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Comment by mistermann | Hacker News Reader

I don't watch ads and yet I still buy things. Granted, not as much as if I watched ads I'm sure.

If you don't buy something, and hold off on spending, then the GDP goes down, as the velocity of money slows down.

If 1 dollar is spent 5 times a year, that economy has a higher GDP than when that 1 dollar is spent 4 times a year.

Advertising makes sure that money is spent quickly, to increase the GDP by increasing the velocity of money in an economy.

If you get rid of advertising, you slow down the economy.

You have astatement A and conclusion C but no B step.

Do people spend money without advertising?

I would say, yes they do. People have intrinsic wants and needs. Why would I so fulfilling them, because of a lack of extrinsic wants and needs?

Edit: also aren't you just trying to optimise to what is measured. GDP goes up, and that's beneficial because? Greenspan says so?

People spend more money with advertising. The velocity of money increases. If you believe it doesn't, then you should probably tell that to the trillion dollar industry.

I get that it's not what you want to hear, but that's your problem to deal with, not mine.

"Wishing and hoping" that advertising doesn't work, doesn't actually make it so. Just because you don't like something, doesn't mean it doesn't work.

>If you believe it doesn't, then you should probably tell that to the trillion dollar industry.

The advertising industry is profitable because it's an arms race. Companies have to advertise because their competitors already are doing.

If all industries agreed to limit their ad spending, those trillions could become mere billions overnight, and the marginal revenue decreases would be more than offset by the decreased spending. But such coordination is impossible in a competitive economy, because any defector will reap huge rewards.

In the absence of advertising very few people are educated enough to more productively use their wealth. Principally, you must also consider that almost no dollars today are hoarded - even if you place them in the "slowest" place you can, your bank, that is still a fractional reserve bank that will loan all that out to drive economics in the same way buying goods would. Very, very few people who are saving are going to just hide cash under their bed if psychologically manipulative advertising was coercing them into buying things they did not want or need. And besides that, most of any money held in reserve would go into investments, which can drive much more social utility than buying unecessary crap.

But in reality that does not actually matter either. Like I said, there is very little fiscal responsibility in people - at least in the US - predominantly a product of culture. The money people would have spent on random useless object advertised on TV 1 would instead be spent on personal want 2. The practical effect of advertising is that it is simply redirecting dollars that would have gone to those with smaller advertising budgets to those with larger budgets. The trillion dollar industry exists as an arms race where increasing product quality or diversifying is less effective - because people are already broke, and net wealth is declining, you cannot compete honestly as effectively in product anymore. If you try that, you simply lose to the guy who had more advertising out there using psychological techniques to manipulate people into buying the inferior product over yours, and that is where the wishing comes in, people wish people were more rational, but we are not, and constant bombardment of advertising only wastes money to let the fattest cats maintain sales margins.

I didn't say it doesn't work. I said it isn't necessary.

We aren't arguing whether coke tastes nice, we are arguing whether you need to drink it...

I think you need to reread my comments.

> If you get rid of advertising, you slow down the economy.

I still don't understand why a slower economy is a bad thing. Poverty and starvation is definitely a bad thing, climate change is definitely a bad thing, but a slow economy?

There is certainly an argument for the consequences of a breakneck economy of high monetary velocity. It pressures everyone into being paycheck to paycheck, which increases stress and depression. The hyper-utilization of the monetary base can also destabilize the economic system very easily when that velocity shifts even slightly - part of the 2008 downturn might be attributed to such a mechanism, as would the dramatic rebound of the stock market in the interim. Basically, total utilization can drive significant growth, but it also means any downturn can be that much more catastrophic. More relaxed economies in Europe were impacted much less severely than the US.

If advertising is making people buy things that don't actually improve their lives, then that GDP increase is just a bigger number, with no corresponding increase in utility.

> If you get rid of advertising, you slow down the economy.

I can agree with that, but I wonder how much it matters, in different scenarios. For example, if instead of hiring someone to cut my lawn (increasing GDP), I cut my lawn myself. Since GDP is lower, is the world therefore a worse place than it might have been?

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