In today’s economy, advertising has a tremendous influence on our consumption, and our behavior.  For decades, we have seen huge expenditures on advertising spots, as well as consistent increases in the size of the advertising market.  Since 1950, Advertising expenditures have consistently accounted for between 1.7% and 2.3% of gross domestic product in the United States.  I am particularly interested in this subject due to the nature of the advertising product.  While the majority of markets provide tangible goods and services, advertising is one of the few industries that acts as a reinforcing agent for other industries.  While advertising dollars typically make up around 2.0% of GDP, economic growth due to advertising is generally significantly larger.   In other words, the economic growth due to advertising each year greatly exceeds the capital investments, or inputs, to advertising.  With this paper, I will gauge how increases in advertising expenditures have lead to increases in consumer spending in the United States since 1950.  Additionally, I will use the developments of new media outlets as benchmarks to determine which forms of advertising have been most effective in increasing consumer spending. Several researches have looked into the impacts that advertising expenditures have had on economic growth, and have found very positive correlations between ad expenditures and consumption, innovation of new technologies, and competition within industries.  However little research has been put forth as to the economic impact of emerging technologies and media outlets. 

 

 

Suhler, John. “Communications Industry Spending & Consumption Trends.” (n.d.): n. pag. http://www.iab.net/. Veronis Suhler Stevenson. Web. <http://www.iab.net/media/file/JSS_IAB_Annual_Report_-_VSS_Forecast_Trends_FINAL_4_12_11.pdf&gt;.

 

Bughin, Jacques, and Steven Spittaels. “Advertising as an Economic-growth Engine.” (2012): n. pag. Mckinsey. Mar. 2012. Web. 1 Mar. 2013. <http://www.mckinsey.com/locations/Belux/~/media/Belux/FinalAdvertising.ashx&gt;.

 

“U.S. Annual Advertising Spending Since 1919.” Annual U.S. Advertising Expenditure Since 1919. N.p., n.d. Web. 01 Mar. 2013. <http://galbithink.org/ad-spending.htm&gt;.

 

Nayaradou, Maximilien. “Advertising and Economic-growth.” (2006): n. pag. Web. 1 Mar. 2013. <http://www3.wfanet.org/valueofadvertising/documents/WFA-UDA_Advertising&Economic_Growth.pdf&gt;.

 

Galbi, Douglas. “Cs Ad Expenditure Dataset V1.1.” Galbithink.org. N.p., n.d. Web. 1 Mar. 2013. <http://www.galbithink.org/cs-ad-dataset.xls&gt;.

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Blog Post 4 – its about drugs

 

In the third Chapter of Levitt and Dubner’s Freakonomics, the authors tell an anecdote regarding Venkatesh, a graduate student of the University of Chicago studying sociology.  He was tasked to conduct a survey among African Americans living in sub standard housing arrangements.  His initial survey was soon found to be grossly out of place within the social construct of the predominantly gang patrolled neighborhoods. In a stroke of “luck” our student managed to befriend a Chicago crack dealing gang called the Black Disciples.   Venkatesh chose to study the gang over half a decade, and gained an understanding of the inner workings of a large scale crack cocaine distribution organization.

 

The narrators preface this story by presenting the value of asking questions.  They say that once in a while, a properly directed question we may overturn what is considered to be conventional wisdom.  By providing further analysis of ideas that are often considered to be black and white, we can occasionally change previously understood notions.  Thus implying the importance of consideration of seemingly obvious conventional ideas. 

 

In Venkatesh’s story, we are presented with the somewhat novel idea that criminal organizations are often comparable to large-scale legitimate firms.   The authors likened the Black Disciples to the McDonalds organization.  The “franchise” that Venkatesh stumbled upon maintained its accounts, and consistently dealt with political negotiations that are normally considered to be mainstays of legitimate businesses.  On page 91, we are presented with a basic income statement that outlines Cost of Goods Sold, Rents, Maintenance costs (weapons and mercenaries) as well as costs associated with promoting public opinion.  By simply adjusting the wording, we could potentially be looking at any standard franchises accounts. 

 

We can also observe the power relationships that exist within such an organization.  On page 92, we see standard hierarchies exist in any organization.  There are 120 top men among the organization (franchisers), who command, in J.T.’s case, 3 officers (managers) who in turn command 50 foot soldiers (employees).  We also see a pool of unpaid workers hoping to earn their stripes (the unemployed).  On the following page, we see how systematic inequality parallels that of any firm.  The Bosses are rewarded financially, $66.00 an hour in J.T.’s case, while officers and footsoldiers make $7.00 and $3.30 an hour respectively.   These distinctions are identical to the employer power relationship that Eric Schutz describes in Inequality and Power. 

 

On page 94, the narrators describe why anyone would be willing to risk life and limb to work in an organization with such a low probability of success.  We have already learned that life as a foot soldier realizes a 25% mortality rate, however it is the same concept of cultural determinism that is described in New Neoclassical Economics; that certain aspects of a groups culture are mainly responsible for determining economic status. 

 

In regards to the author’s thesis, the questioning of conventional wisdoms often can illuminate a hidden reality.  The ignorant opinion is to assume that drug distribution organizations are comprised of degenerates, while closer inspection allows the realization that complex business organizations are hidden beneath the constructs of the law.

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Thesis topic blog post

I will be writing my research paper on historical advertising spending in the United States.  I plan to analyze advertising sales data from the past 50 years alongside various consumption variables, population growth, among other things.  Hopefully, I will be able to find a strong correlation between consumer spending and advertising sales.

Additionally, my data includes a timeline aspect to it.  With the proliferation of various forms of communication, I hope to find a significant increase in spending and consumption with the growth of cable television, cable television and the internet.  I think that slow adoption rates may make it difficult to pinpoint the exact time of invention, but I am excited to see what happens.

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Economists on How to Make Better New Year’s Resolutions

In this article, Ray Fisman describes a phenomenon that I can personally relate to.  It is a completely understandable inclination that in order to feel more productive, we should tack on new responsibilities and agendas to our regular schedule.  In this view, adding things that we hope to accomplish will help us feel fulfilled.  

Fisman takes a different opinion on this matter.  In his reviews of Shafir and Mullainathan’s research, he describes a situation in which added responsibilities in fact make us less productive.  This is largely due to the fact that additional requirements fill up the majority of our schedule, thereby disallowing any personal reflection time, and the ability to focus on long term planning.  Coincidentally, the freedom that this inner reflection gives us does far better for our long term happiness than the short term satisfaction from busy schedules does.  

The experiment that Fisman refers to describes two groups of college students playing a family feud style game.  Initially they are given equal amounts of time to answer the question “Things Barbie could auction off if she needed money fast”.  Groups were divided into “rich” and “poor”, depending on the amount of time that they were given to answer the question.  They were also given the opportunity to “borrow” time at interest.  

The study found that “poorer” subjects were far more likely to borrow time, while richer subjects were much less likely.  In the long term, this led to the poorer students having less and less time as the game progressed.  In contrast, the rich players were far less likely to borrow, and over time were able to answer far more questions.  

How does this relate to our readings?  A hunger trap essentially occurs when the poor are unable to accumulate capital due to the fact that they are unable to think in the long term.  They tend to spend all that they earn, and have no way of investing in their future.  We read that the least expensive sufficient diet consisted entirely of eggs and bananas, however the poor would have much rather spent extra money on tastier foods, rather than think long term.  

This is due to the fact that poverty inhibits the ability to focus on growth.  Just as the poor test subjects were tempted to borrow, thus limiting their future scores, those who are stuck in poverty traps are tempted to think in the short term and splurge on tastier food.  

This study has only enforced my opinions on the concept of hunger traps. It shows that those without spare resources are far more inclined to sacrifice their long term happiness for short term satisfaction.  

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Blog Post #1. 1/24/13

1.  What does it mean to blog?

To blog means to have an outlet to share opinions, discuss topics in a social manner, and to regularly update content.  Formal blogs typically follow a consistant theme, although informal blogs can be very varied.  Blogs are growing in popularity because they allow for organizations to frequently, and easily connect with members or customers in an informative way.  

One of the main reasons that blogs are used by companies is because of the impact that fresh content has on an organizations SEO strategies.  By frequently updating content, websites can quickly gain priority in search results.  

 

2.  How is blogging different from other forms of writing?

Blogging is different from other forms of writing for a number of reason.  First, blogs allow anyone to share their thoughts online.  One does not need any publishing capabilities in order to share his or her thoughts.  

Second, blogs do not have a standard format.  Entries can read like journal entries, or can take a more journalistic approach.  This is another reason that blogging has grown in popularity. 

Third, blogs are social instruments.  They are intended to be shared among other bloggers, and discussed openly.  

 

Economic Blogs

1. http://seekingalpha.com/currents/all

   This blog treats it’s content as strictly factual.  There is little analysis, and it is very frequently updated with real time information on various stocks.  I think this blog is interesting because it strictly informational.  There appears to be little bias, and it allows us to make our own conclusions about events in the market.

2. http://blogs.wsj.com/economics/

   The WSJ uses this blog to share noteworthy events and stories that will affect big-picture financial events.  Posts tend to take a more journalistic approach, and do not typically reflect individual organizations.  This is another frequently updated blog.  It is interesting from a news standpoint, because it shows how political events, as well as industry events impact the market.

3. http://www.ritholtz.com/blog/

   This is an individual economist’s blog.  It tends to be heavy in infographics, as well as personal accounts of events and opinions.  It is quite factual, however there is also a deal of personal input on topics.  Somewhat surprisingly, this blog is also updated multiple times per day.  I find that the graphic nature of this blog helps to break down points made by Barry Ritholtz.

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