Re: [OPE-L] Re: Persistence of value

Paul Cockshott (wpc@CS.STRATH.AC.UK)
Mon, 26 Jan 1998 09:43:57 +0000

Gerald Levy wrote:

> 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.

Are you saying that the company sector can increase its share of
income through advertising at the expense of employees?

I do not see how this can be the case.
Advertising can not raise demand of wage earners as a whole above the
set by the aggregate wage. If wages rose there would be an immediate
in profits due to higher costs. The only possible mechanism would be in
reducing the savings ratio out of income of wage earners.
To the extent that this occurs, the effect is likely to be to raise
income as a whole, rather than to raise the share going in profit.

> > 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.

You are suffering from the illusions engendered by competition. When
with the economy as a whole, aggregate demand is set by
wages * ( 1 - savings ratio) +
investment +
rentiers consumption

there is no way that advertising within a particular branch can affect
All it can do is alter the division of the value product between

> > 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."

Yes, Hitler pointed this out in justification for his proposal to build
the Volkswagen. He said something like, ' all industrial products start
out as luxuries for the rich and then become necessities for the
as a whole '.