Bryan Caplan  

Best Passage in Years Containing the Words "Absolute Certainty"

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New Deal Panel, II... If You Want Peace, Prepare for...
National defense, for instance, benefits the special interests that President Eisenhower identified as the military-industrial complex, and governments therefore tend to provide too much of it.  Whether the U.S. government specifically does so is controversial, but we can know with absolute certainty that some governments must be overproviding what is called national defense; otherwise the service would not be needed in the first place.  The overprovision is often a significant net loss of efficiency not only in the country "defended" but in other countries its government threatens.
That's Jeff Hummel in a recent issue of the Journal of Private Enterprise.  My favorite example of what Jeff's talking about is the Red Army.  When the Soviet Union had one of the mightiest militaries in the world, its people were in constant danger of nuclear annihilation.  The collapse of the Soviet state and its military took this terror off the table.


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COMMENTS (8 to date)
Prakash writes:

Could not the same argument be made about advertising and marketing for commercial firms?

we can know with absolute certainty that some firms must be overproviding what is called advertising otherwise the service would not be needed in the first place.

In the marketing case, you could argue that just informing everyone about your new product/service is enough, no need to advertise it aggressively, but if the other firm does it, then heck, you gotta follow.

John Thacker writes:
Whether the U.S. government specifically does so is controversial, but we can know with absolute certainty that some governments must be overproviding what is called national defense; otherwise the service would not be needed in the first place.

Does this hold with absolute certainty even if some "national defense" defends against non-state actors, whether pirates or terrorist groups?

RL writes:

Prakash: The argument does NOT follow regarding advertising. With advertising, even if you have a monopoly, you must advertise to provide some information about your product. People can have monopolies without having optimized consumer demand.

gamut writes:

Prakash:

RL is right. I have more than one product which has no competing alternative. Moreover, the moment I manage to inform a potential client of its existence, they usually buy, the need is obvious, just that nobody knows we exist. The problem is that telling them about it is really expensive and requires lots of advertising, into which I pour countless thousands each and every month. AND, most importantly, the relationship between sales and advertising, in my case, is completely linear -- I just have to calibrate my supply capacity to the demand I'm able to generate.

Missing the role of advertising and sales in informing consumers is missing 90% of what gets us the things we need. Just imagine if gas stations didn't advertise, and left off those pesky large colourful signs from their stations. Boy, what fun driving would be, and how much safer too, with everyone scanning ground clutter for those deceptively camouflaged pumps.

gamut writes:

And if you think I'm being reductionist, just imagine everyone did have signs up, but didn't let it be known what they did on TV. Driving along, out of town, you suddenly feel a little peckish. Scanning down the street you see a series of signs, Shell, GAP, Harvey's, Exxon, Quiznos, 7 Eleven. You instantly know which of those sells food, and which sell things less amenable to being eaten. Even the alternative, of having "Harvey's Burgers", "Exxon Gas", "Quiznos Sandwiches" isn't great because you'd have to read all of them to figure out their business.

Advertising makes all that concentration unnecessary, and that's a damn good thing because I already can't do much else while I drive.

gamut writes:

Oops, partial inversion of parameters between the first and second sentences, but I'm sure you get my point.

Dog of Justice writes:

And if you think I'm being reductionist, just imagine everyone did have signs up, but didn't let it be known what they did on TV. Driving along, out of town, you suddenly feel a little peckish. Scanning down the street you see a series of signs, Shell, GAP, Harvey's, Exxon, Quiznos, 7 Eleven. You instantly know which of those sells food, and which sell things less amenable to being eaten. Even the alternative, of having "Harvey's Burgers", "Exxon Gas", "Quiznos Sandwiches" isn't great because you'd have to read all of them to figure out their business.

Er, I practically never watch TV (and when I do, it's usually downloaded so I don't see ads), yet I never had a problem with what you describe, so I really do not buy this part of your argument.

Ruy Diaz writes:

The Red Army did not provide defense. It wasn't providing a service call "national defense" at all--it was rather an instrument of intimidation and an expression of ideological identity.

The example is terrible.

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