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Advertising spend being too high is a symptom of a supply glut. Too many products in the marketplace, not enough consumers to buy them. In a different world w

by csense 9mo ago

Advertising spend being too high is a symptom of a supply glut. Too many products in the marketplace, not enough consumers to buy them. In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices. Alas, the short-term single-firm directional incentive for company decision makers in that world leads to marginal prioritization of higher margins. The loss of wages leads to loss of consumer spending power but it's spread across the economy. But every firm has the same incentive so they all do the same thing, and the good thing gets ruined. This line of thinking leads to a Georgist-ish conclusion: The class conflict shouldn't be between workers and employers. They should be allies; the real cause of nobody being able to afford anything is rent extractors. (Writing in the 1800's, George [1] was most concerned about land rents; but the advertising monopoly of Google / Meta may be another form of extractive rent with similar characteristics.) Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)... [1] https://www.astralcodexten.com/p/your-book-review-progress-and-poverty https://www.astralcodexten.com/p/your-book-review-progress-a...

metabagel 9mo ago
Stronger unions would help bring wages up.
- 9rx 9mo ago
  That is an interesting chicken and egg problem. A strong union requires members who can demonstrate that prolonged work stoppages are a credible threat. If the employer thinks everyone will be starving and begging to come back after a week, the union has no power. In other words, in order for a union to become strong, wages already need to be up to allow the workers to be able amass considerable savings to get them through the months and years when they aren't working. So higher wages have to come first. But to complicate matters, once workers have that, they often start to feel like they don't need a union. The one time when unions did become strong, workers were so desperate for safer working conditions that potentially being thrown out on the street and left to starve was seen as a better option than being crushed by a machine. But the law now ensures that workers are just comfortable enough to prevent an uprising like that again.
awakeasleep 9mo ago
I dont think you have to go georgist for that take, adam smith’s whole “free market” originally meant “free from economic rent”
achierius 9mo ago
> The class conflict shouldn't be between workers and employers. Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes. Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.
- joshgachnang 9mo ago
  Because employers don't tend to make choices about the "interests of the working class", they make choices about what benefits them specifically in the moment or near future. You need to get some sort of alignment on their interests and the interests of the working class to create change, whether that's via government intervention or otherwise. And I hear you on ownership. It's "just" figuring out how to make that change.
- gruez 9mo ago
  >... so either they're all renting or none are. The article in the parent comment specifically spells out why renting out land is different than say, "renting" out a car factory (or any other productive asset).
Herring 9mo ago
> In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices. Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level. The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP. They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.
- gruez 9mo ago
  >The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP. Why only rich nations? Many of the most unequal countries are also poor (or at least, not rich), so why do they get a pass? https://en.wikipedia.org/wiki/File:Gini_Coefficient_of_Wealth_InEquality_source_(2021).png https://en.wikipedia.org/wiki/File:Gini_Coefficient_of_Wealt... https://en.wikipedia.org/wiki/File:World_Bank_Inequality_2022.png https://en.wikipedia.org/wiki/File:World_Bank_Inequality_202...
  - Herring 9mo ago
    Take a few quantitative courses (ie statistics). Roughly speaking, you usually want to compare similar-ish groups. It's like if you want to examine the effects of diet on a human body, you can't just mix old and young haphazardly. Advertising spend in Somalia probably works very different than advertising spend in Norway.
joshgachnang 9mo ago
I'm not familiar with Georgism, but employers and rent extractors (e.g. the majority stock owners) seem to be one and the same pretty often, at least in the US.
gruez 9mo ago
>Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)... That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.
- sdenton4 9mo ago
  It's a collective action problem. If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
  - gruez 9mo ago
    >If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money. Does this actually work? Suppose you're on an island where the economy only produces coconuts. How does giving workers more coconuts make the economy grow, such that there's more coconuts to go around overall? Unless the workers were absolutely famished, giving them more coconuts isn't going to increase productivity. You might argue this model isn't representative of the real world, but that's approximately how the economy works. It can produce a certain amount of "stuff" (ie. coconuts), of which some portion can be given to workers, and the remainder can be given to the kings/elites/capitalists/whatever. Unless you improve productivity, there isn't going to be magically more stuff to go around. Giving each worker a car can plausibly increase their productivity (less time spent commuting?) but the effect is small, and unlikely to be recouped by car companies. The situation looks even worse in the current economy. If everyone's paychecks were 10% bigger, what marginal item do you think it'll be spent on? A bigger car? A new iPhone or big screen TV? How would any of those increase productivity?
johnnienaked 9mo ago
I don't think that's how it works. These companies have all the visibility control and make you invisible by default unless you pay them. It has very little to do with quality, demand, or any of the rest.
morgoo 9mo ago
I'm just going to add a recommendation for the book 'Technofeudalism' by Yanis Varoufakis. The short version is that the current cloud economy is similar to serfs working under a feudal lord.
Aerroon 9mo ago
>In a different world where there are higher wages, more people would have more spending power. I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case) Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are. When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)
- ronsor 9mo ago
  Food and clothing are often 5-10x cheaper in those countries compared to what people pay in America.
p_v_doom 9mo ago
> the real cause of nobody being able to afford anything is rent extractors. Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce. If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.
- bsjaux628 9mo ago
  Yes, because the employer just happened to be the first one to find the fully built and equipped coat factory and he declared himself the boss. He in no way shape or form had to risk his capital to set up a successful business, so he should be living from scraps
  - KellyCriterion 9mo ago
    Well, this is not was OP said ;-)
afpx 9mo ago
My problem with buying stuff is that by the age of 40 I had already attained everything that I ever needed or wanted except for a occasional replacement. Personally, I don't need more products, but there are many services I would pay for if they existed. But, apparently companies don't seem to care about providing services. Why? Is it because they don't scale?
- lufenialif2 9mo ago
  What kinds of services would you pay for that don’t already exist?
  - afpx 9mo ago
    In general, it's difficult to find services that are high-quality and high-trust.
Imustaskforhelp 9mo ago
Am I seeing a fellow georgist in the wild? That's great! I do agree that these monopolies are rent seeking and we should probably do something about it > Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)... This reminds me of this too https://www.youtube.com/watch?v=uvHwyrem24M https://www.youtube.com/watch?v=uvHwyrem24M (CEO who gave all his employees minimum $70,000 paycheck thriving six years later) Everyone bet that they would fold but they are doing stronger than ever. People took voluntary pay cuts when the company was under pressure and they even gifted their CEO their favourite car out of their own geneorsity! I always smile when I watch this video. (the company's gravity payments) > The class conflict shouldn't be between workers and employers I feel like the problem's becoming that the employers are themselves rent seekers (so think working at google,facebook,twitter) or the VC companies which want to build more Google's and facebooks and twitters but not companies like the one that I mentioned in the video
cyber_kinetist 9mo ago
A Marxist can certainly also be a Georgist, it's a matter between who should we eliminate first: the capitalists or the rent-seekers. Maybe we should eliminate the latter first in order to be able to properly tackle the former: the real class conflict between the proletariat and the bourgeois! But you can also go a bit more extreme (and less orthodox) and say that classical capitalism has already come to an end, and in the current neoliberal era most of the purported "capitalists" are actually just rent-seekers (platform based companies which run either on ads or monthly payments) - you don't sell commodities anymore and instead just access to services. Maybe these are just a symptom of The Tendency of the Rate of Profit to Fall - where the value of labor itself has fallen so much that there is no way for any capitalist production to continue generating acceptable profits unless you do any rent-seeking behavior. In that sense, you can certainly be both a Georgist and a Marxist since you still believe in the TRPF and the inherent contradictions of capitalism (though quite an unorthodox one!)

by csense 9mo ago

metabagel 9mo ago

Stronger unions would help bring wages up.

9rx 9mo ago
That is an interesting chicken and egg problem. A strong union requires members who can demonstrate that prolonged work stoppages are a credible threat. If the employer thinks everyone will be starving and begging to come back after a week, the union has no power. In other words, in order for a union to become strong, wages already need to be up to allow the workers to be able amass considerable savings to get them through the months and years when they aren't working. So higher wages have to come first. But to complicate matters, once workers have that, they often start to feel like they don't need a union. The one time when unions did become strong, workers were so desperate for safer working conditions that potentially being thrown out on the street and left to starve was seen as a better option than being crushed by a machine. But the law now ensures that workers are just comfortable enough to prevent an uprising like that again.

awakeasleep 9mo ago

I dont think you have to go georgist for that take, adam smith’s whole “free market” originally meant “free from economic rent”

achierius 9mo ago

> The class conflict shouldn't be between workers and employers. Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes. Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.

joshgachnang 9mo ago
Because employers don't tend to make choices about the "interests of the working class", they make choices about what benefits them specifically in the moment or near future. You need to get some sort of alignment on their interests and the interests of the working class to create change, whether that's via government intervention or otherwise. And I hear you on ownership. It's "just" figuring out how to make that change.
gruez 9mo ago
>... so either they're all renting or none are. The article in the parent comment specifically spells out why renting out land is different than say, "renting" out a car factory (or any other productive asset).

Herring 9mo ago

> In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices. Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level. The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP. They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.

gruez 9mo ago
>The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP. Why only rich nations? Many of the most unequal countries are also poor (or at least, not rich), so why do they get a pass? https://en.wikipedia.org/wiki/File:Gini_Coefficient_of_Wealth_InEquality_source_(2021).png https://en.wikipedia.org/wiki/File:Gini_Coefficient_of_Wealt... https://en.wikipedia.org/wiki/File:World_Bank_Inequality_2022.png https://en.wikipedia.org/wiki/File:World_Bank_Inequality_202...
- Herring 9mo ago
  Take a few quantitative courses (ie statistics). Roughly speaking, you usually want to compare similar-ish groups. It's like if you want to examine the effects of diet on a human body, you can't just mix old and young haphazardly. Advertising spend in Somalia probably works very different than advertising spend in Norway.

joshgachnang 9mo ago

I'm not familiar with Georgism, but employers and rent extractors (e.g. the majority stock owners) seem to be one and the same pretty often, at least in the US.

gruez 9mo ago

>Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)... That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.

sdenton4 9mo ago
It's a collective action problem. If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money.
- gruez 9mo ago
  >If everyone pays higher wages, there's a greater supply of money for buying stuff / solving problems (assuming the higher wages aren't eaten by rents). No individual form recoups all of the higher wages they pay their workers, obviously, but there's a larger market for the goods of everyone has more money. Does this actually work? Suppose you're on an island where the economy only produces coconuts. How does giving workers more coconuts make the economy grow, such that there's more coconuts to go around overall? Unless the workers were absolutely famished, giving them more coconuts isn't going to increase productivity. You might argue this model isn't representative of the real world, but that's approximately how the economy works. It can produce a certain amount of "stuff" (ie. coconuts), of which some portion can be given to workers, and the remainder can be given to the kings/elites/capitalists/whatever. Unless you improve productivity, there isn't going to be magically more stuff to go around. Giving each worker a car can plausibly increase their productivity (less time spent commuting?) but the effect is small, and unlikely to be recouped by car companies. The situation looks even worse in the current economy. If everyone's paychecks were 10% bigger, what marginal item do you think it'll be spent on? A bigger car? A new iPhone or big screen TV? How would any of those increase productivity?

johnnienaked 9mo ago

I don't think that's how it works. These companies have all the visibility control and make you invisible by default unless you pay them. It has very little to do with quality, demand, or any of the rest.

morgoo 9mo ago

I'm just going to add a recommendation for the book 'Technofeudalism' by Yanis Varoufakis. The short version is that the current cloud economy is similar to serfs working under a feudal lord.

Aerroon 9mo ago

>In a different world where there are higher wages, more people would have more spending power. I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case) Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are. When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)

ronsor 9mo ago
Food and clothing are often 5-10x cheaper in those countries compared to what people pay in America.

p_v_doom 9mo ago

> the real cause of nobody being able to afford anything is rent extractors. Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce. If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.

bsjaux628 9mo ago
Yes, because the employer just happened to be the first one to find the fully built and equipped coat factory and he declared himself the boss. He in no way shape or form had to risk his capital to set up a successful business, so he should be living from scraps
- KellyCriterion 9mo ago
  Well, this is not was OP said ;-)

afpx 9mo ago

My problem with buying stuff is that by the age of 40 I had already attained everything that I ever needed or wanted except for a occasional replacement. Personally, I don't need more products, but there are many services I would pay for if they existed. But, apparently companies don't seem to care about providing services. Why? Is it because they don't scale?

lufenialif2 9mo ago
What kinds of services would you pay for that don’t already exist?
- afpx 9mo ago
  In general, it's difficult to find services that are high-quality and high-trust.

Imustaskforhelp 9mo ago

Am I seeing a fellow georgist in the wild? That's great! I do agree that these monopolies are rent seeking and we should probably do something about it > Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)... This reminds me of this too https://www.youtube.com/watch?v=uvHwyrem24M https://www.youtube.com/watch?v=uvHwyrem24M (CEO who gave all his employees minimum $70,000 paycheck thriving six years later) Everyone bet that they would fold but they are doing stronger than ever. People took voluntary pay cuts when the company was under pressure and they even gifted their CEO their favourite car out of their own geneorsity! I always smile when I watch this video. (the company's gravity payments) > The class conflict shouldn't be between workers and employers I feel like the problem's becoming that the employers are themselves rent seekers (so think working at google,facebook,twitter) or the VC companies which want to build more Google's and facebooks and twitters but not companies like the one that I mentioned in the video

cyber_kinetist 9mo ago

A Marxist can certainly also be a Georgist, it's a matter between who should we eliminate first: the capitalists or the rent-seekers. Maybe we should eliminate the latter first in order to be able to properly tackle the former: the real class conflict between the proletariat and the bourgeois! But you can also go a bit more extreme (and less orthodox) and say that classical capitalism has already come to an end, and in the current neoliberal era most of the purported "capitalists" are actually just rent-seekers (platform based companies which run either on ads or monthly payments) - you don't sell commodities anymore and instead just access to services. Maybe these are just a symptom of The Tendency of the Rate of Profit to Fall - where the value of labor itself has fallen so much that there is no way for any capitalist production to continue generating acceptable profits unless you do any rent-seeking behavior. In that sense, you can certainly be both a Georgist and a Marxist since you still believe in the TRPF and the inherent contradictions of capitalism (though quite an unorthodox one!)