Thursday, January 27, 2005


Could someone out there who understands economics help me with this question: Is marketing a necessary part of a free-market economy?


bkmarcus said...

This may have been intended as a rhetorical question or as a joke that I missed. I'm not always quick on the uptake.

But I'll take the question seriously for a few minutes.

The first thing to point out is that "free market" is not an economic concept; it is an ethical concept: "That condition of society in which all economic transactions result from voluntary choice without coercion." (source)

From an ethical perspective, your question amounts to this: Does free speech include promotional speech? Which of course it does, or speech isn't free. I don't know about you, but I assume that people who are free to communicate will occasionally want to promote themselves or their products. I can't imagine it otherwise.

So I'll translate your question to this: Do the general economic benefits of free-market capitalism require the existence of marketing? I'm aware of at least one study that compared the price of optical care in a state that prohibited opticians from advertising to a state in which opticians did advertise. Prices were much higher in the prohibited state.

A similar study compared the price of fast-food hamburgers before, during, and after a general newspaper strike in NYC. Without newspaper advertising, the price of hamburgers went up. Once the papers were back and running ads again, the prices dropped.

The benefits of economic capitalism result from free entry and competition. Marketing and advertising are critical components of that competition.

(Please let me know if I've somehow missed the point.)

Isis said...

Thanks, bk. You did not miss the point at all. I did not intend that as a joke or rhetorical question. Perhaps it was a basic enough question that most people knew the answer, but not me. So thank you for taking it seriously and for your answer. And thank you for translating my poorly worded question as you did: that was just what I meant.