High ad spending doesn't mean rising prices
Toilet preparations Soap, detergents Drugs Tobacco Grain-mill products Canning Appliances Tires and tubes Paints and varnish Men's, youths', and boys' apparel Women's, misses, and children's clothing Motor vehicles
% of sales spent on ads
Retail price changes 1957-59 to June 1966
14.72% 12.55 9.39 5.28 3.18 2.72 2.48 2.09 1.65
+1.2% +1.4 -1.4 +30.7 +10.4 +10.1 -15.7 +2.6 +4.7
.97
+10.1
.96 .74
+4.7 -3.2
Source: Backman, Jules, "Advertising and Competition," p. 210, New York University Press, 1967
Ad spending doesn't raise prices Advertising does not inflate prices or ensure monopolistic power, economist Jules Backman concludes after an eight-month study supported by the Association of National Advertisers (ANA). He also finds that companies with high advertising-to-sales ratios have increased their prices less than producers with smaller advertising outlays. Details of the study will appear in his book "Advertising and Competition," scheduled to be published this month by New York University Press. Dr. Backman, research professor of economics at NYU's school of commerce, directed a group of economists and statisticians in determining the effect of advertising on the U.S.'s competitive economy. He and ANA members were particularly interested in determining whether advertising breeds monopolies. Results of Dr. Backman's study indicate that advertising stimulates competition and keeps everyone in the best of economic health. He finds evidence to refute these factors usually given to support the advertisingmonopoly argument: • Producers having the "power of the purse" are in a position to buy markets through advertising—Or. Backman emphasizes that market shares are constantly changing and affluent companies cannot enter at will. For example, Campbell Soup entered the dry-soup market in 1962 with its Red Kettle line, spent $10 million in advertising to compete with Lipton and Knorr, but discontinued the dry mixes in August 1966. • Large-scale advertising creates
barriers to entry of new firms into an established market—Armour hurdled the barriers of the soap oligopolists with Dial soap. In other areas, smaller companies are competing effectively on local and regional levels. • Large advertising outlays concentrate economic power—but Dr. Backman finds that in only seven of the 50 largest consumer goods industries did the four largest companies remain leaders in that industry from 1947 to 1958. Many of these largest producers have relatively low advertising-tosales ratios. • Companies which so protect themselves from competition charge high monopolistic prices—statistics show that the most heavily advertised products have had the fewest price increases over any given number of years. For example, the drug industry carries a high (almost 10% of sales) advertising budget, but the change in retail prices of all drugs from 1957 to 1966 has been - 1 . 4 % .
noncontroversial innovations include: • More reliable and longer-range weather forecasts. • Major reductions in hereditary and congenital defects. • Relatively effective appetite and weight control. • New, improved plants and animals. • Three-dimensional photography, illustrations, movies, and television. Mr. Kahn calls the second 25 of his innovations controversial. That is, he says, people would rather not see them happen. These include: • Some control of weather and climate. • Human hibernation for relatively extensive periods (months to years). • New kinds of cheap, convenient, and reliable birth control techniques. • General and substantial increase in life expectancy, postponement of aging, and limited rejuvenation. Number 40, "capability to choose the sex of unborn children," falls into the controversial category. Mr. Kahn cites the possible dire consequences of turning such a capability loose in India, where the male is revered much more than the female; a disproportionate population mix could result. Mr. Kahn's 40th innovation seems to portray one of the main points of his marathon talk—technical innovations will open up all kinds of social problems that few men are even thinking about today. He makes this point by referring to the various military possibilities to come out of fusion research. "I think the point here is that this [fusion] technology is increasingly dangerous in all kinds of ways. Maybe the best thing to do is to close your eyes and just kind of sleepwalk and hope you get through it."
100 innovations by year 2000 A list of 100 "very probable" technical innovations that will occur by the year 2000 was outlined by Herman Kahn to the Jordan Editorial Conference at Arden House, Harriman, N.Y. His list includes multiple applications of lasers and masers and far-out projects such as human hibernation for medical purposes. The director of the Hudson Institute, Croton-on-Hudson, N.Y., labels the first 25 of his list as noncontroversial. These, he says, would probably be accomplished all for the good, although he did have some doubts. The
Herman Kahn Clos© your eyes and sleepwalk APRIL 10, 1967 C&EN
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