Political vs Market Value

I've been thinking a lot about Owen Barder's article: Brand Value - for whom?, since responding to it here and here. In class last night Bryan Caplan discussed Brennan-Lomasky, and I think that it provides an explanation that Owen must address. I'll shamelessly borrow his anlaysis.

We can divide "value" up into two parts. Instrumental value refers to what the product does, whereas expressive value applies to the signalling and image. On the Tesco shelf the two cans of beans might offer the same instrumental value, but the Heinz brand also expresses your taste and wealth. Clearly Owen thinks that the excess value - above the instrumental value - is socially wasteful. At the end of the day, beans are beans.

Notice that if value is subjective, then expressive value is real: i.e. people get satisfaction from it. To suggest government intervention is therefore a desire to change people's opinions, to make us all more similar.

Think about a 'Get Well Soon card'. The instrumental value is virtually zero, but they are popular because they demonstrate expressive value. Does Owen think that they're a gimmicky waste of resources and should be taxed?

Perfume contains slightly more instrumental value than greeting cards, since high quality perfume do retain their scent longer, and are made with more expensive inputs. But the vast majority of value in Chanel No.5 is expressive, since cheaper alternatives will do pretty much the same thing. Should they therefore be taxed slightly less than greetings cards?

Consider the message though. People who bemoan expressive value are saying "Ignorant masses, you're being duped. For you own good I shall tax you, you're not able to spend money on the things that you really want ...." My response to that is don't be so arrogant. We like signalling, and we like expressing ourselves. Some things make us feel good, and you have no right to try and diminish this natural characteristic. Stop your social engineering.

Notice the real irony though: the offered solution to the "problem" of expressive value in the market is to use the tools of government - which is almost solely expressive value!

Remember that in a market your decisions have greater decisiveness than when you vote. In other words, if you want a Big Mac and attempt to get one, it's almost certain that you will. By contrast, if you want a different politician you vote has very little chance of affecting the outcome. In a market, your actions will control the result that affects you. In politics it does not.

If you're choosing between two options, A and B, you'll choose whichever one would give you the highest total value. You'll secure the expressive value regardless of the outcome, but the instrumental value depends on the probability of decisiveness.

i.e A>B iff p(IA)+EA > p(IB)+EB

(A is preferred to B if and only if the instrumental value of A, multiplied by the probability of decisiveness, plus the expressive value of A; is greater than the instrumental value of B, multiplied by the probability of decisiveness, plus the expressive value of B.)

Hence in an election, where p=0, A>B iff EA>EB - regardless of "what the politician does" you'll vote for whoever gives you the most expressive value i.e. the nicest smile, the most patriotic, the greater rhetoric, the nicest tie.

By contrast in a market transaction instrumental value is just as important as expressive value.

So Owen's criticism of branding is that it's socially wasteful, and wants government to step in to resolve the issue. But the political market will have far far more expressive value, more branding, more image and signalling and precisely the things Owen wants to reduce.

You might spot a seeming inefficiency, but let the second singer sing.

Comments

[SL]

Disclaimer: In no way should my opinion below be understood as stating that Heinz UK produces products for other suppliers or that they use products produced by other OEMS. No insider information will be used in the comment below.

Re: Heinz as a branding excise

Time and again, Tesco's and its "generic" labels beat branded products in total volume sold. Heinz now emphasises the fact that they innovate rather than sitting on its classic products like beans (after a shameless marketing campaign now: Beanz) and ketchup. They want the market to believe that their products are actually different, rather than simply being branded differently from Tesco's. The so-called "expressive value" is diminishing fast as consumers are quick to believe that OEMs are making things for different companies and that these companies are simply branding machines rather than manufacturers.

[Marcin Tustin]

Your very premise, that value can somehow be broken down into different components is in itself a marxist fallacy.

[AJE]

My previous attempt to defend branding fell on deaf ears, probably because I was basing my argument on different assumptions. This tactic is taking my opponents framework as given, and trying to defeat it from within.

Both strategies are valid.

Yes, this argument has flaws, but you can't defeat a Marxist by calling them a Marxist! You have to show that they're internally inconsistant.

This is how Milton Friedman defeated Keynesianism, the tragedy being once the ediface is felled he falls with it. Hence a mixed strategy of taking them on at the own gain, and propagating the positive case for branding - that it provides valuable information.