Coase on broadcasting, advertising and policy

Advertising's Elusive Economic Rationale: Public Policy and Taxation

“…On the other hand we know from behavioural economics experiments that people deviate from cognitive rationality without recognising it and we know from neurological studies that desires can be manipulated through subtle signals targeted at the limbic system. The distinction between wants and needs is also an important one in this context (Pratten, ). Welfare analyses need also to consider system level effects; social prestige is by definition exclusionary and may simply amount to rearranging a fixed amount of meaning or power in society (Veblen, )…”

“…Pratten () cites Ronald Coase as recognising the systems effect of advertising: “‘we have to judge an activity such as advertising, which influences tastes, by deciding whether it tends to produce good people and a good society… judging by the emphasis in advertisements on convenience, cleanliness, and beauty, such effect as it has is presumably generally in the right direction’ (Coase, , p. 10).…”

The three roles of the ‘Coase theorem’ in Coase's works

“…His insistence on reciprocity eliminated the moral 37 Coase makes the assumption that the consumer's willingness to pay for a good just reflects her preference, whereas it also depends on her initial endowment and on a social norm of the value of the resource (see, for example, Hausman and McPherson, 1996). 38 Pratten (2001) showed how these ideas underlay Coase's empirical studies about American and British institutions of television and radio broadcasting, and stresses the possible inconsistency between Coase's criticisms of standard microeconomics and this efficiency assumption, which he took from it without demonstration. 39 The self-evident nature of his 'theorem' in his own view is absolutely clear in the assertion Coase made in an interview, that he was 'thinking [he] was making a proposition of the kind of two and two equals four' (Coase, 2002).…”

“…6-7), who adds Pigou's stress on the consequences of imperfect knowledge.25 This issue is somehow raised byDemsetz (1996) who, however, stays with a caricatured vision of Pigou as having an idealist view of government.26 The other difference with the firm is that the State possesses the violent means to enforce regulation (PSC, p. 17). 27 In Coase's view, even more radically, general interest above the satisfaction of individual preferences does not exist and individuals are better placed to know these preferences(Pratten, 2001, p. 624).…”

“…But it is also at the origin of some of his empirical studies, on broadcasting(Pratten, 2001) and lighthouses(Bertrand, 2006a).35 See also Medema and Samuels (1998),Pratten (2001) andCampbell and Klaes (2005).…”