By Adam Thierer & Berin Szoka
Progress & Freedom Foundation Progress Snapshot No. 6.5, Feb 2010 [.pdf]
Advertising is increasingly under attack in Washington. In fact, we're busy finishing up a paper with the working title: "The New Assault on Advertising: What it Means for the Future of Media & Culture." Among other things, the paper inventories the many ways in which policymakers in Washington and elsewhere are stepping up regulation of commercial advertising and marketing efforts-and highlights the common themes that unite them. Unfortunately, the report is already over 50 pages long and we keep finding new threats to discuss!
This regulatory tsunami could not come at a worse time, of course, since an attack on advertising is tantamount to an attack on media itself, and media is at a critical point of technological change. As we have pointed out repeatedly, the vast majority of media and content in this country is supported by commercial advertising in one way or another-particularly in the era of "free" content and services.
Thus, advertising helps solve an otherwise intractable information problem that would otherwise go unsolved without advertising's claims and counter-claims about competing goods and services. Indeed, truthful advertising is itself an important type of speech that communicates relevant information to the public. As Nobel laureate economist George Stigler pointed out in his now legendary 1961 article on the economics of information, advertising is "an immensely powerful instrument for the elimination of ignorance-comparable in force to the use of the book instead of the oral discourse to communicate knowledge." As leading advertising scholar John Calfee has argued, "advertising has an unsuspected power to improve consumer welfare" since it "is an efficient and sometimes irreplaceable mechanism for bringing consumers information that would otherwise languish on the sidelines." More importantly, Calfee argues:
Advertising's promise of more and better information also generates ripple effects in the market. These include enhanced incentives to create new information and develop better products. Theoretical and empirical research has demonstrated what generations of astute observers had known intuitively, that markets with advertising are far superior to markets without advertising.
If anything, these numbers understate the vital importance of advertising to consumers, since advertising is so ubiquitous in our capitalist world, it is like the air we all breathe: We rarely notice it except when it annoys or bothers us. Given how deeply ingrained our cultural bias against advertising, and how subtly advertising works to benefit consumers, it's remarkable that so many consumers realize that advertising empowers them by increasing total awareness of the many choices available in the marketplace.
Constitutional protection for advertising is explicitly based upon the idea that freedom to advertise brings benefits to markets generally, especially consumers. The central argument in Supreme Court decisions overturning restrictions on advertising is that consumers can benefit from a free exchange of information- the 'marketplace of ideas' celebrated by authors and jurists since at least the time of John Milton.
Advertising, however tasteless and excessive it sometimes may seem, is nonetheless dissemination of information as to who is producing and selling what product, for what reason, and at what price. So long as we preserve a predominantly free enterprise economy, the allocation of our resources in large measure will be made through numerous private economic decisions. It is a matter of public interest that those decisions, in the aggregate, be intelligent and well informed. To this end, the free flow of commercial information is indispensable.
Economic concerns are as important to our society are as important as political concerns. By extension, economic information is as important as political information. Political information receives full First Amendment protection. Therefore, economic information should receive full First Amendment protection.
Amana [Corporation]'s initial advertising of its pioneering microwave oven provided consumers with information on how such ovens work, what they can do, etc. This created consumer demand for the product, which benefited subsequent entrants, such as Litton and Panasonic. Advertising by these later entrants was used to explain the benefits of their particular brands rather than to explain to consumers the functions of a microwave oven: Amana's advertising had already provided general product information and helped create consumer demand for the product.
 See, e.g., Adam Thierer & Berin Szoka, Chairman Leibowitz's Disconnect on Privacy Regulation & the Future of News, Progress Snapshot 6.1, January 2010, www.pff.org/issues-pubs/ps/2010/pdf/ps6.1-Leibowitz-disconnect-on-privacy-and-advertising.pdf.
 George Stigler, The Economics of Information, 69 Jour. of Political Economy 213, 220 (June 1961). "Since Nobel laureate George Stigler's 1961 article on the economics of information, economists have increasingly come to recognize that, because it reduces the costs of obtaining information, advertising enhances economic performance," note Howard Beales and Timothy Muris. "[W]hat consumers know about competing alternatives influences their choices. Better information about the options enables consumers to make choices that better serve their interests." J. Howard Beales & Timothy J. Muris, American Enterprise Institute, State and Federal Regulation of National Advertising, 7-8 (1993).
 John E. Calfee, Fear of Persuasion: A New Perspective on Advertising and Regulation, 96 (Agora Association, 1997).
 Calfee, Id. at 107-8.
 Va. Pharmacy Bd. v. Va. Consumer Council, 425 U.S. 748, 765 (1976).
 Id. at 763.
 Id. at 765 (emphasis added)
 Richard T. Kaplar, Advertising Rights: The Neglected Freedom (1991) at 60.
 Id. at 71.
 Calfee at 115.
 Kenneth J. Arrow, George J. Stigler, Elisabeth M. Landes & Andrew M. Rosenfield, Economic Analysis of Proposed Changes in the Tax Treatment of Advertising Expenditures, (Lexecon Inc., 1990), available at www.scribd.com/doc/27267813/Economic-Analysis-of-Proposed-Changes-in-the-Tax-Treatment-of-Advertising-Expenditures.
 Id. at 16.