groups, things looked fine.
I’m not saying that the UK is on the verge of tranforming into an Ingsoc society, but from the individual freedoms and civil rights point of view, it has considerably degraded and is looking pretty bad. Of course if you don’t care about such things much, well, you don’t care about such things much.
I do care about such things, about as much as I care about the total prosperity of the group. In my utility function they are approximately equal. I am worried about the erosion of civil rights, not because they are being misused much now or because of any inherent beliefs about human rights but because of the potential for abuse later down the line. The way I see it laws that give a particular position unrestricted power without independent checks and counterbalances are problematic in the long term. As time increases to infinity the probability that such power will be abused tends to 100%. That is, eventually a particularly misguided or sociopathic or mentally ill person will eventually end up in that position.
It’s also why I think large scale data mining is more dangerous than CCTV cameras. To abuse CCTV you need to change the laws to make new things illegal, you can’t do it as one person. To abuse data mining all that is required is for the head (or sub head) of intelligence to get the records of every current and prospective politician then threaten to leak certain uncomfortable details at key times. Most people have something online that would interfere with political election. Too much power in one person with too little oversight. The potential for abuse is huge.
Apologies about my manner this past while. I’m still getting used to people attacking my ideas without attacking me. Historically the two have been correlated in other webforums and I’ve not yet convinced my brain to give up the link. You know, I’m curious about what your favoured policy is. You don’t like soft paternalism, what system do you go in for?
I think we are in agreement about that.
It’s a false dilemma, there is absolutely no reason why we must have one or the other and so must choose the lesser evil. We can choose none. Of course, in reality it seems we will get both.
I don’t expect there is significant difference in large scale data mining between the US and the UK. The NSA and MI5 are best buddies :-/
Nope. You only need to to see compromising (not necessarily illegal) information. If you capture footage of a minister going to visit his mistress, that’s not illegal but that’s useful blackmail material.
No apologies necessary, that has been a pretty polite debate (by the internet standards, at least :-/) so far.
I hesitate to declare allegiance to a particular system, but my favoured direction is allowing people to do stupid things and then reap the consequences. I think autonomy trumps optimality.
I agree with every point you just made, good catch on the false dilemma. Apart from the last one, I hold small reductions in autonomy which give medium sized or greater increases in optimality to be allowable. I suspect this difference may stem from a divergence in upbringing and culture.
Out of curiosity, how does allowing people to do stupid things work exactly? Zero tax on alcohol? Cigarettes advertised openly and sold at market rate? What does the implementation look like and what consequences do you expect?
That is likely :-)
In the usual way. Have you forgotten what freedom looks like?
Haha, oh you rapscallion. But seriously, freedom can be used to argue for almost every angle of any possible debate. Freedom from taxes, freedom from bandits (by way of increased taxes) ect. I can’t really model it except as a cross between an applause light and a mental category masquerading as something implicit. In a very real sense I never knew what freedom looked like in the first place. It is a chimera.
One should not miss an opportunity to properly use a pithy phrase :-P
Your question is way too broad, though—I’m sure you’re capable of imagining a world with zero taxes on alcohol, for example. What do you mean? To foreclose unproductive avenues, I’m neither an anarchist nor a big-L libertarian—I do not seek to do away with the state.
I’ll be narrow then: what are some specific examples of policies that allow people to be stupid (or smart) and reap the consequences?
Um. Allowing people to go climb mountains just because they are there? Allowing people to marry who they damn well please? Allowing people to play or avoid lotteries?
Huh, I was expecting no speed limits on certain roads or shops that sold dangerous drugs legally or even just the reversal of what I was saying about cigarettes earlier. Without a tax on cigarettes you necessarily end up with packs of cigarettes for 80p. Then again you did say you were hesitant to declare allegiance so I’ll not push you about it. It is kind of puzzling to have an idea torn down but not be told what the tearer would rather replace it with though, normally they go hand in hand. I am not used to that.
Future is uncertain and I am not wedded to ideological absolutes. I have a good idea of the direction I want to go, but not so much about the place where I would stop.
For example, I want a smaller, weaker government compared to what we currently have, but I don’t know how small and weak until we try some experiments and see how they turn out (not that I’m holding my breath). Testing by reality is paramount and I see little use in imagining grand social structures—that killed enough people already.
Fair doos, it’s been nice talking to you. Considering how active you are I’m sure we’ll run into each other again
You have chosen examples where the status quo is a restriction. Lumifer has chosen examples where the status quo is no restriction. That is, you have both chosen examples that point in your respectively favoured directions.
I’m not sure I have on all the examples. Cigarette price hikes are status quo, as are (kinda) soft drinks but the rest don’t seem to be. The no speed limits for example is illegal in most countries apart from Germany with the Autobahn. Interfering with food prices and availability to massively favour healthiness is not done in any country that I’m aware of. It certainly couldn’t be called status quo or else crisps would cost £3.50 while healthy microwavable meals would be £1.
Unless I’ve misunderstood you?
Well, given the free speech laws of the UK (or rather lack thereof) I think your existing laws are bad enough.
True but irrelevant. I am not making a comparison between the UK and US laws.
“Intentionally low” barriers have this way of expanding when the people who put the barriers in place either find they don’t work to keep people away, or stand to benefit from making the barrier stronger.
Also, you’re still forcing your decision on people who are poor enough that they can’t afford to get across the barrier easily. (Whether that happens, of course, depends on the exact barrier used.)
You’re right and yes, I am. That’s the downside really. Policy debates should not appear one sided and all that. The upsides appear to outweigh the downsides from where I’m sitting. I just haven’t come across a better system yet and I don’t plan on waiting generations for AI to find an answer for these questions.
I measure a slightly reduced autonomy in areas of obvious harm to be a lesser downside than increased death rates.
It goes back too far for that. I would suggest it goes back to distrust of the British colonial government. A country formed by rebelling against the government is going to end up distrusting government more.
I was thinking more about events during the lifetimes of people actually alive today. Being taught about the struggle against the British from a young age would count.
However, I’ve just realised that this entire line of reasoning is extremely speculative and my probability of being right is small. Probably best to scrap the line of discussion.
How about, being immersed in a culture where the standard story is of a noble rebel fighting against an oppressive government?
I am not sufficiently familiar with it and, frankly, I don’t care enough about the topic to go read a bunch of economics papers and then fisk them. My data-less suspicion is that bans on advertising are a consequence of reduced competition and/or near-monopoly behavior by incumbents, just a harm to consumers is also a consequence of the same thing, and people misinterpret the correlation between “less advertising” and “harm to consumers”.
So, you pointed out the benefits. What about costs? Why do you believe the benefits are higher than costs?
Also, you’re ignoring the advertising for established products, as well as for failed products (e.g. the New Coke).
Note that I’m not saying that all advertising is harmful and that zero advertising is the desired state. I am saying that my best guess at the “optimal” point (which balances costs against public benefits) is such that I think the current levels of commercial advertising are above that point. Reducing advertising would get us closer to that optimum—though, obviously, I don’t know where exactly it is.
Of course the optimal point which balances costs against public benefits is different from the optimal point which balances costs against the firm’s benefits.
Let’s not get quite this ridiculous X-)
That’s a cop-out :-) Besides, adversarial competition in a free market optimizes for the firm’s benefits from advertising, not for the public benefits.
Because, as you mentioned, there is “adversarial competition in a free market”. That includes price wars, promotional coupons, etc. By your logic, there should never be promotions for a product—why lessen your profits for no good reason?
But I don’t see costs to consumers here. Savings would not be passed on to consumers (see below), so what is the problem? That some people find the adverts annoying? Sure, but others find them entertaining. Coke in particular has had many adverts that have entered public consciousness.
This is exactly the kind of claim that I think should have to face a very heavy burden. Your WAG (which you cheerfully admit is not based on a careful reading of the literature) is that the public costs of advertising (which you do not specify) are greater than the (equally unspecified) public benefits. Because you can’t specify or quantify any costs or benefits, you can’t say how much you’d like to reduce advertising by, but it’s just got to be reduced, dag nabbit!
So? That only implies that firms pass on cost savings if we have perfect competition (driving price down to marginal cost). If you have imperfect competition, firms are (at least partially) price-setters, not price-takers, and set price based on demand, to maximise profits. For an extreme example of imperfect competition, a Damien Hirst artwork that was cheap to make doesn’t necessarily sell for any less than one that was expensive to make. For a standard example of (pseudo-)perfect competition, see petrol—it’s an essentially indistinguishable commodity, so all petrol stations sell it at basically the same price (small changes based on location), and cost rises/falls are passed on to the consumer.
On the contrary, promotions for a product are an excellent sign that you don’t have perfect competition—that’s why you never see a sale on petrol (see above). Companies run promotions because they are selling well above marginal cost, but they want to be able to price-discriminate to make additional profits. For example, suppose I am selling Coke, and there are two people, Alan and Bob. Coke costs me 10p per litre to produce. Alan values Coke at £2.50 per litre, and would like to buy 1 litre per day. Bob values Coke at 60p per litre, and would like to buy 1 litre per day. So I price the Coke at £2 per litre, and make £1.90 (Alan pockets 50p consumer surplus, Bob doesn’t buy). That’s more profitable to me than pricing the Coke at 50p per litre, because although I’d make an additional profitable sale to Bob, it would reduce my profits from the Alan transaction by more. What I really want to do is sell Coke to Alan at £2 per litre, but Bob at 50p per litre, and that is where promotions etc come into play. Ideally I will find a way to advertise my promotion to Bob, without letting Alan find out.
I don’t know what you mean by ridiculous. I buy a lot of Coke, but I am a thrifty shopper. I carefully collect coupons etc for discounted products (not just Coke) to take advantage of the cost savings, and buy staple products like Coke only when they are on promotion. In the absence of advertising for discounts etc, I definitely would go to the supermarket more often to check for offers. This would be an annoying waste of my time. There are plenty of other people like me.
I feel there’s some disconnect here. Advertising costs are effectively paid for by consumers so of course the magnitude of these costs impacts the consumers. Imagine them doubled or quadrupled—you don’t think this would result in higher prices? Or do you believe the prices to be a ratchet going one way only so that reduced costs never lead to reduced prices?
Since it’s the consumers who pay for advertising, the direct public costs of advertising are pretty easy to estimate: that’s the revenue of the advertising industry. You can, of course, then start adjusting this number is a variety of ways.
Public benefits, I have no good estimate for.
My WAG is, of course, a WAG, but I don’t see why your position that the level of advertising expenses happens to be optimal for the public benefit should enjoy the advantages of being the default baseline.
The reasoning behind my estimate is pretty simple. Firms set the levels of advertising expenditure based on their estimates of the benefits to the firm. My assumption is that any advertisement brings more benefit to the firm which places it than to the public at large. Given this, the market-determined level of advertising is going to be too high from the public benefit point of view.
Yes, of course, and it’s a very complicated process which depends a lot on the particular details of the industry. However I find the blank assertion that the firms will not pass any cost savings onto the consumer (especially in a highly competitive industry like soft drinks) to be not tenable. There is the market force pushing prices towards the average (not marginal) cost and while it may be counterbalanced by many things it’s still there. Look at, say, electronics—as the costs drop so do prices.
I understand price discrimination, but that’s irrelevant for the subject under discussion which is whether the consumer will ever see part of the cost savings.
Going to the supermarket “on a much-more-frequent basis, just to check the price of Coke” implies a ridiculously low value of your time. I don’t know of anyone who goes to the supermarket just to check prices on soft drinks. And in this particular example we’re talking much more about information rather than advertising. To illustrate the difference, if you subscribe to receive emails about Coke promotions that would get you all you need. Expensive video clips showing attractive women orgasming as Coke touches their lips are pretty useless for your purposes.
You keep asserting this. You provide no evidence or argument that it’s true. I agree that advertising costs are likely to be paid for by consumers in (say) the petrol market, although given that market is complicated by franchises, even there it may not be true. I think they are very unlikely to be paid for by consumers in markets featuring (partial) monopolies, such as Coke/Pepsi. So no, I don’t think that if Coke quadrupled its advertising budget it would be able to pass on the cost to consumers.
You seem to think the soft drink market is “highly competitive.” And you’re right, in the sense that everyone is trying to bring the best products to market, to make a profit. But you’re wrong, in the sense that the products are not direct substitutes in terms of consumer experience. Coke does not taste the same as Pepsi, and only the Coca-Cola Corporation knows how to make Coke. This is why Coke can sell their product for twice the price of some supermarket own-brand cola; they are earning rents on their intellectual property. The same goes, to a lesser extent, for Pepsi. This is a partially-monopolistic market, very different from the market for electronics, where the products are functional substitutes, and so are close to commodities, and indeed, cost savings are passed on.
And note that we see the most advertising precisely in partially monopolistic markets, and very little in commodity markets, precisely because of the effect on prices.
I am sorry, but what other options are there? The advertising costs are paid out of interest on the firm’s bank balances? Out of tax subsidies? Out of charity donations?
The firm’s costs are paid out of the firm’s revenues. If the firm’s revenues come from selling things to consumers, the consumers are paying for the firm’s costs—all of them, including production, distribution, advertising, office space, janitors, and executives’ membership in the golf club. The consumers get the product in exchange, of course.
As you mentioned, “You keep asserting this. You provide no evidence or argument that it’s true.” Let me provide a counterexample.
Many fast-food chains have exclusive contracts with Coke or Pepsi. McDonalds, for example, serves only Coke. Given this, you can directly observe whether Coke is accepted as a substitute for Pepsi: often enough at the counter you can hear the following exchange:
-- What’s your drink?
-- Pepsi (automatic answer as that’s what the person is used to drinking)
-- Sorry, we have only Coke.
And at this point the customer can either accept the substitution (and say “Coke is fine”) or decline it (and say “I’ll have X instead”). I don’t have actual data, but I’ve seen this case happen many times and the number of people who will accept Coke is much higher than the number of people who will refuse it.
Coke and Pepsi are functional substitutes. They don’t taste exactly the same, but then Samsung’s and HTC’s phones don’t look and behave exactly the same either.
Citation needed. Advertising is basically buying market share. I would argue that we see most advertising in highly competitive markets where you can buy market share. That means that you can differentiate your product and convince part of the public that the product is better than the other guy’s and not just because it’s cheaper. And I’m not willing to call all markets with differentiable products “partially monopolistic”.
Your ability to persuade an average bloke that petrol of brand X is better than petrol of brand Y is limited. Therefore your ability to buy market share is limited. Therefore you don’t spend much money on advertising. But you ability to persuade the same bloke that beer X is better than beer Y is much higher. Thus you can buy market share and advertising beer is worth it (for the firm, of course).
Out of the firm’s profits.
Yes, this is true, in a sense. But it says nothing about what changes when one of these costs change. If the cost of office space increases, does that raise prices for consumers, or does it mean the firm has less to spend on golf club membership, or a mixture, or what?
Consider the toy example I gave above when I’m selling Coke to Alan and Bob—if you recall, I set the price at £2 per litre, and am making £1.90 in profit. Now suppose I start spending £1 in advertising. Do I raise the price to £3? Nope; I already set my price at the level that would maximise my revenues. It just means my profits are now only 90p.
Regarding substitutability: yes, Coke and Pepsi are partial substitutes, and electronic goods are not completely commodities. But Colas are much less substitutable than Samsung and HTC, or Dell and HP. The question is one of degree.
So try a model where all cola costs 10p a litre to produce, Alan values Coke and Pepsi equally at £3 a litre, Bob and Chris value Coke at £3 a litre, Pepsi at £1 a litre, and Dave and Edward value Coke at £1 a litre, Pepsi at £3 a litre. In equilibrium, how much will Coke sell for? How much will Pepsi sell for? Now suppose Coke and Pepsi each spend £1 on advertising. How much will Coke sell for? How much will Pepsi sell for?
Yes, we see advertising in “competitive” markets in the sense you are using (which appears to be something akin to “contested”), but not in the economic sense of “perfect competition” i.e. commodities. You are not disagreeing with me there. You may not be willing to call markets with differentiable products “partially monopolistic”, but I’m afraid I’m using standard usage. See e.g. Wikipedia:
You should also note that as advertising is a fixed cost, not a marginal cost, so it wouldn’t affect the marginal cost anyway...
Unfortunately I feel like I’ve reached the end of the line trying to explain this to you.
Bollocks. Profits = revenues—costs. You can’t pay costs out of profits.
The whole point of advertising is to change that level. You’re spending a pound per litre in order to change the equation which determines the proper price.
If you expect your advertising to reduce your profits why would you advertise in the first place?
Hi you two (Lumifer and Salemicus). A are you aware that you are having a wordy public conversation on a somewhat political topic more than two times deeper than the LW comment thread depth? I had trouble even finding the start of your conversion due to the limits. No one will vote on you and you clutter the recent comments. I recommend to both of you to discuss this as a privat conversation.
As it happens I was finding the conversation interesting.
Thank you for taking the time to giving feedback this deep in the thread (hurray LW notification system). I reconsider my recommendation now. And will look away next time.
I am aware that we are having a wordy public conversation. I don’t consider microeconomics to be political, even “somewhat”. I don’t care whether anyone will vote on these posts or not. As to “cluttering” recent comments, all posts do that. If you don’t want to read this subthread, avert your eyes.
I will avert my eyes. I accept your decision. It was a recommendation and you don’t need to take it.
Hi you two (Lumifer and Salemicus). A are you aware that you are having a wordy public conversation on a somewhat political topic more than two times deeper than the LW comment thread depth? I had trouble even finding the start of your conversion due to the limits. No one will vote on you and you clutter the recent comments. I recommend to both of you to discuss this as a privat conversation.
This doesn’t jibe with my intuition—I think virtually no one would be upset if there were fewer soda advertisements.
Do you think the same is true for iPhone advertisements?
Yeah, I think so. Maybe this is a culture-bubble thing, but I don’t think I know anyone who would notice, much less care, if there were more or fewer advertisements for one particular product or another (ad space, keep in mind, is fungible).
But how will they know which product is cool, that is, is efficient at signaling status?
If it becomes effective at signaling status by being advertised, then the only people who would be disadvantaged by reducing the advertisements would be people who already had iPhones. People with the money to consistently own the newest iPhone surely have other ways of purchasing status, anyway, and would continue to do so even if that status wasn’t assigned specifically through the medium of advertising.
Even if political advertising produces a little more informat voters, I find it unlikely that the money is as well spent as money on a GiveWell recommended charity.
Furthermore a lot of TV ads don’t really inform and aren’t completely honest. Watching a news show is more likely to inform than watching a campaign ad.
Polling that interrupts people also steals them valuable time and many people are too polite to simply put down the telephone. Less money spent on pollsters that optimize advertising messages is a net gain.
GiveWell’s top recommended charity is giving direct aid to poor Africans. This may make their lives more pleasant, but is very unlikely to have any long-term effect—Africa is poor because it has bad institutions, not inadequate consumption. In 30 years time, GiveWell will still be trying to find ways to alleviate African “poverty,” but will that word mean near-starvation, or something akin to the lives of poor Westerners today? That will be determined by the rates of economic and technological growth for the world as a whole, which in turn are critically influenced by public policy in the First World. Public policy in (broadly-defined) Western countries is the most important issue facing mankind today, and even small improvements are therefore worth vast sums. My own altruistic giving is entirely to a domestic political party for just this reason.
But a lot of news shows don’t really inform and aren’t completely honest, so your conclusion doesn’t follow. Campaign adverts allow politicians to get their message out unfiltered by the news media—which has its own agenda. This is particularly important for anti-incumbent politicians. Advertising turns information presentation around elections into a properly adversarial process. If information only goes through the news media, that crucial element is often lost, and with it much of the accountability of elections.
Oh come on, this is marginal at best. Did you object to the census on the same grounds, or is this just mood affiliation?
Well yes, ceteris paribus. But presenting election information in a way that doesn’t speak to the electorate is a net loss, ceteris paribus. I complained the other day that you can make anything look good under “benefit analysis”—here we have the converse, a “cost analysis.” We do both sides of the cost-benefit analysis for a reason.
Have you looked at the actual arguments put forth by GiveWell? The money isn’t mainly used for consumption but often used by people to start businesses that they otherwise couldn’t start.
Empowering individuals to start businesses has advantages over funneling money into bad existing institutions.
I do value checks and balance and I don’t want unfiltered lies.
The problem is that the value of the time of the person answering the phone isn’t priced into the calculations of the person running the query.
I think the census does provide valuable data. More targeted political ads don’t provide much value.
I’m not sure whether all the advertising is just about choosing between the two brands. A costumer might drink many different beverages besides Coke and Pepsi.