John Kenneth Galbraith was a member of Harvard University's economics
department as well as ambassador to India for JFK and a outspoken
socialist. His debates with his close friend, the late William F. Buckley,
Jr., were famous--and he lost all of them!
In his book The Affluent Society (1969?) he included a chapter, "The
Dependence Effect," on advertising which has been reprinted all over the
place, especially business ethics collections. He argued that
corporations create desires in us all for their wares and services and we
become hooked to them and thus corporations keep getting prosperous on and
on and on. The even more famous Nobel Laureate economist F. A. Hayek wrote
a rebuttal to Galbraith's piece, "The non-sequitur of 'The Dependence
Effect'." He argued that Galbraith misunderstood desires, thinking them to
be decisive in leading to human action. Hayek pointed out that desires can
be governed, controlled, ordered, suppressed even. The two essays are
featured in a great many books on business ethics and nearly all
discussions of advertising.
I believe Hayek was right all along but if one needs proof, I believe our
current economic mess provides it in spades. Consider how readily people,
bent on tightening their belts, manage to resist ads everywhere. It is so
bad that the government is making desperate efforts to bolster
consumption, trying to generate, artificially, demands for goods and
services that advertisements don't succeed in getting sold. Now, if
corporations had all that power by way of advertising, that Galbraith had
ascribed to them, how is it that they aren't bringing in customers? How is
it that customers all over the country and elsewhere are these days
refusing to spend their resources in the market? Advertising may have
moved from newspapers to the Internet but there is plenty of it around,
yet customers are not budging.
The likely truth of the matter is that the majority of people are quite
capable of ordering their desires, of saying "no" to this ad or that,
while "yes" to some others. And they do this mostly with an understanding
of their economic situation, so that just now most of them, seeing that
money is hard to come by, tend to be reticent, hesitant about spending.
(Whether the efforts by governments, following certain parts of John
Maynard Keynes' economic theory, to beef up demand works is an interesting
and very much open question; books abound disputing the idea as well as
supporting it, by reference, especially, to historical epochs such as the
Great Depression and the ensuing New Deal.)
This also suggests something important about human choice. When people are
said to have free will, it is often mistaken to imply that they act
helter-skelter, without anyone able to predict anything they will or won't
do. But that's not free will but randomness. Free will means one can set
oneself on various courses of action, some short range and some quite
long--just think of the commitment made when a the bride and groom utter
"I do." Surely we can make some predictions as a result of that yet admit
that they were free to choose whether to marry.
One reason the Obama administration's stimulus policy may not work out so
well is that people aren't forced to respond to stimuli--they can turn
away, refuting the underlying assumptions of what it takes to get them out
there to buy stuff! Governments tend to wish we were malleable but we
aren't, really. This is just one of many reasons governments ought not to
be counted on to direct an economic system. The people of that system
might not want to comply with The Plan they hatch there in Washington.
They may well have other ideas in mind. In a genuine free market--not to
shabby facsimile we have had in place for decades on end--the interacting
individuals would figure out what is best for them and follow their
judgments thus informed. And that would, like Adam Smith suggested, lead
to the optimum overall economic benefit of all!
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