Advertising

0:00Okay, advertising should be sort of the central focus tonight. Also, of course, touches on the competition monopoly thing, but I'm going to try to focus on the advertising aspect of it. Advertising has always had a very, very bad press in economics, textbooks and treatises and so forth. Only within the last couple of years has there been any kind of re-evaluation of advertising. Even that is pretty grudging, I'll tell you that. One thing is advertising is supposed to be wasteful. It's supposed to be a waste of resources. It's supposed to be monopolistic. And it's supposed to somehow determine the consumer. In other words, the advertising, you look at the ad and somehow it sets up some kind of a button in your head. And it determines you to rush off and buy the product. These are sort of, I guess, the three basic charges against advertising.

0:52The thing about being wasteful stems from a topic which I will return to with great love and affection later, the so-called perfect competition model, the pure competition model. One of the cookiest, most peculiar, most bizarre theories has ever come to dominate economic thought, and really still does, and we can't write down to it. The perfect competition model is a model which, given to us by Frank Knight, founder of the The Perfect Competition Model is supposed to be, as a name, perfect implies, obviously. If you use the word perfect, you're already using a very value-loaded term, or else the word pure, another word, another alternative, where it's also value-loaded.

1:42Obviously, everybody's in favor of purity and perfection. The pure perfect competition model assumes that the only real competition, the only fruitful competition, the ideal kind of competition, the only competition worth the name, is the competition that exists when every firm in the industry is so small, so teeny, so minuscule, that nothing it does has any effect whatsoever on the price, on the product, on nothing. This is pure competition, I should say, more specific. Pure competition is that. Every firm in the industry is atomically small, therefore has no impact on anything.

2:27Perfect competition is pure competition, all of that, plus perfect knowledge on the part of everybody. I swear, everybody in the market knows everything. All consumers know everything about what's going on. All products, all prices, they know, they're born somehow with information in their head. And all producers know everything. All businessmen know what the costs are, they know what the demand is. It's all there. And you see, it's given on the textbook. You open the pages of the textbook, there it is. It's got the demand curve, the cost curve, I don't know if you know what. It's all given. So the assumption is that perfect competition is somehow realistic, and better, and terrific, and wonderful.

3:14And then you see what these people do. They look around at the world, and they look around and they see that things are not like perfect competition. Firms are too big. They're big enough to affect the price of their product. They're not tiny. They're not microscopically small. And you don't have perfect competition, you have a lot of people who don't know what's going on. Like most people don't know what's going on. And nobody knows the future. And it's not only perfect knowledge, it also means perfect knowledge of the future, obviously. It means that you know what future prices are going to be, and it's up to the indefinite future and future demand, the future course. It's total insanity, there's no question about it. But this is the assumption. And what happened was that Frank Knight in the Chicago School, really the original Chicago School, set up this perfect competition model, except they assume this is the way things were more or less, with a few deviations which were unimportant.

4:10The model, by the way, forces the 19th century wheat farm. Irem Jones, Iowa wheat farmer, you know, whatever he does within reason, it's not going to affect the wheat market terribly much, although, you see, philosophically it's still not true, because if the angel Gabriel came down to him and gave him some magic formula for multiplying In the 19th century, 19th century economists were much more realistic, when they talked about competition. They didn't assume perfect competition, they were living in an agricultural so-called era. In the era, they didn't assume perfect competition or teeny wheat farms, but the pure competition model comes in in the early 20th century, just when the whole wheat farm model is going out the window, because it is obviously irrelevant.

5:07Anyway, so the Frank Knight people assumed the perfect competition, pure competition, was pretty realistic. This is what competition is and was, and this is great and so forth and so on. And then in the early thirties, Chamberlain and Robertson, independently, Edward Chamberlain, one of the most famous PhD thesis ever written, and Robertson's book coming out of there I think in the same year in 1933, essentially said, and I said, we'll get back to this when we get to the marketing competition proper, essentially they said, hey, wait a minute, this is not the way things are, the world is not like this, you don't have teeny-wee

6:16The Market is Far from Perfect and Far from Pure, and therefore, it's monopolistic and and therefore it's evil, and therefore it's impure, and therefore the government has to come in and smash it some way. Now the point is that the Chamberlain Robinson, I don't really blame the Chamberlain Robinson people, because they were working within the matrix that had been accepted by that time by orthodox economics, Frank Knight, these people having imposed it sort of on an orthodox economic, and they accepted the perfect competition model as being the proper one, and the best thing to happen, and so on, And without considering it was totally absurd, unrealistic, it would be bad if we had it.

7:14It seems to me almost self-evident, at any rate. They said, well look, we haven't got it, we're far from it, and therefore the market is evil and we have to do something about it. And it seems to me this is almost as follows. I don't really blame them as much as I blame the original Perfect Competition model builders. At any rate, getting to the advertising end of this, If the man curves are given, if you've got perfect knowledge, if consumers know everything, if all consumers know everything automatically, and all producers know everything automatically, of course advertising is wasteful. And nobody in his right mind would advertise. If all of us had ESP, if I knew what Mises' sale was going to be tomorrow without having to look at some paper, and you just sort of automatically know that Mises is going to So toothpaste for such and such a tube would be no point in Mises' advertising.

8:05Then of course it would be wasteful and they'd know it and they wouldn't advertise. Of course the point is we ain't omniscient, we haven't got perfect knowledge, and in order to find out what Mises is going to do tomorrow, we have to read about it some way. Somebody's got to inform us of it. This is called, quote, advertising, unquote. The assumption of waste only follows from the insane, bizarre, absurd assumption of perfect competition, of perfect knowledge, of the idea that somehow people know everything to begin with. They don't have to learn, and learning takes time and effort, and somebody's got to tell them, and there's a whole information industry built around this. And so, incidentally, well, the whole idea of differentiated product, I will get back to, too.

8:58This is one of my pet peeves, a differentiated product. It's the assumption, on the part of most economists, that when a product is differentiated between brands, that somehow this differentiation is artificial, evil, and imposed upon the consumer by some kind of brainwash. I'm not being brainwashed when I say that Wonder Bread, to me, is better than Tasty Bread. There's nothing to do with advertising or pretty girls being advertised on the commercial or anything of that sort. I just like it to taste better. Okay, let me turn it in. Actually, advertising, again, you see the demand curve, remember we have the given demand curve in quotes, The Man Curve for what is the next question. The Man Curve for the product. The product is also given.

9:49In this never-never land of orthodox microeconomics, products are given. So nobody has to develop any new ones. I mean, they're there. They're there, that's all. I mean, Wonder Bread somehow drops down from the sky. Somebody starts selling it. No Mr. Wonder ever sat down and thought of the idea of Wonder Bread. Nothing ever gets created new. So the whole problem of innovation then comes into the picture.

10:42You have to inform the public that it's there, my peccadillo, whatever the name of the room is. You have to inform them that it's there somehow. Inform the public of the high quality, of what you think high qualities are, cause their attention. So that therefore, in the first couple of, in any product, in the first couple of years of a new product, the highest percentage of advertising, then when it gets established, it wins its market, The percentage of advertising usually falls off. So you have to inform people of a new product. You also, by the way, have to inform them, even if it's not new, you have to inform the new generation coming up. There's a new generation of kiddies coming up who might never have heard of Wonder Bread, for example.

11:32It has to be informed of it. And you have to remind the authors, because people do not have infallible memories. They might forget somehow about Wonder Bread, even though to me it's unlikely. In other words, they were not Wonder Bread fanatics. They might forget they might walk down the street one day and buy some other bread, unbeknownst, not having remembered about Wonder Bread. So they have to be re-informed, reminded of the existence of this product. Okay, I'll get back to that, too. too. Actually, just as new products obviously need a lot of advertising, advertising is an extremely important form of competition rather than being a form of monopoly. Again, the reason, incidentally, why it's supposed to be a form of monopoly according to the textbooks is because by definition, all products are uniform and therefore any differentiation Theividic competition of products within an industry, within a broad field, a broadly defined industry.

12:30Any differentiated product is somehow monopolistic. But in actual practice, when products are differentiated, when there is a difference between Wonder Bread and A.C. Bread, etc., then advertising becomes a form of competition, a form of competing with your rival, and part of the way you restrict competition is to outlaw advertising. Now, for example, this is done in several fields, e.g. the medical profession, we already talked about. One of the ways in which medical competition is restricted between doctors is the so-called ethics, so-called medical ethics, which says to each doctor, it's nasty to advertise, it's nasty to put up a big sign in front of your building, so far it's only a little sign This form of restricting advertising is a form of restricting competition.

13:29Similar to this, even more blatant are the laws in many states prohibiting pharmacists from putting up signs in the store advertising or listing price of their prescription drugs. Here's an interesting point. Pharmacists are prohibited by law from having a sign up saying they can do it for non-prescription

14:19And then the price would come down from what it is now, this way, since advertising, this form of listing, advertising, listing prices is a form of advertising obviously, it's a form that most people don't attack too much and they don't realize it's advertising. The listing of prices in the store, in the window, just as much advertising, calling attention to the public of your product and what the price is, just as much advertising as getting commercial television, also cheaper of course. The fifth outlawing of this is a method by which competition can be made in the drug industry, and the outlawing is a method by which competition is restricted. Oh boy, I could go into the pharmacy business. It's another hot one.

15:10Okay, also in economics, in economic theory, a big distinction is made all the time. This is part of the whole competition monopoly thing too. A big distinction is made between quote production cost unquote and quote selling cost unquote. The assumption is that production cost is okay, that's legitimate. You have to pay money, you have to pay out money in order to produce something. So that costs something, it costs a certain amount of money to make a high-five set, that's okay. What's not okay, what's illegitimate, wasteful, evil, monopolistic, you name the pejorative term, what's not okay is selling costs, meaning getting these damn high five steps out from your warehouse and into the hands of the public. Anything of that sort, advertising, listing of price, marketing, direct mail, any of these things, a selling cost, somehow it's illegitimate.

16:05Why is it illegitimate? One of the reasons, there are several reasons I've already mentioned. One of the reasons is, according to economic theory, that production cost is okay because you're doing it to, you're incurring these production costs in order to fulfill your demand curve, to meet the demand curve, like the demand curve is there, and you're there, there's demand for high prices, and you're incurring costs in order to meet the demand. But selling costs are evil because the guy who's incurring it is trying to increase his demand curve, trying to push it upward by satisfying The problem with this is, that's what production costs are. For heaven's sake, if you're making a high-end set, you've made everything except the speaker. You don't have a speaker yet. Well, I think you put the speaker in, what are you doing?

16:52You're raising the demand curve for the product. Without the speaker, the demand curve is a lot lower. You push the demand curve up by adding a speaker. If you polish the surface, put a mahogany surface on it, as a production cost, technically you're raising the demand curve. What's wrong with that? That's what the whole shouting match is all about. The idea of production, the idea of being in business is trying to get your demand curve as high as possible for your product, as large a market as possible. There's no difference between selling cost and production cost. It's a phony, totally phony decision. I'd say all production costs are trying to raise your demand curve from zero. When you start with nothing, you have a nothing demand for it. Zero demand for nothing. And as you keep adding stuff, you're raising your demand curve.

17:40What is it, of course? The technical, physical thing, the high-five set, is not going to do the consumer any good if it's 500 miles away in a warehouse. It's somehow going to be transported, it's going to be called to the attention of the consumer, and so forth and so on. Another point, which my late mentor, Professor Mises, I used to talk about, is an artificial distinction between production cost and selling cost, because if you take a package of any product and you wrap a nice ribbon around it, a nice red ribbon, this is a production cost and supposedly legitimate, the other half you take that ribbon and hang it on the store in which you're selling a product, this is evil, it's a selling cost and therefore illegitimate, because it's not part of a physical product, you see.

18:26This brings me to another point, about physical product. It used to be said back in the 19th century, in the days of classical economics, that consumers in many cases are irrational. There's a lot of stuff in economic social history about the so-called irrationality of consumers. One of the reasons it's supposed to be irrational, which is sort of stuff John Stuart Mill, the Victorian type anyway, of course, used to say, is that, well, people are willing to pay a higher price for a certain product in one store than they are in another store. Somehow they're willing to pay more around the corner than they are from where else. And it seems to be irrational. Why aren't they insisting on, you know, shopping around for a cheaper price?

19:15Now there are many reasons why a physical product might not have the same price in different places. In the first place, location might be better. I might be willing to pay 10 cents more for the same product around the corner than schlepping downtown and paying 70 cents a fair to get the same product. Obviously, location cost comes into the picture, but even more, and so this is more relevant to the physical product, production cost, selling cost distinction, even more than that When you're buying something, you're not just buying a physical object, you're also buying, possibly, the whole ambiance that goes with it, the service, the whole atmosphere. This is all part of a package of consumers' buying. Now, two Jon Stewart mills might appear irrational, but with the others of us, they might appear very rational.

20:04For example, supposing you're buying vanilla ice cream at Lutece or at Medix, let's assume for a minute it's the same damn ice cream, as many left-wing anti-market types will say, it's the same thing, it's the same aspirin, they just put a different brand on it, let's Let's assume for a minute that the same ice cream, both of which were bought from Breyers or whatever, and the Lutece would cost $2 a plate or whatever for this ice cream, and Nidic would cost 20 cents. The question is, is it irrational to go into Lutece and just eat this ice cream instead of eating the same ice cream for a much cheaper rate?

20:53No, it isn't. Because of Lutece you're getting not just the physical ice cream, you're also getting much higher quality service, A much prettier restaurant. You're getting a fawning service thrown at you with disdain and contempt. You're getting a more pleasant atmosphere. You're getting the possibility or the probability of seeing John Lindsay at the next table or whatever. Those who like that sort of thing pay for it. You're getting all these things, all these associations and services, intangible services for wrap-up and eating a little test, which are unrelated really are not simply the physical item that you're actually eating, and people are willing to pay for that, obviously they're willing to pay for that, and to say this is irrational is simply not seeing that the physical object is not the only thing that's being purchased.

21:44I'll just say it's both of the atmosphere, the service, but the external effects as we call it and so forth, the ambiance. Getting back to the differentiated product now, there is this notion, as I say, which came into Chamberlain Robertson's hands heavily, that in the broad industry, and this broad industry is not defined too clearly, but industry, let's take Thomas's definition, that any differentiated product within that industry, any brand name, is really artificial, is differentiated only by advertising, by cunning on the part of the producer, by brainwashing, but they're really all the same. The assumption is they're really all the same thing, and they're stalking the consumer more because they're paying more for it.

22:34You have this brand loyalty which has been induced, but the assumption is that the products are really the same, and the public, the consumers, think they're different. My contention is, and this is the contention I first discovered in Lawrence Abbott's very My contention is that the facts are really just the opposite. What's really going on is that the consumers don't know that the differences that do exist, in other words, that the differences that exist are even greater than the consumers think they are. We don't know anything about a field. Here we get to the whole concept, which economics books never talk about, the concept of learning to consume. The assumption is not just a reflex action, The Theory of Money and Credit

23:49And the point is, so all these fantastic differences between wines, most people don't care about the difference, they don't see it, they don't evaluate it, but the point is the differences are really there. Rather than differences being artificial, differences are really there. The consumers, as they found out more about the topic, more about the area, discover these differences more and more as they go on. So rather than brand names being artificially different, they're right on target. I could say, for example, the New York State champagne is exactly the same thing as French champagne. It's absurd, anybody knows anything about champagne. It's not an artificially differentiated product. And it goes for every area of consumption.

24:40It goes for music. It goes for some area of music. First of all, noise. Then as you start about consuming more because you see all sorts of differences and differences between composers, differences between players, et cetera, et cetera. And you learn more and more about differences all the time. Same way about baseball. Somebody who doesn't know anything about baseball thinks that all baseball players are the same. It's all the same junk as if they were waving a bat. As you learn more about it, you find out the enormous difference between Willie Starge and the kid around the block. And so forth and so on. Now the interesting thing is that people like Galbraith, who's a fantastic snob in this area, always says that everything which the masses buy is all the same stuff, all artificially differentiated.

25:27What he buys, of course, is all very subtly discriminating and different. He would never say, for example, that his economics book is the same as all other economics books. Why not say that? All textbooks are the same, all economics books are the same, it's all the same junk, and that's it. As you learn more about economics, of course you'll find out there's enormous differences. If you want to learn more about economics, there's enormous differences. You find out that Galbraith is really different from other people, and etc., etc. And I'm sure that Galbraith himself would say he's very different from other people, too. But in the areas that he doesn't like, he's not interested in, such as Wonder Bread. I'm sure he was, I'm sure, I'm sure that Galbraith would say, just a priori, I'm sure that Galbraith would say that one of us is the same junk as a lot of us.

26:13I may as well state another difference here. I'm a big Pepsi fanatic. To most people who don't care about colas one way or the other, who are marginally interested in colas, to them Pepsi and Coke are all the same. To me, of course, there are fantastic differences between Pepsi and Coke. and I could talk about that at length. So the real Pepsi fantasy, I'm sure when I started out as a little kid learning about cola, I'm sure I thought it was all the same too. It's only when I became an officiado in the field that I realized that Pepsi is much better. So rather than these differences being artificially created by advertising by evil businessmen Okay, so what the advertiser has to do, he has to inform people of new products, he has to inform people of new prices for the product, to inform new generations of consumers of what's going on, to remind even older people, even veterans of the existence of the product, of the improvements in the product, and so forth.

27:38In other words, he's competing for consumer attention. Here's another point that anti-advertising people don't seem to understand. Not only doesn't the consumer have perfect knowledge, consumer's time is limited, his energy is limited. I mean, there's only a certain number of things that you can do a day, and you're bombarded with different suggestions, plans, proposals, etc. The function of advertising is trying to call the existence of the product here, the attention of the consumer, this busy, harassed consumer, and try to say, hey, wait a minute, look, we got this product here, it's really pretty good, and so forth. Think, for example, a gas station. There's an enormous amount of anti-billboard hysteria among intellectuals. So think, for example, you're driving along, you're likely to have some gas, and if you prevent anybody from putting up a sign up there saying, I mean, after all, how are you going to find the gas station? I mean, unless you have total knowledge of the area, which most drivers don't have, you're not going to find it unless somebody

28:45They say somewhere up there is a sign saying gas with flashing lights or something. And so the function of the advertising sign is to inform the public, call the attention of the public that here's some gas available. The anti-book board fanatics who want to first eliminate all signs and book boards would mean that everybody would have a lot of gas breakdowns. Maybe that's what they want. Professor Kirzner, my colleague, who's written some very excellent stuff on advertising, points out also that an interesting thing that happened in NYU where he teaches during the height of the campus revolution, back in the 1969-70s, famous campus revolution period, when only anti-advertising new left were using the walls, of course, of NYU as their billboard. Only The anti-billboard types, they're putting billboards up, wall posters, is that cool?

29:41And the thing is that as they kept going, they kept competing for consumer attention, because obviously the kids were being harassed, there were a lot of riots to go to and so forth, and a lot of things going on. So, the slogans kept getting punchier and catchier, the signs on the wall posters began to get bigger and bigger, The commercial front began to be used by the New Left because that's what they were doing, the same sort of thing.

30:27They were trying to get the consumers of their constituency, the attention so they can try As a matter of fact, I think what we see pretty well, this brings us to the famous, the philosophic attack on advertising, we see pretty well that what businessmen are doing, desperately almost, is courting the consumer, the consumer is the king, the king on the hill, and the businessmen are trying desperately to get the consumer's attention, court the consumer, say buy this product, they like it and so forth and so on, and this It seems to me pretty conclusive evidence in itself that the consumer is not being determined like a push button to, as soon as he sees something, to rush out and buy it.

31:13In other words, the whole atmosphere is completely different. The whole attitude as part of the business man is not, hey, you go out there and buy this product. The whole atmosphere is, wait a minute, stop here, you'll like it, and so forth and so on, wooing, courting the consumer. If it were true that the consumer was determined by this sort of robot manner, then for example there would be no need for an enormous increasing sub-culture or sub-occupation, which most of us don't know much about, called market research. Market research is a big industry and the whole point of market research is devoted only one thing, that's for businessmen to try to find out desperately in advance will consumers The point of this is, the point of this is almost a desperate quest to try to please the consumer in advance, try to find out what the consumer is going to do.

32:16Will he like it, will he not like it? The whole point seems to be pretty clear. The consumer is the king of the walk, the consumer is being wooed and courted, and not that the consumer is being pushed around like a robot. And then, of course, there's the famous floparoos, which even Galbraith admits, he says these These are exceptions which prove the rule. Even he admits that they've existed. In other words, cases which don't happen too often, because after all, there is market research where the citizens are not desperately trying to find out in advance if they're going to lose a lot of money.

33:04But cases, there are cases where after an enormous amount of ballyhoo and publicity and advertising, the product is produced and falls completely on its face. It swaps. There's of course the famous case of the ethical car, which is a total flopperoo. There's also the case of Corfan, Corfan's shoe, where the idea was, you see, that there's a new kind of, a new thing which is better than leather because it doesn't break in at all, it just stays there like a mold and your foot breaks in, unfortunately, the discovery. The foot caves in before the leather, for the Corfan. People didn't like that. People wanted to feel they were in control of the shoe, the shoe in control of them. The result of which Corfan was also caught for real, the Corfan shoe.

33:51So, these are two heartwarming examples of undetermined consumers, obviously, consumers asserting their wrath.

34:09The whole determinist argument, as a matter of fact, just like in all other cases, and all other cases of determinism I should say. There are many instances of ideas of philosophical determinism. Just as in those cases, the same way with advertising, there's always a hidden escape hatch for the determinists. In other words, the assumption always is, you, you, and you out there, you're all determined, but I'm not. Boy, I'm somehow out of it. I'm floating above the cloud, telling all you jerks that you're all determined. Now obviously, there's something peculiar about this kind of reasoning. If everybody's determined by If this is really the way things work, how come the gal-brave and every left-wing intellectual you've ever met, how come they've risen above all this?

34:58They're not the term of anything, they don't buy a damn thing, presumably. They are free-floating intellectuals, floating on top of, levitating above the crowd, and not subject to these determining influences. Well, either they're superheroes and somehow heroically escape this miasma, which I somehow doubt, or there ain't no determinism, which I think is the correct solution of this. I don'tsidek they have any sort of secret immunizing potion that has prevented them from being determined while all the rest of us have been robotized. Another point, of course, and I think this is a crucial point, that's a point with the epsilon core fan also, is that on the market, and particularly on the market when we get to advertising, there's a direct feedback, or a direct reality test, or a direct market test, called a reality test, of a product.

35:57I don't care how much junkie advertising you're subjected to. I don't care if you sit there, if the housewife sits there all day and Mr. Clean whistles her out of the kitchen. I think it was Mr. Clean. You go out and you buy Mr. Clean, you find out. I mean, very quickly, does a giant appear and wish you out of the kitchen? If not, then either, if you really believe this nonsense, then you have to have an IQ of something like 30, if you really believe that, then you're disillusioned, and you realize, there's no Mr. Clean, there's no genie that comes and suddenly pops up, and all the rest of it, and then you forget about it, that's the market test, the reality test, of, you know, puff-up advertising. So you find out, you find out very quickly as we found out about core fan on your foot and so forth and so on, you find out if the radio works, you find out whether the detergent

36:48works and all that stuff, you find out by the reality test, the market test to see if it works or not. So in other words, advertising can only do so much, it can call your attention to something, it might even get you to buy the darn thing for the first time, there's always this test, you find out if you win the girl if you use Gleam or whatever it is. If you don't, that's it. Your reality test works. The interesting thing is, there is one area of life, one very large area of life, which neither Galbraith doesn't talk about, and the left liberal intellectuals don't talk about, ever, ever, in connection with advertising. There's one area of life where there is no reality test. There is no direct market test. There's no feedback. There's no nothing. And that's the area, somehow, I'd say, these people never criticize advertising in this area.

37:36This is political advertising, whole area of government, whole area of politics, if you elect me, my friends, I will do such and such, that sort of advertising. And somehow, the political process, where you can't find out if Mr. Clean works or will get you out of the kitchen, or if you'll win the girl with a gleam and that sort of stuff, where there's no direct test, there's no nothing, there's vague, cloudy promises. It's in this area of political advertising that has full sway, where people can be sucked in to believing stuff which isn't true, but somehow left liberals never, never, never discuss this problem. This brings us to, really brings us to government, the whole question of government vis-a-vis and the Market, and that connection.

38:36Okay, one of my disagreements, one of my minor areas of disagreement with my mentors in free market economics, is that Professor Mises will refer to the market as the democracy of the market, or the ballot box of the market. I think that's a smear on the market. The processes, what happens in so-called democracy is so inferior, that's why it's consumer choice goes, or feedback or anything of that sort, so inferior to the market that they don't really bear comparison at all. For example, on the market you buy your product, you buy a Mr. Clean, you try it, you don't buy it anymore, you buy it some more, whatever, you have this direct test, also you have complete control of your own individual purchases, and you have your income, and you decide what to purchase and which things to purchase and so forth. You can decide to keep buying it or not buy it. And you have an enormous number of choices. I mean, even though there's a

39:31lot of griping about there should be twice as many automobile companies or something like that, still we only have thousands and thousands and thousands of ways in which to spend the consumer dollar, and thousands and thousands and thousands of different entrepreneurs are trying to sell us stuff. We have an enormous range of choice and it's a choice that keeps The market is always being attacked as being monopolistic. We turn to government, which is usually being praised as heroic and democratic and the people's will and all that. In the field of government, we have a situation where, first of all, we vote, we cast our ballot not every day for, for Mr. Clean or against Mr. Clean, but every four years, once.

40:16In the last three or four years, at best, if we really think the majority rules, which is dubious anyway, as assumed from the majority rules, at best 51% of the people will get their way, but the other 49% are shaftless in another four years. In other words, they can't say, well, I don't want Mr. Clean. They can't say that because majority's voting for Mr. Clean, it's tough, but you're going 49% can't opt for business or whatever, also, in addition to the fact that you have a 51% crushing the 49%, instead of buying individual things, you have this majority buying the The whole complete package. You like one guy for president, one guy for congressman, et cetera, and that's it.

41:13And he works his will with you for four years. In other words, you're not saying, well, I think I'll vote for your rent policy, but against your foreign policy, or whatever. No, no. It's a complete package, wrapped up, and when you vote for one guy, you're getting his entire package, period. There's no way to break this down. On the market, of course, you're buying Mr. Clean, you're not buying it, you're buying Hi-Fi sets somewhere else, you're not buying them, and so forth. The individual service is broken down to their individual components, and to the individual consumer. Of course, the government is totally different. In government you have the masses collectively buying a pig and a poke. Literally. You're buying, you're putting one guy in, you're not sure what he's going to do, there's no... There's lots of fraudulent advertising. When I get in, I'll raise expenditures for everything and cut taxes, and that's where it stops.

42:02and then inflation, and after four years, the guy violated every one of his promises, and nothing happens to him. He's not sent to jail for fraud. In fact, he probably gets a pension from the taxpayer to live the rest of his life. There's no feedback at all. There's no reality test at all. There's a cloudy, vague, vague promises, vaguely met, vaguely repudiated, nobody knows what happened. If you haven't seen it, you probably haven't for four years. Who remembers anyway? If you can't remember what happened two weeks ago with your purchase, who's going to remember what the guy did three years ago? Also, in addition to that, on the market, despite the usual approach of monopoly, et cetera, et cetera, there are thousands upon thousands of choices of firms, businesses to buy from.

42:52In politics, in government, there's only two. A duopoly. We have what's known as a giant duopoly. Democratic party and Republican party. There's a couple of minor parties that don't amount to much. And there's two parties. Not only are there only two parties, but everybody loves this. Every liberal, political scientist, if you ever take a course in political science, what a wonderful thing we have. A super glorious two-party system. You ever hear talk about a glorious two-firm system? That's terrible. It'd be evil and monopolistic. If there are only three firms in the automobile industry, everybody thinks that the world has come to an end. But it's okay to have two firms and the entire government apparatus, and only two. Of course, when you have a duopoly, as classical economics shows, you tend to have collusion. If you're only two guys, why not?

43:39There's a collusive duopoly. The Democrats and Republicans sound very much alike, and their promises are very much the same. And then what do you do? Where is our choice then? It means we have no choice whatsoever. So this wonderful democratic choice, which is offered every four years, is a choice between one fraud and another fraud, each of which are pushing almost the same ideology, with slight differences in rhetoric, in order to differentiate the product artificially a little bit. And so here's where the only attack on monopoly differentiated product, on collusion, on concentration of size, on lack of choices, all that sort of stuff, all this stuff really applies to the government. And yet somehow the liberal economist never, never applies to the government, never, even right-wing economists don't apply to the government, no place, you get this kind of analysis.

44:31Now, government is sacrosanct, you see. You don't apply ordinary standards to it. That's why I say that when you say the market is democratic, you're really smearing the market. Well let's take the uniformity of 51%. Let's take a specific example, which at least until A year or two or three ago, there was a hallowed example in American life and any criticism of it was considered the equivalent of criticizing motherhood and apple pie, because motherhood is sort of under attack now, and I don't know about apple pie, at any rate, it's now sort of almost legitimate to criticize the public school system. Let's take the public school system, here's a system run by the taxpayers, let's say, run by the majority of each area, well you have to have this product, you have to run on it in some way, public school, and it has to be a decision, there's all sorts of important decisions to make.

45:32Should it be traditional education, should it be progressive, should it be some combination of the two, should it be sex education, should it be religious education, should it be push capitalism or socialism, dozens of different very important questions to be decided. And the point is whatever the decision is, usually the decision will be bland, centrist, and not annoying too many people. That would be the usual bureaucratic majority kind of decision. The point is once the decision is made, that's it. There's no room for dissent, getting out from under the uniformity, etc. Whereas the private education where the parents and children are in control, consumers are in control, then instead of being one type for Public School, which is imposed on the whole country, the whole area, robot-like.

46:23You have all sorts of different groups of parents who will set up and sponsor different kinds of schools. You'll have Christian schools, parochial schools, secular schools, progressive, traditional, left-wing, right-wing, et cetera, et cetera, and the consumers then will determine what kind of school they want. So instead of having a uniform, centrist kind of uniformity with a market you have an enormous range, a wide range of diversity, and diversity is covering a whole spectrum of what people are interested in and willing to pay for. There's again a difference between a government in action and private individuals in action on the market, because the market really means voluntary action, that's really the result of voluntary action.

47:12Take, for example, another educational, which is one of my favorite examples on the educational front, because education doesn't only mean schooling, obviously. We learn things all the time. And one of the ways in which we learn things is newspapers and magazines. Now, if we should have public schools, then we should also have, it seems to me, public newspapers and magazines. Can you imagine the kind of magazine that would come out? Can you imagine the kind of newspaper that would emerge from a government bureaucratic handling of it? Can you imagine how monstrous it would be? Can you imagine how dull? Can you imagine what a painter would be? Who would read it? Obviously nobody would read it, but taxpayers would kick in for it.

47:58Imagine, for example, the interesting decisions would be made. Supposing, how would they decide how to allocate their space, the scarce amount of space, for any newspaper, any magazine, how would they decide who gets into it? Should they have this left-winger in it? Should they have a right-winger in it? How do they decide this? And of course, every decision becomes a political decision as the taxpayers are supposed to pay for this, so they will wind up with a blandest map you can possibly imagine. I would not be writing for the government newspaper, even if I wanted to. Okay, so the result of this, of course, is a stifling result of government education, whether it's schools or newspapers or magazines, a stifling of any kind of independent thought, any kind of criticism, any kind of opposition of the status quo.

48:45This is what public schools inevitably become. They become the engineers of consent, Engineers of general public support for the status quo, for the government itself. It's inevitable, regardless of how they even start at that to found the public school system. If we get back, interestingly enough, if we get back to the origins of the public school system in this country or abroad, we find out that the origins were precisely that. But the people then were much franker than they are now. The origins were specifically to mold the public into a general government way of thinking, obedience to the government, obedience to the powers of the... In the case of the United States, the first public schools were in New England, Massachusetts, and Puritan Massachusetts.

49:33The idea was to mold the public and mold each little kid into a Puritan framework. Every kid becomes, you know, such fast or Puritan. And that was... They made no bones about it. There was no democratic patina surrounding the public school system in the old days. In addition to that problem, this of course relates to, in general, the whole problem of education and the whole problem of use of resources government get to later, too.

50:19In addition to this, there's also involved in the attack on advertising a monstrous assault on free speech. Interestingly enough, the civil libertarians, who are very hept on civil liberties in some areas, somehow lose their voice when they get to, for example, cigarette advertising on television. That seems to me, cigarette advertising on television is a form of speech, a form of expression, and yet the government has outlawed it with no, as far as I can see, no reaction whatsoever, no complaint, no griping from the American Civil Liberties Union, no nothing. As far as I'm concerned, liberties are under direct attack when cigarette advertising is outlawed. If we're going to say that somehow it's fraudulent because you're not being told at all times that you're going to get lung cancer from cigarette advertising or whatever, if we can say that we should outlaw all fraudulent advertising, this brings up an interesting point.

51:22If we're really going to outlaw all fraudulent advertising, all advertising is not going to meet its, somehow its promises, what are we going to do about campaigners? What are we going to do about government? What are we going to do about all these politicians? Do we outlaw them? Well, I'm almost tempted to say yes. It's only my devotion to free speech that prevents it. I'd sooner outlaw political advertising than I would cigarette advertising. So that way, people are much more fraudulent. And yet, somehow nobody advocates outlawing that. Then, of course, we get into other, even touchier areas. What about Professor Galbraith, for example, in his books? Some of us would say it's fraudulent to call it economics.

52:08Do we then give the government the power of saying what's really economic and what isn't? and anything which is not as really be outlawed as being fraudulent. You see a lot of sticky areas here when you start outlawing instruments of expression. There's a book on the advertising front, and it's sort of basically against the attack on advertising, by Galbraith, in his famous book, The Affluent Society, which is one of my least favorite books of all time. One of these things, the affluent society, by Galbraith, who was the first great best-seller in 1959.

52:59He talks there, it was an assault on affluence, people were too affluent, capitalism was evil because we were too affluent. That was before they found out that capitalism was evil because we were too poverty-stricken. That was about three years before that. This was the anti-affluence gig. At any rate, in there he talks about, see the problem is that these brainwashed wants, these things which we are induced to purchase, such as Wonder Bread or Pepsi or whatever, these are artificial wants, he calls them, artificial wants. And there's this very strong implication in Galbraith, that artificial wants means that they're illegitimate, they're improper, they should not be expressed. This is in contrast presumably to natural wants.

53:46What are natural wants? This is about left pretty vague. It seems to me pretty, if he says it, it really does say that unofficial wants are wants that are discovered from other people, learned of from advertising or from friends or whatever. If you really say that, you're really outlawing practically everything except the pure, you know, sort of caveman kind of wants, like, you know, sort of chewing up the meat and sort of basing this pure subsistence. Everything above pure subsistence, pure permanent subsistence that is dismissed by Galbraith as being artificial. There's a peculiar kind of philosophic system he's got there. Why is it artificial? Why is it evil or artificial, improper to learn about wants from other people?

54:34After all, people, human beings are not animals. We don't learn about stuff through instincts. We can only learn about stuff either from our own experience or from other people's experience. So we learn about wants, just like we learn about techniques. We learn about wants from other people, from friends, neighbors or whatever, and this is really the process This is what civilization is all about in many ways The fact that we are influenced by other people and we learn about things from other people, you try to outlaw this, it seems to me you're really outlawing the human condition altogether. There are very few people who can create their own once a day novo, sort of out of thin air, without consulting anything else, an experience, or any other person. If it's ever been done, it's pretty unusual to say the least, I doubt whether Galbraith even has done it.

55:20And in the learning process, again, I've talked about the learning process before, the learning process also includes the process of learning about what's going on. I mean, you learn about TV sets, for example, because the first guy in the town buys a TV set when it first comes out. You go and look at it, hey, it looks terrific, and you want to buy it yourself. This process of diffusion of new consumer products is very similar to the diffusion of producer's products. Incidentally, Hayek and Dejuvenel both written some very interesting stuff, which egalitarians have always stuck in egalitarians' throats. Justifications for differences of wealth and income on the basis of learning how to consume. In other words, the wealthy guy in town buys the first TV set, and he buys it because not too many TV sets have come out yet, it's pretty In other words, the wealthy people have performed an important social function of pioneering in consumption.

56:29Huftus don't like that approach, I think it's correct. Again pointing out, there's always a person for everything, there's always a first creator of inventions or production or new products, there's always a first consumer of everything, First guy goes out and gets a TV set. First guy has his own private helicopter or whatever.

57:01Interestingly enough, Galbraith is attacking, in this book, the Axlum Society, which I'd say is one of my veins, one of the veins of my existence, he's attacking these artificial ones constantly throughout the book. And then when he's talking about a solution to the problem, his solution is what we need, he says, is a vast multi-billion dollar program using federal funds to educate people so they can change their consumption, so they can do the right things like listening to Bach or reading his books or whatever it is. For some reason, these things are not artificial. Doing the sort of things that Galbraith wants you to do, like drinking fine wine, or listening to Bach, or reading Galbraith, or watching God forbid, Channel 13 all your life, public television was that time in New York, or listening to uplift kind of lectures all the time, this sort of activity is somehow not artificial, but somehow on the same plane as raw existence.

58:03Well, that's one of the many contradictions in the outbreak. That's one of the things that sticks in my court of this day. Well, we have, I'll just say just a word here, a very lengthy topic, I just want to say a couple of words on it. It's the sort of thing you can be talking about for weeks. That's the whole relationship between the market and ethics. I've been talking about how Galbraith really wants to change people's consumption patterns, but he's really saying it's somehow unethical to buy Pepsi and buy Coke and buy Wonder Bread, but it's ethical to listen to Bach and buy Galbraith's volumes.

58:59That's his implicit position. And I can see how the point about the market is, the free market, is that it leaves the public, the individuals on the market free to follow their own values, to follow their own ethics, to buy whatever they want to buy, and they follow their own codes. The, now you can say if you want to, but some of their purchases are unethical from some What I'm saying is that you should try to persuade a person that is an unethical purchase rather than outlaw it. That was the difference here between coercion and persuasion.

59:48Oddly enough, Galbraith is very, very upset about the persuasion involved in advertising and the persuasion involved in market selling court, etc. and the selling court, etc. It's not upset at all about coercive actions of the federal government to force people to listen to Bach or to do whatever. Somehow that's okay. That's not brainwashing. That's not artificial. I think you can say, if you want to, that certain categories of purchases are unethical. It's kind of difficult to say that, for example, a lot of people say that we're spending too much on cosmetics. It's a common charge. If America spends too much on cosmetics, we should spend less on cosmetics and more on bubble gum or whatever the alternative is.

1:00:36Well, the thing is, I don't know of any ethical system which can grind out or crank out a quantitative conclusion like that. What's the ethical optimum cosmetics purchase? I don't know, I don't think anybody else does these. You can try to make the case that cosmetics are evil and should be abandoned altogether. I wouldn't agree with it, but that's a possible case. But to say that there should be 10% less purchase on cosmetics than there are now, I don't know how anybody can really back this up. I've not yet heard anybody set forth a system of quantitative ethics. and yet there's a lot of the ethical criticism of the market of this sort of peculiar kind of quantitative ethics.

1:01:24There's also of course, in this connection, there's the familiar, less intellectual critique of so-called materialism. The people, the market forces are too materialistic to somehow encourage materialism. Actually, I don't know what sense, I guess it gets vague in what sense the person is talking about materialism. If you mean concern with purely physical objects or physical consumption or something like that, then it's really the reverse of the truth because in the primitive period, when everybody is on mere subsistence level, Everybody's spending all of their time scratching out food. Nobody ain't got time to think about economics, philosophy or anything of that sort, or high culture.

1:02:14High culture only becomes possible when there's a certain surplus standard of living, when the standard of living gets to the point where people have the leisure to begin concentrating on other things. Secondly, the cuter thing about this materialism attack is, for example, somebody will say this guy is making a terrible thing, this guy's making a lot of money because he's writing stuff for the public likes, it's too commercial, it's too materialistic and he's making millions out of it, whereas I was a great novel making practically nothing. Well, it seems to me he should glory in this. He shouldn't be griping about it. If he's really against materialism and money and commerce, then the fact that he's making nothing out of it should be a great joy to him. Somehow it isn't.

1:03:02Somehow the conclusion from this is, our anti-materialist is, that somehow the other guy's material should be taken away from him and handed over to him, the anti-materialist, who then is more deserving of these material goodies. and it seems to me an inner contradiction by the anti-materialists. There's always sort of the implicit inclusion clause that somehow either the government should take tax the commercial people and give it over, hand it over to the anti-materialists or whatever. That seems to me a big contradiction there. Well, another thing I wanted to say about government advertising and public advertising and all that is that public service commercials, for example, on television strike me as being fantastically dull.

1:03:50Dull, dull, doleville. Even if they're not government, even if they're just some, you know, a beloved public agency, a private voluntary agency, they are dull and probably the most imaginative of them One turns out to be a complete fraud. That's our old pal Smokey the Bear. Now it turns out that Smokey the Bear has been peddling fraud for all of his years on television because there's a split, you see, among the conservationist and environmentalists, which has just surfaced recently. And that is that all this hysteria about forest fires turns out to be a bad thing because forest fires are really good. See, the small-scale natural forest fires, we don't have the government rushing every forest fire and stamping it out immediately. uh... you have some natural forest fires that clears away the underbrush that makes the pine cones hot so the pine trees can then refurbish themselves and all that you can see I'm a little hazy on the technological points but my close friends in the

1:04:50the nature field tell me this is true uh... and then they can refurbish themselves and all that but now you see what's happening since the government comes in and stamps out every forest fire helped by Smokey the Bear as a theoretician of this, they don't give a chance for natural forest fires to grow and the planting fees don't grow and there's too much underbrush and then a big forest fire comes and strikes down the whole forest as a result, so the government messes everything up always regardless of what area it's involved in, even Smokey See the bear, seemingly harmless kind of thing there.