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The game theory of firms choosing to advertise seems to be prisoner's dilemma like. The only equilibrium is for both firms to advertise at a loss. If either fir

The game theory of firms choosing to advertise seems to be prisoner's dilemma like. The only equilibrium is for both firms to advertise at a loss. If either firm stops advertising, the other firm's ads become more effective and it will steal market share. As a consequence of this, I think advertising will always persist irrationally unless the system if changed to prevent this irrational behavior. A really high tax on any ad spend would probably work.

dredmorbius 4y ago
Among the sea-changes in the publishing industry was the abolition of exceptionally high taxation rates on advertising in the UK in the early 19th century (circa 1830 or so). I've only read peripherally about this and don't have any good sources handy, but it's a historical fact which strikes me as quite interesting.
whimsicalism 4y ago
That's not what "at a loss" means and is also not irrational. High tax on ad spend would be a throwback to our Christian moralist days where we decide that some spending is good spending that we like and other is bad spending. Most attempts to ban payment for boosting speech have failed, see citizens united.
- datadata 4y ago
  I'm sorry, but have we ever left "those days"? There are dozens of examples of sin taxes on things like Cigarettes, Gambling, Alcohol, Carbon Emissions, etc.
  - softwarebeware 4y ago
    Taxes on cigarettes, in the US, at least, are not driven primarily by Christian moralists. I was part of a prominent US non-profit that is behind both higher cigarette taxes and laws that ban smoking in public areas. The motivation is health.
  - whimsicalism 4y ago
    Carbon has clear negative externality. Most of those other taxes were first instituted during periods of much greater Christian beliefs in the US than now.
    - datadata 4y ago
      So are you OK with a sin tax if it is on something with a negative externality? Do you think advertising does not have any negative externalities?
      - whimsicalism 4y ago
        Carbon is not a sin and that is not the historical reason it is taxed, unlike say alcohol and cigarettes. Many of these other things may have externalities, both positive and negative, but not so clear cut as carbon.
        jlund-molfese 4y ago
        The reason you're getting downvoted is because you compared a tax on ad spend to "Christian moralist" taxation in the United States, otherwise known as sin taxes. But you changed your definition of a sin tax halfway through the thread. These days, sin taxes like those on soda are often not motivated by religious concerns, at least in the US. They're taxes on goods or services that are harmful to individuals or society.
    - qwytw 4y ago
      And Cigarettes, Gambling & Alcohol don't?
      - whimsicalism 4y ago
        The primary impact of all of these things is on the purchaser. So not an externality. Of course, there are arguments around the externalities of all of these things. I view most of those arguments as society contextual (people don't like others smoking, so it is an externality) as opposed to something like carbon which would have a negative externality regardless of this societal/cultural context.
potamic 4y ago
Tax on advertising is a very interesting idea. Everyone understands that is a necessary evil and most parties would rather not do it given the chance. But how do you classify what advertising is? Buying adspace on a website or billboard might be obvious? What about other forms like content creation, influencer marketing etc. If you create some websites or videos related to your services, is that considered advertising?
- whimsicalism 4y ago
  Exactly. It wouldn't survive a court challenge.
- datadata 4y ago
  I think you only need to track financial transactions, advertising companies would have to report and be taxed on income. The government has shown moderate competence at being able to implement things like this (maybe there are some areas where there is a lot of tax fraud, but generally it works). It is an interesting question you raise about second order effects-- would there be ways to work around this to get advertising for free?. For example maybe spam would become more common and intrusive and be used by more reputable companies. Note that ideas such as "hashcash" were solutions to effectively put a fee on email spam. The root of what is troubling about this all is that free speech isn't a sufficient framework in the modern world where attention and time are constrained.
  - r00fus 4y ago
    How do you separate advertisement companies and, say, entertainment companies that happen to just do product placement? I'm in favor of taxing ads, but it'd need to be comprehensive definition unless you want some unintended consequences.
    - vlovich123 4y ago
      Product placement is advertising. You only need to tax the transaction for the advertisement not “advertising companies”. It does get more complicated about how you define that it’s an advertisement vs not. And there’s lots of “paid placement” stories even in “respectable” newspapers that masquerade as news but would be hard to pierce the veil on as advertisement instead of just “free speech”

dredmorbius 4y ago

Among the sea-changes in the publishing industry was the abolition of exceptionally high taxation rates on advertising in the UK in the early 19th century (circa 1830 or so). I've only read peripherally about this and don't have any good sources handy, but it's a historical fact which strikes me as quite interesting.

whimsicalism 4y ago

That's not what "at a loss" means and is also not irrational. High tax on ad spend would be a throwback to our Christian moralist days where we decide that some spending is good spending that we like and other is bad spending. Most attempts to ban payment for boosting speech have failed, see citizens united.

datadata 4y ago
I'm sorry, but have we ever left "those days"? There are dozens of examples of sin taxes on things like Cigarettes, Gambling, Alcohol, Carbon Emissions, etc.
- softwarebeware 4y ago
  Taxes on cigarettes, in the US, at least, are not driven primarily by Christian moralists. I was part of a prominent US non-profit that is behind both higher cigarette taxes and laws that ban smoking in public areas. The motivation is health.
- whimsicalism 4y ago
  Carbon has clear negative externality. Most of those other taxes were first instituted during periods of much greater Christian beliefs in the US than now.
  - datadata 4y ago
    So are you OK with a sin tax if it is on something with a negative externality? Do you think advertising does not have any negative externalities?
    - whimsicalism 4y ago
      Carbon is not a sin and that is not the historical reason it is taxed, unlike say alcohol and cigarettes. Many of these other things may have externalities, both positive and negative, but not so clear cut as carbon.
      - jlund-molfese 4y ago
        The reason you're getting downvoted is because you compared a tax on ad spend to "Christian moralist" taxation in the United States, otherwise known as sin taxes. But you changed your definition of a sin tax halfway through the thread. These days, sin taxes like those on soda are often not motivated by religious concerns, at least in the US. They're taxes on goods or services that are harmful to individuals or society.
  - qwytw 4y ago
    And Cigarettes, Gambling & Alcohol don't?
    - whimsicalism 4y ago
      The primary impact of all of these things is on the purchaser. So not an externality. Of course, there are arguments around the externalities of all of these things. I view most of those arguments as society contextual (people don't like others smoking, so it is an externality) as opposed to something like carbon which would have a negative externality regardless of this societal/cultural context.

potamic 4y ago

Tax on advertising is a very interesting idea. Everyone understands that is a necessary evil and most parties would rather not do it given the chance. But how do you classify what advertising is? Buying adspace on a website or billboard might be obvious? What about other forms like content creation, influencer marketing etc. If you create some websites or videos related to your services, is that considered advertising?

whimsicalism 4y ago
Exactly. It wouldn't survive a court challenge.
datadata 4y ago
I think you only need to track financial transactions, advertising companies would have to report and be taxed on income. The government has shown moderate competence at being able to implement things like this (maybe there are some areas where there is a lot of tax fraud, but generally it works). It is an interesting question you raise about second order effects-- would there be ways to work around this to get advertising for free?. For example maybe spam would become more common and intrusive and be used by more reputable companies. Note that ideas such as "hashcash" were solutions to effectively put a fee on email spam. The root of what is troubling about this all is that free speech isn't a sufficient framework in the modern world where attention and time are constrained.
- r00fus 4y ago
  How do you separate advertisement companies and, say, entertainment companies that happen to just do product placement? I'm in favor of taxing ads, but it'd need to be comprehensive definition unless you want some unintended consequences.
  - vlovich123 4y ago
    Product placement is advertising. You only need to tax the transaction for the advertisement not “advertising companies”. It does get more complicated about how you define that it’s an advertisement vs not. And there’s lots of “paid placement” stories even in “respectable” newspapers that masquerade as news but would be hard to pierce the veil on as advertisement instead of just “free speech”