[OPE-L] Re: Persistence of value

Gerald Levy (glevy@pratt.edu)
Sun, 25 Jan 1998 12:26:02 -0500 (EST)

Paul C wrote on Wed, 21 Jan:

> How then does advertising differ from the production of
> luxuries, since these too do not contribute to accumulation?
> I think that the answer is:
> Advertising is a cost born by firms rather than owners
> of capital, as such it is a deduction from their profit
> figures at the end of the year.

Advertising appears to be a cost to firms and a deduction from profits.
This would be the case if and only if individual firms can't increase
individual profit by increasing market prices for the commodities sold.
I.e. firms, depending on market structure and the elasticity of demand,
can transfer the cost of advertising to consumers in the form of higher
prices. The advertising itself is then the vehicle for both increasing
demand and increasing price. What is gained by individual firms can be at
the expense not only of other firms but also the social class which
purchases the commodity.

> The collection of firms as a whole are left with no
> tangible assets for their advertising expenditure. To
> the extent that one firm gains market share thereby
> another loses it. So for firms as a whole it is a net
> cost.

See above. This would only be the case if given the particular competitive
nature of that branch of production, firms couldn't raise prices as a
means to both cover advertising expenditures and increase profit.

> Luxuries on the other hand are bought by the owners of
> capital out of their personal incomes. They are a purchase
> out of revenue, which has already ceased to be part of
> the capital assets of the company sector.

Yeah ... well ... higher-income workers can purchase some "luxuries."
Indeed, what is understood as a "luxury" has changed over time and many
commodities which are now purchased by working-class families were
formerly considered to be "luxuries."

> Luxuries contribute directly to the wellbeing of the
> rentier class as a whole. Prior expenditure on advertising
> by the firms from which they get their dividends contributes
> nothing to their wellbeing, or to their capital.

Yeah ... but what happens when the "luxuries" are consumed by
working-class families as well?

In solidarity, Jerry