Bryan Caplan  

Winston on Advertising Regs

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Radicals for Capitalism... Empiricism and Dogma...

Here's a neat passage from Clifford Winston's Government Failure versus Market Failure (complete book available for free downloading):

Calfee and Ringold (1994) focused on surveys of consumers’ attitudes toward advertising. Analyzing six decades of data that began in the 1930s, they found for each decade that 70 percent of consumers thought that advertising was often untruthful and sought to persuade people to buy things they did not want. (Nonetheless, consumers also believed that advertising provided useful information.) The authors argued that the stability of consumers’ beliefs about advertising through time — especially during the 1970s when advertising regulation moved from extreme laxity to unprecedented force and the 1980s when regulation receded—was inconsistent with the view that advertising regulation increased the credibility of advertising.

I'd call this another interesting application of my favorite undervalued economic methodology: learning by listening.


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COMMENTS (3 to date)
conchis writes:

(1) Those measures don't seem, at least at first sight, discriminating enough to capture much change in the balance of "untruth" vs. "useful information".
(2) In any event, the reported stability isn't inconsistent regulation being beneficial if there would have been an upward trend otherwise.

John Thacker writes:

In any event, the reported stability isn't inconsistent regulation being beneficial if there would have been an upward trend otherwise.

Well, "upward trend otherwise" only if it were a situation of advertising regulation always increasing. However, by contrast, advertising regulation has increased, decreased, and largely remained the same in different decades, as the passage notes-- and consumers' beliefs have remained remarkably steady under each scenario.

I think it's much harder for you to argue that there would have been an upward trend in distrust of advertising in the 70s without regulation, but that there would have been an increase in trust in the 80s without deregulation, but instead it stubbornly stayed the same both times because the changing regulatory environment perfectly anticipated the changing trends.

John Thacker writes:

conchis:

I think that you would have a much better argument justifying regulation if you argued that this merely shows that consumers are extremely slow to react to the effects of regulation on advertising, or poor judges of changes in the deceptiveness of advertising.

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