A conversation with Ramsi Woodcock
For this month's edition, I spoke to Ramsi Woodcock, a professor of law at the University of Kentucky. An expert on antitrust law, economics, and policy, with a particular focus on the consequences of the information age for the antitrust treatment of personalized pricing, dynamic pricing, and advertising, in 2018 Ramsi wrote a paper for The Yale Law Journal called 'The Obsolescence of Advertising in the Information Age.' I wanted to talk to Ramsi about the relevancy of advertising and continue learning more about it after my conversation with Jean Kilbourne that explored the impacts of advertising on society. Is it, in fact, now obsolete, as Ramsi writes?
Shonagh Marshall: You're a professor of law with expertise in antitrust law, economics, and policy. What drew you initially to this type of work?
Ramsi Woodcock: I went to law school, and I found most of what they do in law school to be not very interesting. I chanced upon a subfield called law and economics, which I found very interesting because the economic theory gives you a kind of intellectual structure with which to evaluate legal rules. Generally, when one studies the law, you just learn what the rules are, but you don't understand the underlying social facts that drive the rules or what the effects of the rules are going to be on society. Economics gives you a way of evaluating the impact of laws on the real world that I found fascinating.
The field within the law that's most heavy in economics is antitrust because it's oriented towards market structure, looking at whether companies are monopolizing markets, and so on. It was the theoretical work that comes with economics that got me interested in antitrust. I don't just do antitrust; it's more the economic theory background that drives my interest.
I practiced law for a few years in antitrust and constantly got in trouble with the partners for spending too much time reading the expert reports. For example, one company is suing another to break it up because of monopolizing activity, and they get economists to write reports explaining what's going on. The reports were fascinating to me, but the litigation documents were not, so I figured I had better become an expert; otherwise, they're just going to fire me. So that's how I ended up teaching antitrust law.
Shonagh: In 2018, you wrote an impactful paper for The Yale Law Journal called 'The Obsolescence of Advertising in the Information Age.' Before I ask you about your thesis for this paper, I wanted to ask you to explain what advertising is. What is its role?
Ramsi: Mine is an economic account of advertising; I'm sure sociologists would give you a different account.
The economic account of advertising is that it has two main functions. One function is to inform. To allow consumers to identify the products that best fit their preferences and find them. That's the information function of advertising.
The second function is what economists call a persuasive function. I like to call it the manipulative function. The idea here is that advertising is meant to change preferences. So it's not about providing information on where to find goods that fit a pre-existing, immutable, static set of consumer preferences. Instead, advertising goes out and changes your preferences to make you like something or make you think you like something that absent advertising would not fit your preferences at all. That's why they call it persuasive, and I call it manipulative. It's the idea that advertising changes what you like or what you think you like.
This account of advertising is surprisingly old. Economics as a field is only about 100 years old. Still, in some of the first economics papers published in professional journals in the early 20th century, you find economists looking at advertising and saying that it's got these two functions, it persuades and it informs.
I should add that there's a third account of the value of advertising; it's relatively recent, by which I mean that it dates to the 50s, 60s, and 70s. It focuses on the idea that advertising itself is a good or a source of pleasure. So rather than simply conveying information or manipulating you, advertising is a product itself that you or I might enjoy consuming. We feel pleasure when we see certain ads, the most obvious example in the American context being Super Bowl commercials. A lot of people want to watch the Super Bowl halftime show just so they can see the commercials because they think they're so funny and clever, and because they have such high production values. And so that's the third function, that advertising is a good in itself — a kind of creative endeavor.
Image by AlphaTangoBravo / Adam Baker, via Creative Commons
Shonagh: Thank you so much for explaining that. In the article, you look at antitrust cases in the 50s, 60s, and 70s. I was interested to learn about them. What happened in those cases?
Ramsi: In the 1950s, Vance Packard wrote an influential book called The Hidden Persuaders that argued that advertising is essentially manipulative in function, almost exclusively so. It was a best-seller, and it opened the eyes of many Americans to the fact that they may be being manipulated by ads. That seemed to trigger ongoing policy interest at the Federal Trade Commission and, more broadly, in the American policy world — interest in reining in advertising and viewing it in a negative light. That culminated in a series of cases that the Federal Trade Commission brought, which tried to argue that advertising is anti-competitive because it prevents the best product from winning in the market.
The way to think about this is that you might have a more innovative mousetrap that better fits consumers' preferences than do the mousetraps of your competitors. But a competitor might hire a better marketing agency. That marketing agency might then persuade or manipulate consumers into thinking that they prefer the competitor’s inferior mousetrap. Consumers then buy the inferior mousetrap, and the superior one doesn't get any sales and goes out of business. That makes advertising anti-competitive. When a market is functioning correctly, the best product should win. If you make a product that best fits consumers' preferences, it should win in the market, and then all the other competitors should lose business and eventually fail. If advertising prevents that from happening, it's undermining competition. That was the argument.
The most famous of the Federal Trade Commission’s anti-advertising cases is one that it brought against Procter and Gamble. Procter and Gamble, to this day, is a major consumer products company. In 1957 it acquired Clorox, the brand of bleach. The Federal Trade Commission argued that this would lead to anti-competitive effects in the market for bleach because Procter and Gamble had an advertising advantage. In the 50s and 60s, television advertising meant buying time on one of three channels, A.B.C., N.B.C., and C.B.S. The argument was that Procter and Gamble buy so much advertising time for so many different products that it can negotiate a bulk price for airtime from the networks. Once they've acquired Clorox, the argument went, they're going to be able to purchase advertising for Clorox at a low bulk price. This meant they could run more ads than any other bleach competitor, and since they would be able to run more ads, they would be able to manipulate more people, which meant that they were going to win in the market. A vital part of the case was that Procter and Gamble would do this for Clorox even though all bleach is chemically identical. Clorox is going to win in the market purely because of advertising, not because Clorox bleach is a better product. Actually, at the time the case was brought, the acquisition had already been consummated, and the Federal Trade Commission wanted this acquisition to be unwound. The case went all the way up to the Supreme Court, and the Supreme Court affirmed that the advertising advantage Procter and Gamble had would have a psychological effect on consumers that would be anti-competitive.
There are a couple of other cases over this period that were also successful. One of them involved concentrated lemon juice in the 1970s. Concentrated lemon juice is like Clorox in the sense that it's all chemically identical. The case was against a brand that had invested massively in promoting itself. This wasn't a merger case; it was a direct monopolization case saying this brand advertises too much, creating competitive disadvantages for other brands of lemon juice that were not justified by differences in product quality. The Federal Trade Commission won the case at the level of the Court of Appeals.
The problem that eventually prevented the Federal Trade Commission from continuing forward was in part a huge political sea change in the United States with the Reagan Revolution in 1980. But part of it was also that the Federal Trade Commission was only winning cases involving wholly undifferentiated and chemically identical products. If you're talking about bicycles or cars, they're all a little different — they're not chemically identical. So long as they're slightly different, the defendant can argue that advertising isn't manipulating consumers into preferring one brand or product over another. The advertising is just informing consumers that the Chevy is better than the Ford, and indeed Chevies are different from Fords. The Federal Trade Commission couldn't get into a situation where it would have to argue that Ford is better than Chevy, and hence advertising that makes consumers buy Chevy is manipulative, because then it would look like the Commission was trying to decide for consumers which product are best for them. Politically, that would be very dangerous for the Commission. So they just ran out of cases involving undifferentiated products in which they could easily show that advertising was manipulating consumers. Sentiment changed so quickly and completely that by the mid-80s, the entire campaign against advertising had almost been completely forgotten.
Image by Daniele Boffelli, via Creative Commons
Shonagh: In your paper, you argue that the information age has completely changed the landscape. Was the impetus for your article based on Russian interference in the 2016 U.S. election?
Ramsi: Actually, it wasn't. It was fortuitous. I got interested in it when I was at a conference in Mannheim, Germany, and someone gave a paper about advertising. It got me thinking about what advertising does. Then it occurred to me that the information function is obsolete because we have all the information that we could possibly want on the internet already. We've got user review websites. So we don't have any basis anymore for valuing advertising based on its information function.
Shonagh: In the article, you argue that brands aren't providing information, because as you explained, the internet does that now. Instead, they are manipulating people. Can you explain a bit more about how you define manipulation and how it comes into being?
Ramsi: There's a body of behavioral economic literature, based on cognitive science, which argues that the mind has two deliberative faculties. One is the hot faculty and the other the cold. The hot faculty is the impulse-driven faculty, and the cold involves deliberative long-term thinking about consequences.
There's a famous example in this literature that I like to talk about. If you're an American in London, it's very dangerous for you to cross the street because you're used to looking in the wrong direction for traffic. The impulse to look the wrong way is due to the hot faculty in the mind, which is making decisions for you based on habit; it is where you always look. The cold function, the deliberative function, is at work when, after you take a moment to think about it, you decide that you had better look the other way. The nice thing about that example is that it clarifies that if we had to choose one of these two faculties as the seed of our true preferences, we would select the cold faculty. There's a lot of dead American pedestrians in London who would say, “you know what, I don't think the hot faculty represented my true preferences.”
So what is advertising trying to do? It tries to get you to make decisions using your hot faculty, not your cold faculty. It is trying to get you to make impulse-driven decisions. That is what I mean by changing preferences. It's not only that you change them, but that you shift deliberation from the cold set of preferences to the hot set of preferences. When you get somebody into the hot set of preferences, then their preferences become more manipulable; they can be changed. The cold set not so much.
Going back to the F.T.C. cases, the problem was that you have this information function and this persuasive function. Once you get out of a very small set of products, like Clorox bleach and other products that are chemically identical, it becomes impossible to determine whether people who have been subjected to advertising, and who change their buying decisions as a result, have done so because advertising gave them the information they needed to find the products that are right for them — reflecting the information function of advertising — or because advertising has manipulated them into buying products that they do not really prefer — representing the so-called persuasive function of advertising. We could say that the popularity of Clorox bleach was due to manipulative advertising because no amount of information is going to make a consumer prefer one chemically identical bleach to another, but we could not say that the popularity of Chevy relative to Ford was due to manipulative advertising because maybe the advertising informed consumers about some advantage of a Chevy that could not be ruled out because Chevies really are different from Fords. So we couldn't say through which channel — the information function or the persuasive function — advertising was operating. But now that we have this pervasiveness of information everywhere, we're no longer in that situation because we can say for sure that even if there were no advertising, consumers would be able to find the products that they want. They get on Google; they search for them, they read reviews. The information aspect of advertising is still there; advertising still provides information; it's just redundant. It's obsolete. We don't need it, and if we didn't have it, we would have an excellent substitute in the form of the Internet. So we no longer have any ambiguity about the function of advertising. Why would an advertiser advertise in a world where consumers will get all the information they want about their product anyway from other sources? It's got to be because advertisers believe that they get something else from their advertising, and that other thing must be the only other thing advertising does for advertisers: it persuades or manipulates their customers. That's the basic argument.
Image by Ray Sawhill, via Creative Commons
Shonagh: It's fascinating. I have been thinking about this in relation to fashion. For example, a car gets you from A to B, there's a certain need, perhaps you are in an area where there is no public transport, or you've got children. In contrast, fashion is based on planned obsolescence and false scarcity, rooted in trends. I have wondered if you got rid of fashion advertising if fashion could survive as it is today. It's reliant on hype and novelty, selling us an idea that we can reinvent ourselves. Is that something that you've thought about in your research?
Ramsi: After you posed this question to me over email, I thought a bit about it. Fashion is a very interesting subcase. One of the important things to mention about the fashion industry is that it doesn't get intellectual property protection. So you can't get a copyright or a patent on a clothing design. There has been a lot of debate over whether this is a good or a bad choice that the law has made. In any event, what it means is that to make the big bucks off a fashion design, you're cannot rely on intellectual property protection and so you must rely instead on what we call “first-mover advantages” — the delay between when you enter the market with a new trendy design and when competitors can bring copies of that design to market. That's when you make your money. You pointed to the idea that fashion is linked to a want to reinvent yourself. That's partially driven by the desire to unlock these first-mover advantages because if you keep your style static for too long, the market gets saturated with copies, and you can’t charge any markups.
Also, when you don't have intellectual property protection, you put much more money into branding. Intellectual property locks the market up for you; it gives you a mini monopoly in your design. But you can also create the psychological monopoly — branding. What advertising does is create brand loyalty that creates a kind of psychological lock on your consumers. That's why a lot of fashion isn't built around designs at all; you might think it should be the design matters, but it's built around the brand. The brand can turn out all kinds of crap designs, and people buy them anyway, just because there's a lock on the mind that comes from advertising.
I agree only in part that if we were to get rid of fashion advertising, we would stop having trends. I think to some extent, we would have fewer trends, and they'd be less managed from the top. But I do think you'd still have some trends because if we go back in history, to periods before mass-market advertising — the 17th century and the 18th century — you still have fashion and trends. The difference, however, was that massive fashion houses weren't defining those trends through advertising. I would consider such pre-advertising trends more human and organic; they were people seeing stuff on the street that looked cool and wanting to copy it. There were maybe more design-driven trends and less brand-driven trends.
In a way, this illustrates one of the points I tried to make in my article about what a world would look like without advertising. It's not going to be a world in which people can't find products or new products can't get to market, or can't become popular. We're still going to have all of that, except it will be done through older, human channels like word of mouth.
Another part of my argument about advertising is that firms don't invest as much in innovation if they invest in advertising. In other words, in a world without advertising, how do you get your product to become successful? You simply must make it better than competitors’ products. There is no other way. But your product doesn't have to be better in a world in which you can advertise because you can now win simply by making your product better advertised, rather than better in fact. So you can imagine that a world without advertising would increase design-based competition in fashion and potentially lead to greater innovation, greater experimentation, and greater creativity in design than what we see now.
The flip side is the third function of advertising — the argument that advertising is a good in itself, a source of pleasure of its own. I mentioned that this function started to be recognized in intellectual debates in the 50s and 60s. This function makes possible the counter-argument that fashion companies use image and advertising to create realms of social meaning associated with wearing their products, so that when you put on a piece of clothing, it's not just an ugly piece of cloth or a poorly designed piece of fabric, it’s a symbol to you of your role in the world, it makes you feel like you're participating in something, and that creates pleasure — measurable pleasure you might be able to identify in a brain scan. The argument is: why deprive people of that?
My argument is that whatever benefit we get from advertising as pleasurable in itself has got to pale relative to the benefit we would get from increased innovation. So, in other words, the better design has got to give us more pleasure than the pleasure we get from the illusion of participation that we get from wearing an ugly design that's been enhanced through advertising. In other contexts, I like to give the example of the cell phone. Would we say that we get more pleasure from a well-advertised flip phone, circa 2000? Or from the iPhone? Clearly, the innovative design gives massively more pleasure than the illusion of grandeur associated with advertising for a flip phone circa 2000. At least in the tech context, I think we all intuitively agree that improvement to reality are more pleasurable than improvement to image. But in fashion, I don't know; I haven't thought enough about it. I don't know enough about how fashion functions to give a good example, but my hunch is that it's true there as well.
Image by Brechtbug, via Creative Commons
Shonagh: I would question the longevity of the pleasure given when talking about fashion. The iPhone functions in many different ways and acts as a portal to the internet, making contact with others; it has tools and apps to navigate daily life. However, fashion functions more like social media; the endorphin high is fleeting and fades over time. You might buy something because you've seen the Kardashians advertising it or an image in a magazine. If I buy it, you think I will look like the person I have seen in the ad. However, the gratification is momentary, soon the reflection begins, and you realize that you're still who you always were. I think there's deeper psychological work to be done to measure the impact of fashion today. Our value system is so skewed that we're seeking value externally. I think they're terrible bedfellows: fashion, advertising, and social media. It is a loop where you can't win; you will never complete the game.
Ramsi: You got me thinking about something. A few years ago, I read a piece about fashion photography in the Soviet Union. It was a very thoughtful article about how they had women's magazines in the Soviet Union that were anti-commercialism. The writer remembered wistfully about the images. She said, in the western capitalist magazines, it was all about portraying a kind of unattainable beauty, or there was something otherworldly about how people were photographed. Whereas what they aimed for in Soviet magazines was portraying real people wearing clothes. It is almost like Bill Cunningham (the New York Times street photographer) versus a Vogue shoot. I think it's an exciting way to think about commercial fashion photography relative to the possibilities that are out there, which are much broader.
Shonagh: That is interesting. The first thing that I wonder is how these images were used for other forms of propaganda, but it is undoubtedly a fascinating avenue to explore. Something I have been thinking about recently is family albums and snapshots, where clothes are always documented as markers of passing time.
Shonagh: I wanted to ask you if any of your work is fuelled by concerns about rising consumption? Is that something that drives you?
Ramsi: I guess I'm somewhat of a doctrinaire economist, in the sense that I don't see consumption itself as problematic. Consumption in economic theory is a proxy for the pleasure that the economy can deliver to you. In that sense, I'm not motivated by concerns about consumption per se. I am motivated by concerns that we're not choosing to consume the things we really want to consume. To the extent that we find consumption sinister today, it may well be because our contemplative brains tell us that we're making the wrong choices about what to consume because we are making our consumption choices using our hot, impulsive, faculty. And that's scary. We have a sense that corporations are in control, in part through the advertising they use to manipulate us. They're making the decisions about what should be produced and consumed, and we are not. And that may be leading us to consume things like fossil fuels that we know are eventually going to destroy the world but which we can’t seem to resist consuming.
To touch on something you said earlier about propaganda in connection with the Russians. Here in America we're always worried about government propaganda and control, even paranoid about it, about big government and government surveillance, but we have this much more evident area of commercial control — commercial advertising — through which we're being constantly propagandized everywhere we go by big corporations, and yet no one seems to have anything to say about it. At least in the U.S. I get the sense that in other countries, there is maybe more awareness of the manipulative function of advertising. In the U.S., by contrast, for at least the last 20 years, most Americans have not conceptualized advertising as problematic. They see it as a good in itself, like Superbowl ads. They're not even aware that they're being propagandized. This is very odd, particularly for a political culture that's otherwise very paranoid.
Shonagh: Thanks so much for talking to me today. My final question, is what would your utopia be? Would you do away with advertising?
Ramsi: Yes, I would definitely get rid of advertising. In-store advertising is acceptable, although that will become less and less important because everything's shifting online. But any non-point-of-sale advertising, I would get rid of.
I think that would open up a lot of space for cultural development. I hate to say it, but Americans today don’t have a concept of culture. There was an elite concept of culture in the U.S. through, maybe, the 80s, but it's completely gone now. Many European countries retain a concept of culture, and as long as you have a concept of culture, you will find advertising problematic. Because you're going to have the notion that there are certain things the public should learn through their lived environment, things that are constitutive of identity. And so you are going to find it problematic when advertising takes up so much cultural space. This, in turn, creates implicit limits on what companies are willing to try to do with advertising in your country. It restrains the advertising they engage in. But the U.S., a country that never had a strong concept of culture, now has none. So there are none of those limits that you find in other countries. The commercial occupies the entire cultural space. So if we were to get rid of advertising in the U.S., I think we'd make possible the development of an authentic organic American culture that at present is not possible. If you go back to the 19th century before mass advertising, you had a kind of nascent American culture — Walt Whitman and other poets who were actually good. I think we might be able to pick up the threads of that and have a national culture that isn't commerce-driven. That's my ideal.
