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REASON: So you like the Sherman Antitrust Act? This is an anomaly.
STIGLER: I like the Sherman Act. I don't like the Clayton Act.
REASON: Why not?
STIGLER: Oh, it starts to get gimmicky there. It has dumb things in it like interlocking directorates that don't matter. It has a merger statute that I think is too severe, although I like it better than none at all. And it says, let's have a thing called the Federal Trade Commission, which took a separate act and which I would like in so many ways to see abolished. It's a nuisance. It's been petty. The current one is moving the other way, but it's got lots of terrible laws at its disposal.
REASON: What about advertising in the American economy? Is advertising some sign of monopoly?
REASON: Of inefficiency?
STIGLER: You're almost getting close to what I did my work on, which should have, maybe did, win the prize for me-the economics of information. That is the area where I've done probably my most important work as a professional scholar. Economics for a long time had a standard model in which it was assumed that people have perfect knowledge. And on this model, it's clear that advertising is manipulative and tends to deceive you and so forth and so on. So there was a very widespread, entrenched hostility to advertising among professional economists. And if you go through the literature up to 1960 or '61 when I wrote my article, and for some time after that...
REASON: "The Economics of Information"?
STIGLER: Yes. You would find lots of this hostility strewn across the landscape. But now economists have found that it's a fascinating area-does it make an important difference whether you and I have different amounts of information? and what competitive forces are there to stop exploitation of ignorance? and things like that. And now I'd say that the hostility to advertising is greatly diminished and the understanding of it improved. In some ways it's a marvelous method of creating information. In areas like the local newspaper, the daily sales of the grocery stores, there isn't anything remotely like it in terms of efficiency and power in bringing about what we consider a well-organized market, which is a market where people are paying about the same prices for the same things.
REASON: What about some of the television advertising? How does the slogan "Have a Coke and a smile" help consumers?
STIGLER: Some very interesting stuff has been written on that by a former student of mine named Phillip Nelson. He says that if I advertise that I am the leading brand, whether it's automobiles or computers or cocaine or what, that conveys information to you-the information that a lot of people are using the product and are continuing to use it and that therefore it hasn't got palpable and serious deficiencies. And maybe that's the main clue you'll want at this moment. If I were to say to you, "Here are the engineering specifications of my car," you'd say, "My god, do I really want to know that much about a carburetor when I'm buying a new car?" Consumers have the problem, you see, of how to intelligently control their lives. If I can think up a method that will convey to them information that they can rely on as a guide and yet does not insist that they take postgraduate courses in three sciences, they'll be delighted. So one of the real searches in advertising is to try to communicate information of a kind that's relevant. The assurance of the continuity of the enterprise is one kind that's relevant. Now that's not the only kind. And statistical studies so far suggest that in fields where there's a great turnover, like cosmetics, advertising helps new products to get in pretty fast. So advertising opens up the market to new products and new brands, which is a source of potential strength to the system.
REASON: Let's turn to the larger picture. Is it the twilight of capitalism?
STIGLER: I don't think so. If it weren't for foreign military threats, we could go along one way or another with a very slow rate of increase of income with all the regulations on God's earth and no early demise of capitalism. It wouldn't be a very exciting or dynamic capitalism, but I'm not sure that it would come to a halt. Indeed, much of the problems of capitalism come from businessmen, from their own visits to Washington, not from having Ralph Nader run it over the rocks.
REASON: Visits for special favors?