Bryan Caplan  

Capitalism: You Look Marvelous

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The most unintentionally funny magazine in the world is Adbusters. The world's got to be pretty good if the only thing you have left to bemoan is Ronald McDonald. The letters to the editor are a scream - the bitterest people alive complaining about the pettiest problems imaginable. But behind all that inadvertant mirth, Adbusters has a theory: Advertising is designed by the greedy corporations to brainwash us into accepting their rule.

Any decent economist can point out the hole in this theory. If the capitalists are so greedy, why don't they free ride? Why waste money making capitalism popular, when your firm captures such a small slice of the benefit? Economist Dan Sutter develops this argument with great panache in his forthcoming book on the economics of the media.

Yet recently I've begun to think that the Adbusters position can be partially salvaged.

Less than a decade ago, I drove from former West Germany to former East Germany, and was struck by how much more beautiful the West was. Houses in the West had flower boxes. Houses in the East did not. I reflected that the aesthetic gap between West and East used to be vastly greater. And I recalled how people I knew who toured the Soviet bloc were more likely to sadly describe the "greyness" of communist life than the machine guns at the border.

The upshot is that the private pursuit of beauty in the West had a striking externality. Every time a West German put a flower box in his window, he was making capitalism look prettier than socialism. And while intellectuals may say they couldn't care less about such things, I suspect that sheer aesthetics changed a lot of minds about East versus West.

What does this have to do with advertising, and commercialism generally? Corporations do not advertise to create support for capitalism, any more than West Germans planted flowers to fight communism. But advertising does more than just sell one firm's products; it also contributes to the beautiful image of the whole system.

Flip through a popular magazine, or wander through your local mall. Even if you don't remember a single product, you get an overall impression of a world that is colorful, fun, glitzy, and sexy. And that probably leads more people around the world to admire capitalism than Milton Friedman ever did.

In other words, Adbusters is right to insist that advertising persuades people to like capitalism more. It does. But contrary to Adbusters, the corporations don't intend to do it. It just so happens that in their quest to make a buck, corporations make the whole capitalist system look marvelous.

If you share Adbusters' anti-capitalist ethos, this will just cement your desire to squelch advertising to help make capitalism as ugly on the outside as it is on the inside. But if you appreciate the benefits of the free market, you've probably been underestimating the social benefits of advertising. After all, if the real arguments for capitalism fail to persuade, it may win anyway just for being so good-looking.


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TRACKBACKS (12 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/311
The author at The Club for Growth Blog in a related article titled Thursday's Daily News writes:
    Lessons on CAFTA - Washington Times Editorial DR–CAFTA Yes, Sugar No - Daniella Markheim, Heritage Congress Should Extend Bush Tax Cuts - RMN Editorial Why The Estate Tax Should Be Repealed - John Tamny, NRO Of Taxes and ‘Treason’ -... [Tracked on July 14, 2005 9:01 AM]
The author at Right Mind in a related article titled Capitalism: You Look Marvelous writes:
    TITLE: Capitalism: You Look Marvelous URL: http://right-mind.us/archive/2005/07/14/34658.aspx IP: 198.206.162.134 BLOG NAME: Right Mind DATE: 07/14/2005 12:22:51 PM [Tracked on July 14, 2005 12:22 PM]
The author at Ed Driscoll.com in a related article titled Capitalism: You Look Marvelous! writes:
    Economics professor Bryan Caplan explains the beauty of advertising to Adbusters magazine:Less than a decade ago, I drove from former West Germany to former East Germany, and was struck by how much more beautiful the West was. Houses in the... [Tracked on July 17, 2005 3:42 PM]
The author at The Club for Growth Blog in a related article titled Carnival of the Capitalist -- July 18, 2005 writes:
    CARNIVAL OF THE CAPITALISTS - JULY 18, 2005 Welcome to the Carnival of the Capitalists for the week of July 18th, 2005! Before we get into it, let me make the usual disclaimers and shameless plugs. First, if you... [Tracked on July 18, 2005 7:36 AM]
COMMENTS (30 to date)
Danno writes:

You know, you two fellas, I think maybe you haven't all read enough science fiction.

See, I'll bet you've both read Animal Farm and 1984 and probablly Ayn Rand's books too. But you probablly haven't read Jennifer Government or Snow Crash or a couple of the other books that paint the picture of what some of these people are worried about with regards to the totally unchecked free market capitalism that you fellas seem to advocate.

Don't mark me as a socialist or a communist though, I basically agree with the free markets principle (well, truthfully, I wish socialism worked, it'd be a very nice reflection on humanity if we could all "just get along", but that's a pipe dream that depends on people saying , "I don't really need more than I have now", which is a sentiment that only Bhuddists seem to espouse), it's just that the power that seems to accumulate with individuals under the system is worrying. Men traditionally aren't very noble about their power. Oh, you get the occasional benevolent ruler, sure, but the average is for guys that are kinda nasty.

Randy writes:

I think the other thing that the anti-crowd might rightfully worry about is the effectiveness of ads. Sure, ad companies have an imperative to exaggerate the effectiveness. But there are signs that ad companies are looking at brain activity patterns to discern effective ads from ads that are just so-so. Does this not cross a line? How far can the brain-imagining ad-tuning be taken? We are mimics in so many of the things we do. I wonder where it all ends.

asg writes:

Am I mistaken, or did someone just refer to Jennifer Government as a serious expression of worry about our social situation, rather than a self-parody?

Not a dingbat writes:

Danno, can you explain how "corporate rule" will work when the free market has very few rules?

How can minimizing political power lead to more political power?

How can putting companies in charge of shareholders and customers (instead of states) be "corporate rule"?

Are you still just a dingbat that doesn't understand the real plutocracy is state-rule, not "rule" by free people making free choices?

John P. writes:

Prof. Caplan's argument seems to be another way of saying that capitalism is better than communism (etc.) at giving people what they want. People prefer attractive surroundings to unattractive surroundings. When you travel from old East Germany to West Germany (or today from, say, Cuba to Florida), you're struck by how much prettier the capitalist country appears. That's because the capitalist country's economy is better at giving people the prettiness they like (as well as the varieties of clothing, food, entertainments, etc., they like).

David J. Balan writes:

I think Bryan makes a good point here. But you can just as easily tell an externality story that cuts the other way. Advertisers seek to manipulate the preferences of target audiences in such a way as to make them more likely to buy the product; they don't take into account any damage that they do along the way. We now live in a world where people are exposed, from earliest childhood, to an unceasing barrage of persuasive advertising messages. It is not hard to come up with stories whereby this may cause psychic damage to people (e.g., if it makes a child unable to appreciate a book or a walk in the woods, or even to formulate an independent thought or a genuine human relationship), but advertisers have no incentive to take this into account. Indeed, an individual advertiser who did so would simply end up putting himself out of business.

The only solution, it seems to me, is for persuasive advertising to come to be perceived as offensive, like a billboard at the opera would be. But that is unlikely to happen, given that, as Bryan has pointed out, advertising is more or less self-advocating.

Mace writes:

Danno said:

"it's just that the power that seems to accumulate with individuals under the system is worrying"

I think you have it backwards. The human race really gets itself into trouble when too much power is taken **away** from individuals - i.e. collectivism. Witness the 20th century and Stalin, Mao, and Hitler and 100 million dead. When you organize a society with most of the power in the hands of government, it attracts the most unsavory and abusive personalities. You don't have to read the chapter about this in Hayek's "Road to Serfdom" to realize this - I see it everyday in my corporate job (and most everywhere else for that matter).

The more we **decentralize** power, the less people will die at the hands of the State.

RandyB writes:

Mace,

Exactly. Any form of social organization will have accumulations of power. The advantage of free market/democratic systems is that they allow individuals to accumulate power/wealth through non-violent means, thereby allowing a greater number of people to do so.

jult52 writes:

Bryan -- I'm really impressed with your ability to think creatively and wide-rangingly. Keep up the good work. I'm sure you've thought of how this post connects with Virginia Postrel's recent book.

Danno writes:

Okay, answer a question for me if you guys are so sure that Free Markets present nothing to really worry about: If the government went away tomorrow and took with it every service it provides and left only Free Market Organizations and private citizens in its wake, would businesses begin assembling military power?

Ian Lewis writes:

To Answer Danno's question about Free-Markets and military power: If the government went away tomorrow and all those services were gone, there would be mass chaos and lots of death.

But, if these things were decreased gradually (since they often built up gradually), yes, they would be replaced. Just look around you. Think of how many private security forces there are. Alarm systems, gun manufacturers, Brinks trucks, Kevlar vest makers, etc.

When thinking of Free Markets, try not to think of Supply and Demand, try to think of Demand and Supply. If there is a demand, someone will supply it.

Heck, why are our fighter planes and tanks built by private companies and not the military? Private companies are just better at it.

Now, would they become dangerous military machines? Probably not. The grand majority of businesses out there HATE war. Wars are bad for economies. Lots of consumers die, lots of employees die, people become nervous and save there spending for only the most needed items.

Heck, when Hitler was trying to gain power in Germany in the '20s and '30s he looked to get support from three major groups: the mass of people who lived in the cities, the farmers and others involved in Agriculture, and the business leaders. He did the best amongst urbanites, somewhat worse with farmers (although, not all that bad) and he did awfully with the business leaders.

I could go on but I think you get my point.

Dale Courtney writes:

Bryan,

I visited West & East Berlin back in 1979. I was *shocked* on crossing from West Berlin into East Berlin about how "dark" it was. The colors of the buildings were dark; everything was plain and dreary.

I thought that I might be imagining it (after all, we had only crossed thru Checkpoint Charlie and gone a few hundred feet), but my companions verified it. There was an unhappy foreboding in the grayness, and the appearance of the architecture alone was oppressive.

I could go on with stories about food in grocery stores, etc.

One thing is for sure: Socialism does not promote goodness, truth, and beauty.

best,
Dale

John P. writes:

Danno, I'll also take a shot at answering your question. Believing that "Free Markets present nothing to really worry about" does not necessarily mean that one thinks the government should "go away." There are services provided by the government that enable the market to work as well as it does. What one is willing to put in that list depends on how much of a capital-L Libertarian one is (I'm small-l libertarian myself). My own belief is that the U.S. free-market system has been immensely successful in raising the quality of life, AND that its success is based partly on the government's provision of defense services, policing, and a rational legal system that enables people to seek remedies for fraud, theft, etc. Its success is also based on the people's willingness to keep the government from interfering too much with the market (although that's relative; there are still a lot of dumb regulations and probably always will be).

Paul N writes:

Nice post, Bryan. My seminal experience was being in Prague in 1988 - it was obvious this was a historically wonderful city, but every single building had its facade under scaffolding! "Gray" is the perfect word to describe it.

I love ads! I enjoy "reading" e.g. Vogue or W just for the ads (the articles are useless). Ads in Wired are usually good, too (did anyone else think that Hitachi hard drive ad with the graph paper and the patent application on the back was awesome?). It's fascinating to me that these magazines are essentially free (try eBay) becaues the ads pay for them. In the case of Vogue, I think there's no reason for the magazine to exist except as a compilation of ads, it must be 90% of the pages are ads. I always think about how much money each ad must have cost, and whether the response to the ad will likely be worth it.

RandyB writes:

In 1993 I walked into East Berlin through the Brandenburg gate, turned left a couple of blocks past the huge communist era government buildings, and right past a Harley dealership. That's when I knew we had won.

RandyB writes:

Danno,

A "company" is a business organization. It is also a military unit designation. The origin of the military designation is from a time when military "companies" were in fact business organizations. So the answer to your question is yes. But the semi-mercenary armies of the european monarchies were beaten badly by the nationalist armies of Napolean. Lesson learned. In military terms, a strong central government is necessary for the survival of the nation. Which is not to say that said government must also control every aspect of the citizen's lives.

John P. writes:

RandyB, I don't think that's right about the origins of the term "company" as applied to a military unit. The term's application both to business entities and to military units derives, as far as I can tell, from its more general meaning as a group of people. (Consider, for example, Conan Doyle's historical novel The White Company. It's about a group of knights.) The term came to be applied to business entities as a shorter version of, for example, "Richard Roe & Company" (i.e., Richard Roe and a bunch of other guys who are his partners). The French still use this formulation for corporations: "Marcel Lefebevre et Cie."

RandyB writes:

John,

You could be right. I have no primary sources, just something I read. Consider though, that by Doyle's time the use of the word in its military context was common. Was it common as well during the early middle ages? Don't know.

Dave Peterson writes:

But behind all that inadvertant mirth, Adbusters has a theory: Advertising is designed by the greedy corporations to brainwash us into accepting their rule.

Any decent economist can point out the hole in this theory.

I guess that rules Galbraith out.

Danno writes:

Okay, wars were always messy, right? And mercenary units have never been larger than maybe a few hundred men, right?

Hasn't the development of industry along with technology pushed the messiness of war down to much smaller scales? Used to be, when you needed to blow up a factory, you'd send a whole wing of Heavy Bombers and concentration bomb the whole area in the hopes that one bomb would nail the right building.

Now, we have one infantry unit paint a target from a mile away and an offshore battlecruiser sends a missile 200 miles to destroy that building with minimum collateral. Hell, who even needs infantry to paint a target? Send a couple of UAVs into the general area and when you've spotted the building, Fox 1, Fox 2. Goodbye Mr. Building.

When warfare becomes economical, it'll be a business tool, right?

Well, whatever, I don't think I'm going to convince anyone here of anything. But, my final question is this: What is the key difference between Anarchy and a Totally Free Market?

I don't really know, honestly.

Chris Bolts writes:

[quote]Okay, answer a question for me if you guys are so sure that Free Markets present nothing to really worry about: If the government went away tomorrow and took with it every service it provides and left only Free Market Organizations and private citizens in its wake, would businesses begin assembling military power?[/quote]

Only the most anarchist of anarchists would suggest that government go away. Most sane free-marketeers and libertarians recognize the need of government to protect the fundamental rights of human beings against themselves. Government's role, as seen by Milton Friedman, Adam Smith, and other liberals (as the original word means) is that of referee: it enforces the rule of law, protects property rights, and enforces the contracts that are volunarily entered into by individuals. The problem with government is when it abandons its referee role and starts awarding "points" to certain individuals or classes to try and equalize the game.

As a rule of thumb, when power becomes more concentrated into the hands of the few, whether it be corporations, government, or a small band of village idiots, it begins to corrupt. It's that corruption that eventually begins to tear at the fabric of society that presents humanity with its problems (among other things). So yes, it is entirely possible that if government went away that corporations would probably fill the void, but then again, it could also be a crafty group of individuals who step in to take power for themselves, but the problem of corruption still remains.

As for the key difference between Anarchy and a Totally Free Market is that one has a complete absence of government whereas the other prefers that government goes back to its original role of nonintervention into peoples lives, even if it think it is doing it for the betterment of its people.

[quote]Hasn't the development of industry along with technology pushed the messiness of war down to much smaller scales? Used to be, when you needed to blow up a factory, you'd send a whole wing of Heavy Bombers and concentration bomb the whole area in the hopes that one bomb would nail the right building.[/quote]

Obviously you've missed the past two years of the Iraq War. If anything, as technology progresses, war is becoming even messier.

MyNameIsAsh writes:

A governments place is to neither regulate or help business.

Danno:
With the advent of the United State as the world's only superpower war is becoming more messy. No entity can defeat us in a conventional battle of military against military so conflicts become guerilla campaigns (forth generation warfare). This means that out technology is worthless because we don't know who to attack with out "smart" weapons. If we destroy the wrong building we add more enemies...

spencer writes:

I do not know about the origin of the word "company". But when you study the development of the US economy in the era between the Civil War and WW I you find that the graduates of West Point played a major role -- around 1900 it was known as the home of the presidents of most major railroads as it had more RR president among its graduates then generals.

This evolved this way because the early developement of the US railroad system was largely dependent on the systems of logistics needed to build them. Well it turned out that the people who knew how to organize and implement large scale logistics systems were the former army officers who had learned how to do it in the Civil War.

Free markets are great, and like government they do good things and bad things. But very, very frequently, it is the combination of free markets and government that achieve the best results.

skip writes:

Danno -- perhaps you should try thinking. I advocate the free market, which includes individual ownership of firearms. Does this mean I advocate shooting random people? The answer is no. Perhaps you should read Mises, Hayek and others instead of dime-store pulp (and crappy dimestore pulp at that!)

RandyB writes:

Danno,

Re; "What is the key difference between Anarchy and a Totally Free Market?"

That's easy - the difference is government. A free market cannot exist if transactions are not voluntary. The government ensures that transactions are voluntary. A totally free market is not free of all government, it is free of government that goes beyond ensuring that transactions are voluntary.

Back in the real world, it is easy to believe that the differences between left and right are very great. But considering the range of possible governments, our differences are really quite minor. It usually boils down to, should taxes be raised a few percentage points, or lowered a few percentage points.

Henry Schriemer writes:

Danno,

"What is the key difference between Anarchy and a Totally Free Market?"
In general: (1) judgement - as in arbitration and consequent reward/punishment, whether provided by government decree or mutual agreement (either explicitly, or though cultural or religious expression).

Henry

John P. writes:

For whatever it's worth, the earliest use of "company" to mean "a body of soldiers" listed in the Oxford English Dictionary (1st ed., all I had available) is circa 1380. The earliest use of it to mean "an association formed to carry on some commercial or industrial undertaking" is listed as 1553.

Andrew writes:

When Frederick Douglas escaped from the socialist, slavery-based society of the Old South, he was taken aback by how prosperous and well-kept he found the free lands of the North to be. Interestingly, I learned this little tidbit while in a English class taught by an out-and-out commie at Berkeley.

Duane Gran writes:

"If you share Adbusters' anti-capitalist ethos, this will just cement your desire to squelch advertising to help make capitalism as ugly on the outside as it is on the inside."

I resemble that remark, to some extent. Advertising is, to put it bluntly, an effort to plant desire in another person and to manipulate the person's resources to your benefit. It may be mutually beneficial, but there is nothing inherent in advertising that inclines it to be so.

I find the analogy to flowers a curious one to raise. In my travels to Italy I've found that the common person has a passion for decorating the terrace and in creating beautiful places. If I were to compare the aesthetic behavior of people living in Italy's mixed economy versus the more free market United States should I conclude that socialists are more prone to do beautiful things? (my point: cherry pick your examples and you can derive your own conclusions)

For another example, consider the advertising of downtown Hong Kong for a horrid example of advertising gone mad. While aesthetics will always be a subjective matter, I can't imagine how anyone could find beauty in advertising.

Paul writes:

John P provides a blinding glimpse of the obvious, but Im surprised it wasn't hypothesized in the post.

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