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9_March 15+17.doc

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Brock University
Thomas Mulligan

Monday, March 15 - Marketing, Advertising, and Ethics Galbraith and Hayek on the Dependence Effect KEY CONCEPTS • NON SEQUITUR o argument o premises o conclusion • LIBERAL POLITICAL ECONOMY (Galbraith) vs. • CONSERVATIVE POLITICAL ECONOMY (von Hayek) • AFFLUENCE • ORIGINAL WANTS o innate (born with) vs. • NON-ORIGINAL WANTS o synthesized by (a) emulation and (b) advertising/salesmanship • PRODUCTION • THE DEPENDENCE EFFECT JOHN KENNETH GALBRAITH (1908 – 2006) 31 books, 45 honorary degrees • born in Iona Station, Ontario • 1937 - U.S. citizenship • professor, Princeton & Harvard • presidential advisor, ambassador • 1997 - Order of Canada • 2000 - U.S. Medal of Freedom "The Dependence Effect" (Honest Work, 313) Part I of the argument: • Current theory of consumer demand: there is never a point where human has no wants – once wants are being satisfied new wants come up (first physical, then psychological); wants originate in individuals’ personalities ( psychology) • There are original wants (innate, born) which are most natural and most urgent  physical wants • Allegory: If we just wake up in the morning assailed by demons who demand certain things and have certain wants, there is good reason to satisfy the wants – however, if the demons are created and cultivated by us/society first, the wants might not be reasonable at all • In society: Production fills a void which it has itself created  production creates wants in people in then satisfies them • Modern advertising and salesmanship have the central function to create desires; are the demons • ‘A broad empirical relationship exists between what is spent on production of consumers’ goods and what is spent in synthesizing the desires for that production  The more money is spent on production, the more money is spent on advertising in return • THESIS: Production itself creates the wants it seek to satisfy = DEPENDENCE EFFECT 3 WANTS PRODUCTION 1 2 5 4 6 1) Innate/original/born wants (shelter, food, clothes, sex) 2) 2)Wants inspire us to create the means of production (grow food, hunt, create shelter) and to develop skills 3) Production satisfies these original wants 4) Economy grows 5) Original wants are all satisfied, contrived/synthesized/not born with wants take over 6) Production now suggests new wants which it seeks to satisfy (e.g. Fashion, not merely clothes)  Most social/economic energy spent on synthesized wants  money given to production that, in return, spents money in order to synthesize new wants  How production creates wants: Passively through emulation; actively through advertising and related activities = DEPENDENCE EFFECT • The mere fact that wants can be synthesized by advertising, catalysed by salesmanship, and shaped by manipulation of the persuaders shows that they cannot be urgend (e.g. hunger does not have to be synthesized; it is there) • This is possible because all physical wants are satisfied; in this state people are open to persuasion  as society becomes increasingly affluent, wants are increasingly created by the process by which they are satisfied Part II of the argument: • Final problem of affluent society is what kind of products it produces and how wealth is distributed • He thinks that our society is being divided in a rich private sector and a poor public sector  several examples (e.g. car vs. street)  UNEVEN distribution • Why does this unevenness occur? Private sector has the purpose of making profit  produce things that are easy to produce and promise to generate profit  this they even enforce through advertisement Public sector has to take care of the goods that are harder to produce and that do not make profit (e.g. education, health care) • Dependence Effect leads to social imbalance FRIEDRICH HAYEK (1899 – 1992) 25 books, 130 major essays Taught at: London School of Economics Univ. of Chicago Univ. of Freiberg, Germany Nobel Prize - Economic Sciences (1974) "The Non Sequitur of the 'Dependence Effect'" (Honest Work, 318) • Title is his THESIS  Galbraith’s argument is non-sequitur • He starts of with stating what the critics of free enterprise/socialists claim: problem of production has been solved (enough wealth exists) but it is distributed uneven; too few people hold means of production  problems of social justice • He especially addresses Galbraith and his argument (Dependece Effect); ‘heart’ of Dependence Effect is the problem of artificial needs • He finds that the whole argument is non-sequitur Hayek's Summary of Galbraith's Argument 1. People have two kinds of wants: (a) Original / Innate (b) Non-original / Contrived
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