Saturday, January 30, 2010

Perhaps Advertising isn't a Waste

I discussed a while back my concern over the wasted resources that go into advertising. Perhaps I spoke too soon. Here's some research pointed out by a recent add to my blogroll, Economic Logic:
Benedetto Molinari and Francesco Turino point to a positive correlation between GDP and advertising in the OECD and try to rationalize this within the Neoclassical growth model. They find that the impact of advertising is rather through the labor supply. As individuals want to consume more, they need to work more to generate the necessary income. This increases GDP (8% for the US) and utility.
I also wonder if it decreases the costs in searching for the item you want. Then again, it seems just as likely that it increases them.

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