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Quotation of the Day…

… is from pages 174-175 of the reprint of Harold Demsetz’s brilliant review of John Kenneth Galbraith’s The New Industrial State; this review – entitled “The Technostructure, Forty-Six Years Later” – originally appeared in the March 1968 issue of the Yale Law Journal, and is reprinted in volume II of the 1989 collection of some of Demsetz’s most important articles, Efficiency, Competition, and Policy:

The formation of wants is a complex process.  No doubt wants are modified by Madison Avenue.  They also are modified by Washington, by university faculties, and by churches.  And it is not at all clear to this reviewer that Madison Avenue has the advantage when it comes to false claims and exaggeration.

The Administration in Washington is immune to legal attack for promotional distortions when it asserts that this program or that tax measure is indispensable to the welfare, security, and progress of this country.  And academic freedom protects large numbers of professorial promoters in the nation’s educational institutions; how often in the classroom have we asserted or heard asserted,without any evidence and with precious little thought, that this theory and these positions yield those public policies which in turn will surely improve the lot of the common man.

Imagine business firms and peddlers promoting an elixir guaranteed to exorcise the devil and to give to its user eternal life.  The FTC surely would tar and feather the poor fellows, even if they truly believed in their product; the FTC undoubtedly would be joined, perhaps blessed, in this crusade by the various churches throughout the land, who, protected by the laws of the land, promote their own formulas for salvation at least once each week.

No, it is not at all clear that our social system discriminates in favor of promotion in the marketplace.