Thought Manipulation: The Use and Abuse of Psychological Trickery (13 page)

Generally speaking, Hayek relies on the invisible hand of market forces in a free society to work out moral questions—mysteriously, miraculously, and beyond any human being’s ability to comprehend. My own task is to demonstrate the “magical” ability of the market mechanism to cope spontaneously with social problems.

INVISIBLE SOLUTION TO MANIPULATIVE ADVERTISING

Competition is usually understood in its very narrow sense, as in a sporting contest, a chess game, or an election. In the marketplace we are used to seeing similar manufacturers, such as shoemakers, compete for the limited budget of the same consumers. I suggest labeling this sort as “widthwise competition.”

We tend to forget that even the simplest merchandise, such as a shoe, a pencil, or a shirt, is the outcome of complicated processes of production, marketing, and selling, and that there are always conflicts of interests between the different agents who serve one another in the chain of production, marketing, and selling. For example, shoemakers probably negotiate with their suppliers on the cost and quality of raw materials. This kind of competition in the production chain can be labeled as “lengthwise competition.” In general, the conflict of interest between the different agents in the marketplace appears in almost any form, dimension, and structure.

Competition in the global sense, from the point of view of the market as a whole, appears as a wide, complex, and multidimensional structure. It is very difficult if not impossible to understand, let alone to describe, the notion of competition in a complete or comprehensive manner. Unfortunately, our limited understanding of the complex structure of competition makes us focus only on certain aspects of the competitive market. Therefore, to concretize the spontaneous regulation and control of the market, I focus on specific aspects of a limited example. This example strives to demonstrate the invisible restrictions on the operations of the advertisers, the professional “manufacturers” of manipulation.

It seems that competition between advertising companies focuses on presenting the most attractive, appealing, and influencing advertisements. Advertisers aim to create the most efficient ads in the sense of motivating potential customers to buy. However, examining the issue more closely reveals that “efficiency” might gain a different, or more precisely a wider, meaning than the promotion of sales.

Like almost every other agent in the market, an advertiser has to earn a living, and in order to earn a good living it must have customers. Accordingly, the advertiser operates in two directions. On the one hand, the advertiser wishes to expand his clientele. On the other hand, he needs to preserve his current client base and keep them from readily straying into the open arms of another advertising firm. Therefore, the advertiser has strong incentives to strengthen the working bond with his current customers and even to maneuver them to become dependent on his services. In other words, side by side with his natural motivation to promote the sale of merchandise, the advertiser has a strong incentive to make the current ad campaign lead to the next one.

The last description indicates that the manufacturer and the advertiser, which are supposed to work as a harmonious team, also experience a conflict of interests. The manufacturer is motivated to maximize profits via the nonstop selling of goods and services at minimum production and marketing expense. The advertiser is motivated to maximize gains by creating infinitely expensive advertising campaigns for those same goods. For example, banana growers probably wish that every one of us would never be able to stop eating, thinking, and dreaming about bananas. Of course, such an imaginary success would leave grower’s advertisers in search of another job. Advertisers, from their side, will not object that the growers will believe in their ability to create infinite advertising campaigns, each of which can be influential only for a limited period of time. Of course, if these ambitions were fully applicable, then both sides of the transaction would have been satisfied. Banana growers will not stop selling, and advertisers will not stop advertising. Unfortunately, we the consumers will never have something else in our lives besides eating, thinking, and dreaming about bananas.

The advertiser has a strong incentive to manipulate his customers, the manufacturers. He is interested in rapid planned obsolesce (that is, an advertisement that becomes nonfunctional after a certain period of time). The advertiser wishes to limit his campaign’s range of influence in a way that will pave the way to a new campaign. However, we should not forget that all of this activity is taking place in a competitive market. Therefore, such an ambition always involves a risk of losing clients because when the consumer sobers up from the marketing messages and sales start slumping, another advertising company may enter the picture and capture the manufacturer.

As complicated as the issue of surviving in a competitive market might sound so far, our description is only the beginning. One of the reasons is that the relationship between the advertiser and the manufacturer does not develop in a vacuum. For example, there is another pivotal player whose presence has an immense influence on the manufacturer-advertiser duet: the retailer. The retailer, our new player, has independent interests that do not always overlap with those of its partners in this trilogy.

For example, the retailer is “looking to make money not just by selling products to consumers but by renting shelf space to manufacturers.” Many supermarket retailers tend to encourage competition among manufacturers for shelf space in their grocery aisles. In other words, the retailer motivates, or even enforces, manufacturers to compete for the visible position of their products within the supermarket. The argument is that a noticeable location at the point of sale has an impact on consumers and is therefore a valuable and expensive selling tool.

Every manufacturer has a limited budget for advertising and sales promotion, which he wishes to spend in the most efficient and beneficial way. Therefore, competition seems to reach another level. The advertiser finds he is competing with the retailer for a decent share of the manufacturer’s sales promotion budget. Of course, this additional dimension of competition brings its own contribution to the complex relations among the different players. For example, it opens a dispute over the most efficient method to influence consumers; advertising in the mass media versus marketing at the point of sale. Those who vote for “point of sale” argue that consumers mostly reach a decision in the shop. According to a 2001 report of the Food Marketing Institute, the understanding that consumers can be most influenced at the point of sale changed dramatically the distribution of advertising expenses. The emphasis shifted from advertising in the mass media to promoting sales in the stores where the consumers actually buy their goods.

This observation brings us back to the field of our discussion— manipulative advertising. It reminds us that consumers might also have something to say about their purchases. Consumers may want to have a close look at the product, think about its quality, and consider its functionality, and not necessarily buy it because of a fantasy about a top model.

The struggle between the different players in a competitive market takes place in different dimensions and on various fronts. The invisible hand—the mysterious powers of multidimensional competition— seems to regulate the balance of power of the different competitors by various means, such as power shifts. To put it differently, the competitive market is revealed as a dynamic mechanism that limits the power of the agents who deal with advertisements and sales promotions while spontaneously filtering manipulations.

BETWEEN CONSTRUCTIVE AND DESTRUCTIVE COMPETITION

The struggle between the different agents, as has been briefly and partially described, demonstrates the potential of the competitive market to spontaneously control, regulate, and restrict advertising and sales promotion and indicates how the competitive market is actually able to defend customers from damaging influences. However, the description is built upon a theoretical vision of an ideal free-market system. However, most real-life institutions (such as the market) do not operate as ideal mechanisms. Unfortunately, whenever human beings are involved there are always crises, troubles, and misery. Moreover, we learned from experience that trying to implement ideal visions can bring disasters. The inevitable questions are: How can market failures be diminished? How can the appealing performances of an ideal free market be approached? How can you guarantee that the market will operate in the most beneficial way for society?

The market system operates as a multidimensional mechanism whose complexity exceeds the comprehension of any human being. It is impossible to collect and take into account all the necessary information that is required to make specific predictions and to control all the events in the causal chain. Any well-thought government intervention in the conduct of the market will probably lead to unintended consequences, and such unintended consequences can be harmful to the market and the people. For example, in many countries the minimum wage laws, which were supposed to ensure a minimum decent salary for workers, increased unemployment and hurt the very people they were intended to help.

We face a dilemma. On the one hand, there is a severe danger that deliberate intervention in the spontaneous conduct of the free market will bring disaster or, at least, will cause more damage than benefit. On the other hand, the free market system, like every mechanism that involves interaction between human beings, is not an ideal system. Moreover, competition, which is the dynamo of the free-market system, can be very destructive for many human beings. The inevitable question is: How do you direct the competitive market to operate for the benefit society, but without direct intervention in its internal processes?

Many free-market economists, who frequently search for solutions to this riddle, tend to regard the market as a multidimensional evolutionary system. They believe that in an ideal free-market system, social elements (such as institutions) that are efficient and beneficial for society survive and whatever operates against society becomes extinct (the selfish interests channeled to the benefit of society). The question is: How can you direct the real-life market to approach this ideal?

As strange as it may sound, constitutional economists—especially those who show much interest in evolutionary processes—are highly suspicious of the ability of competition per se to solve all social problems. Moreover, they tend to emphasize that a competitive market has strong tendencies to create monopolies and might also bring many other social distresses. Their general view is that beneficial competition can emerge only in an adequate framework of legislation and institutions. One of their main interests is formulating general rules that will ensure “fair competition.”

In the case of a simple game, such as basketball, football, and chess, the rules of a fair game are designed to guarantee that the best players will win the contest. In the social context, multidimensional competition has to benefit almost everyone. The practical meaning is that a decent free-market society creates only “winners.” The project of constitutional economists is to search for the appropriate constitution, or rules of the social game, that will indirectly steer social interactions to operate for the benefit of its participants. In the case of manipulative advertising, for example, the question is: What is the appropriate legal framework that can reduce the impact of damaging influences?

As stated in the beginning of this discussion, social competition (in contrast to a sporting contest) is based on a multidimensional structure. Therefore, it is difficult, especially in the limited context of this composition, to examine closely the efficiency of the “spontaneous regulation mechanism” (that is, the conflict of interests between different actors) that has been illustrated. However, a free-market system can be described as a composite of different competitive smaller markets interacting with each other (for example, the food industry, the political scene, and the marketplace of ideas). Regarding our human limitations, it seems reasonable to examine one-dimensional competition, such as an election, as a case study for the efficiency of “the general rules approach,” or rules that are designed to ensure fair competition.

The next chapter demonstrates that our limitations in understanding the structure of the human mind in general and social processes in particular cannot omit the quest to determine the appropriate “rules of the social game.” The phenomenon of manipulation helps expose some of our limitations in formulating general rules to ensure beneficial and fair competition. I intend to show that intentions to guarantee fair influence on voters during election campaigns might lead to the opposite result.

NOTES

1. Fromm, E., Escape from Freedom (New York: H. Holt, 1994), 128.

2. See Chapter 3, note 5.

3. See, for example, Koestler A.,
The Act of Creation
(New York: Macmillan, 1964), 91–92: “Humour depends primarily on its surprise effect: the bi-sociative shock. To evoke humour the humorist must have the modicum of originality—the ability to break away from the stereotyped routines of thought. Caricaturist, satirist, the writer of nonsense—humour, and even the expert tickler, each operates on more than one plane. Whether his purpose is to convey a social message or merely to entertain, he must provide the mental jolts, caused by the collision of incompatible matrices. To any given situation or subject he must conjure up an appropriate intruder which will provide the jolt.”

4. Phillips, M. J.,
Ethics and Manipulation in Advertising: Answering a Flawed Indictment
(Westport, CT: Quorum, 1997), 18.

5. See Friedman, R. & M.,
Free to Choose: A Personal Statement
(New York and London: Harcourt Brace Jovanovich, 1979), 224: “...advertising is a cost of doing business, and the businessman wants to get the most for his money. Is it not more sensible to try to appeal to the real wants or desires of consumers than to try to manufacture artificial wants or desires? Surely it will generally be cheaper to sell them something that meets wants they already have than to create an artificial want.”