Israel M. Kirzner, Advertising

Israel M. Kirzner’s Advertising (1972), republished in the supplied 2016 edition, defends advertising as an integral part of entrepreneurial production. Its central argument is that supplying goods requires bringing them to consumers’ attention. Advertising helps make an opportunity economically effective, rather than simply adding expense to an already completed product.

Kirzner begins by challenging a broad scholarly consensus against advertising:

Advertising has been badly treated by many scholars who should know better. Not only Marxists and liberals, but even conservatives have given advertising a bad press. Let us examine some of the criticisms.

The criticisms concern offensiveness, dishonesty, manipulation, monopoly, and waste. The manipulation charge reverses the conventional account of market coordination:

Rather than production being governed by consumer sovereignty, quite the reverse: the consumer is governed by producer sovereignty.

Kirzner’s answer does not require defending every advertisement. He initially brackets deception to establish what advertising contributes even when producers act honestly:

In the meantime, let us talk about a world of honest men, men who do not try to deceive.

Within this framework, secure property rights and free entry allow entrepreneurial rivalry. Kirzner distinguishes this process from the equilibrium model of perfect competition, where sellers’ plans are already coordinated and further rivalry has no function. Actual competition involves discovering better ways to satisfy consumers through price, quality, packaging, service, and other features. Product differentiation consequently need not indicate monopoly; it can express competing judgments about buyers’ wants.

This account underpins his criticism of Edward H. Chamberlin’s distinction between production costs, which create goods, and selling costs, which supposedly only increase demand. For Kirzner, that division assumes too readily that the product has a fixed identity independent of consumer valuation. Drawing on Mises’s example of restaurants serving identical food under different conditions of cleanliness, he argues that cleaning changes what the customer purchases even without altering the food. Transportation similarly changes coal’s usefulness. The economically relevant product includes circumstances that affect its value to consumers, not merely its physical substance.

Advertising belongs within this expanded understanding of production. Information about a good can itself be valuable, and supplying it together with the good may be less costly than obtaining it independently. Yet this informational defense leaves an important question unanswered: why must advertising be conspicuous, repetitive, or emotionally arresting? Kirzner’s distinctive response separates information’s availability from actual consumer awareness.

His gas-station example illustrates the difference. Gasoline and a modest sign do not adequately serve motorists who fail to notice them. A prominent illuminated sign helps turn an overlooked supply into a usable opportunity. Entrepreneurship therefore involves more than manufacturing goods or placing factual information where it could theoretically be found. It must awaken consumers to possibilities they have not recognized.

Kirzner subsequently relates increasingly forceful advertising to competition for scarce attention. His recollection of college walls becoming crowded with notices shows how additional messages raise the effort required for any one announcement to attract notice. Affluence likewise multiplies available opportunities while making them harder to recognize and compare. Advertising’s growing expense and intrusiveness can thus accompany an enlarged range of consumer choices. These costs may be undesirable without being economically pointless.

The conclusion returns to the moral objections initially set aside. Kirzner associates offensive advertising with the preferences of the society it addresses, but condemns deceit on moral and economic grounds. Competition offers alternatives concerning whom consumers trust as well as what they purchase. Government supervision, he argues, cannot simply eliminate the problem because it too depends on fallible people; verification remains a cost of exchange.

The work’s central contribution is to integrate advertising into a subjectivist account of production and a discovery-based account of competition. Its defense rests not merely on advertisements transmitting facts, but on entrepreneurial communication making opportunities noticeable. The initial assumption of honesty establishes advertising’s legitimate function without establishing the legitimacy of every actual advertisement.