The proposition that advertising encourages people to consume more than they would otherwise is not controversial. But Hunter College economists Matthew Baker and Lisa George go one step further in their new paper, "The Role of Television in Household Debt: Evidence from the 1950's," and find what appears to be a strong link between advertising and the accumulation of debt.
Baker and George take advantage of the fact that access to TV broadcasts spread in fits and starts across the United States in the 1950s, makeing it possible to correlate TV penetration and changes in the rate at which household debt grew in specific regions.
The results indicate that television access is associated with a higher tendency to borrow to purchase consumer goods and a higher tendency to hold non-mortgage debt.
The theory is that exposure to television advertising naturally increases the desire to consume, but the would-be consumers are unable to immediately boost their earnings by working more at the same time: "Thus, they incur debt to finance higher current consumption and work more in the future."
As one part of the explanation for why Americans became hooked on debt after World War II, Baker and George's paper is useful. But I found myself wondering: If television advertising had such a dramatic effect on consumer habits, then what can we say about newer communications media forms? Do DVRs that facilitate skipping ads partially insulate us from the seduction of debt? What about the Internet, which requires a far more active consumption of media than television? What about Twitter?
The introduction of mass media technologies, combined with advertising on a level and sophistication never before dreamed of, has had a vast effect on our culture and our economy. But this story is far from over. Could it be possible that the splintering of mass media into a billion Web sites, blogs, Facebook posts and Twitter tweets, satellite radio stations and cable television outlets ends up undermining the power of advertising? Could Babel be good for something?