Advertising is Less Powerful but More Important Than Critics Believe

Reviewed by J. Howard Beales III

Why should anyone be afraid of persuasion? Usually, of course, those who fear the supposed manipulative powers of advertising are not concerned for themselves. Instead, in the manner of censors everywhere, they dread the prospect that advertising will persuade others to choose differently than the censor believes is appropriate. John Calfee’s persuasive book provides empirical and intellectual ammunition for those who share the premise of the First Amendment that censorship is not an acceptable solution.

This slender and extremely readable volume explains in simple and straightforward terms that fear of persuasion is unjustified. Advertising is both less powerful than its critics fear, and more important to consumer welfare than they are willing to acknowledge. Perhaps more importantly, some of the most valuable advertising is more easily discouraged by excessive regulation than courts and regulators have been willing to admit.

The primary reason that advertising lacks the power its critics fear is that consumers understand its purpose of persuasion. They know that sellers compose advertising messages to sell products, and understand that those messages will inevitably emphasize the positive aspects of the product. As a result, they do not trust advertising.

Polling data as far back as the 1930s consistently show that 70 percent of consumers are skeptical of advertising, a finding that is surprisingly constant over time and even across different countries. Calfee notes that even second graders understand that advertising seeks to sell a product, and by 11 or 12 children are as skeptical of advertising as are adults. Whether directed to children or adults, advertising is not subtly manipulating defenseless consumers. Rather, it is battling to overcome entrenched skepticism.

Before advertising can persuade, it must achieve credibility. Sometimes, credibility may come from third party experts whom consumers trust. The American Dental Association’s seal of approval and the rise of fluoride in toothpaste is a classic example. More often, however, credibility comes from the combination of advertising and a well-known company or brand name.

The combination of advertising and establishing brands is also a key element facilitating the provision of vital information that might otherwise remain obscure. Once produced, information is a public good that can be freely passed around and used without compensating the original owner. Patents and copyrights may offer legal protection for a particular expression, but in most cases anyone can use the information itself. If information producers are inadequately compensated, however, less information is available than would be desirable.

Because it ties a piece of information to a particular brand, advertising provides a way for firms that produce and disseminate information to capture more of the gains they produce. Of course, the information that sellers disseminate favors their product, but it offers even greater benefits to consumers. Advertising the benefits of fluoride in toothpaste, for example, increased the sales of fluoridated brands, but it also reduced the incidence of cavities, with benefits to consumers than are surely greater than the gains to toothpaste advertisers.

Competitors can make use of the information as well. The first firm in the market may need to explain, for example, why fluoride is important. Subsequent firms can make use of that information by advertising simply that they have fluoride too. The result is lower prices, better products, and improved consumer welfare. Advertising is powerful, not because it manipulates consumers, but because the competitive dynamic that advertising sets in motion forces changes that benefit consumers.

The same dynamic operates even when information may be bad for the industry that provides it. In virtually every industry, some products are “less bad” than others. Their manufacturers, selecting the information that makes their product look best, may advertise their advantage. Although it may sell more of the advertised brand, the new information may intensify consumer awareness of a problem that sellers might prefer to ignore. As the competitive dynamic unfolds, the result may be reduced consumption for the industry as a whole. That, Calfee argues, is exactly what happened in the 1950s when cigarette manufacturers began to advertise “less bad” brands.

Because of the way it operates, advertising is fragile, and easily deterred by regulation. Competition may force firms to advertise, but the information that is most valuable to consumers is often less valuable to any individual seller. Toothpaste manufacturers are perfectly willing to compete on taste and convenient packaging rather than health benefits, if regulators make conveying health information too difficult. Especially when information concerns a negative product characteristic, such as the fat content of fast food meals, industry members collectively may be better off if they can persuade regulators to prohibit that form of competition entirely.

Consumers, of course, have sources of information other than advertising. Even extensive media coverage, however, is unlikely to match the extent and sheer persistence of a profit-motivated advertising campaign. Moreover, unless advertisers can refer to other information without providing full details, media campaigns cannot initiate the competitive dynamic that leads to further improvements.

Calfee is no stranger to the analysis of advertising and its effects. Indeed, the book draws heavily on some of his earlier writing in academic journals. Fear of Persuasion is written for a more general audience. It is far more intuitive, and far more readable, than the typical journal article; one hopes it will be more widely read. It highlights and explains the key empirical findings documenting the beneficial effects of advertising, and the lack of effectiveness of advertising prohibitions in achieving their objectives. It should be required reading for all who propose restrictions on free flow of commercial information.

Attacks on advertising will likely remain a part of the political landscape. The target is highly visible, and 70 percent of consumers are skeptical about it to begin with. Blaming advertising for what ails us is therefore likely to resonate. Regulating advertising may do little to correct the problem, but it can demonstrate “concern” for the issue. It may even gather the support of the regulated industry, which might be more profitable if only there were less competition. That, however, is precisely when the public interest is most at risk.