Roy Kreitner: Enchanted Market Logic

Roy Kreitner

Roy Kreitner is Professor of Law at Tel Aviv University. He is the director of the Berg Foundation Institute for Law and History at Tel Aviv University. He writes on the legal history of American capitalism, the history and theory of money, private law, and law and political thought.

Anat Rosenberg’s The Rise of Mass Advertising is a multi-dimensional, multi-media exhibition. There is an overarching narrative, complete with a number of side plots; there are case studies, often with their own stand-alone lessons; there are illustrations, some lush and colorful, others in small type; there are poems, anecdotes, even jokes, complete with descriptions of audience laughter. But through it all, there is a richly detailed history constantly grappling with a conceptual puzzle that retains analytical clarity. The backdrop to the conceptual puzzle is the tension between the familiar Weberian idea that modernity is characterized by disenchantment, but mass advertising, while central to modernity, thrives on enchantment. In writing a cultural history of mass advertising, Rosenberg aims to show how advertising could occupy a central role within such a modernity without undermining its self-perception. And show us she does. To become a central character in the market culture that characterized modernity, advertising had to walk a fine line. Its effect relied on affect; to work, advertising had to appeal to something beyond strict economic rationality, beyond a cold ends-means calculation. But the appeal had to remain, somehow, within bounds. Enchantment had to be contained, so as not to threaten the image of a calculating individual holding center stage in the drama that would legitimize a market society ostensibly organized around dispersed consumption decisions, or individually rational choice.

The Rise of Mass Advertising takes its readers in on several levels, rare in succeeding both in deep detail and in constant conceptual abstraction that moves quickly among several theoretical registers. Readers interested in theory will have much to chew on, whether they are thinking about the construction of the Victorian subject, the tensions within British modernity, or the methodological questions of how to deal with such generalizing terms. Alternatively, readers interested in history of advertising, or of consumption, or of law’s role in markets, will receive the best developed and detailed version of how advertising rose to prominence and even centrality, during the long nineteenth century in England. Both sets of readers will be endlessly engaged. In an ideal world, it would be off limits to try to comment on the book in one register only, because taking on a conceptual claim without analysis of the concrete (or the other way around) necessarily misses the mark. But constraints of time and space make a joint grappling impossible, so what follows will attend primarily to the conceptual aspect of the book, and indeed, to one idea that appears there and seems worth extension.

I’ll begin by restating, in extremely reductive form, the rich conceptual claim that drives the book, which is the claim of “legally supported disavowal of enchantment.” (11) Rosenberg sums up the claim crisply late in the book, writing:

The case studies I examine differed in their subject matter, social tensions, institutional locations, legal frameworks, dominant ideological viewpoints, and scope… From differing directions and with no unified perspective, legal engagements reveal that enchantment in advertising was being disavowed. It inevitably intruded again and again only to be recast as low culture or reduced to discrete occurrences. Disavowing the systemic quality of enchantment and its proliferation allowed British culture to live with its capitalism, where avowal would have transformed capitalism’s very image. (265)

In other words, there are two parts to the claim, dealing with what (enchantment exists in advertising, but is disavowed), and with how (through a series of legal engagements). Fleshing this out just a bit, the summary narrative is as follows:

From the 1840s on, advertising in England explodes, as it were, becoming ubiquitous and economically and culturally important. In the process, it generates cultural anxiety because it appeals, at times unapologetically, to enchantment (fantasy, magical thinking, transformative experience), while the dominant culture is busy establishing disenchanted rationality as its master trope. And so, advertising, as a central cultural practice, part and parcel of the expansion of business, of consumerism, of urban environments, threatens wherever it appears. News, art, and science, must differentiate themselves from advertising, leading to an economy of appropriation and distance. On the one hand, advertising is accepted as legitimate, but on the other hand, it is disavowed, denigrated, always subjected to a lowering of its status, with law and legal discourse being a central locus of disavowing rhetoric. Law becomes the language in which the threat of enchantment dissipates, enchantment is in a way dismissed by presenting it as a remainder, a low form parasitically but harmlessly tagging onto valuable, rational market activity, and ironically (eventually), one that can be left in the hands of the advertisers.

Now, aside from being engaging (including at times funny), Rosenberg’s narrative is especially convincing – the combination of detail in the service of a complex conceptual claim succeeds in explaining what would otherwise seem chaotic and internally contradictory. This is no small feat, because trying to make sense of the rise of advertising without dipping into conspiracy theories or their correlate in theories of false consciousness is no mean trick. But the concrete analysis of how these various fields manage to come to terms with advertising remains so well grounded that it is genuinely hard to resist. Much of the persuasive force of the book, beyond Rosenberg’s gifts as a writer, lies in her methodological choice to pursue a history that is “reception-based” and shows that “while enchantment was pervasive, it was not a unidirectional force controlled or even acknowledged by advertisers,” and that enchantment “depended on an active involvement of advert readers” with their own “will to enchantment.” (19).

The way this argument generates so much power is by showing over and over and in widely divergent contexts how much advertising actually works – not because the populace is engaged in a resistance movement that denies the image of disenchanted rationality, but rather because people – as consumers, as city dwellers, as readers of newspapers (or buyers of multiple copies of newspapers) – navigate seemingly chaotic appeals to their attention, framed across the entire spectrum from hyper-rational to deeply enchanted, with relative aplomb. Cultural anxiety isn’t really an anxiety of the masses: the masses are pretty resilient, and understand themselves as such – but rather of people (typically relatively elite people) who have serious stakes in the advancement of a particular cultural form, one dependent on the image of rationality. And within the cultural elite, there are varying stakes: some groups are interested in bolstering their cultural authority; others may be more interested (at least for some immediate conflict) in short term gains; some have wider theories about the extent to which decision making power should be dispersed, others may have only more local stakes.

What the story succeeds in showing is that enchantment worked, in various ways, on consumers of advertisement, and that such a success had to be culturally digested. Law was an important locus for that process, and its mode of address was one of disavowal. Law had a specific voice, a soothing story committed, not to the particular place where the line between enchantment and rationality would lie, but rather to the idea that such line-drawing (or boundary work) was precisely the routine and achievable work of legal discourse.

Nonetheless, there is always the possibility of some additional remainder, something that escapes the successful work of containment to which legal discourse devoted itself. What I would like to concentrate on here, then, is an extension of the argument about the cultural digestion, if you will, of advertising’s enchantment. Now, I present this as an implication drawn from Rosenberg’s claims, but to be honest it is actually a question; I think there is more than a hint of the argument already in the book, but I’m not quite sure whether Rosenberg would agree. The point of entry for this question is Rosenberg’s own expansion of the argument from consumers to advertisers, when she writes:

The uncomfortable position between enchantment and rationalism needed careful management not only in the stories told about consumers, but equally about advertising professionals themselves. Practitioners craved the respectability of rational experts, yet introduced the forbidden element of enchantment, supposedly rejected in capitalism, into the heart of the system. (340)

The question is what it means for enchantment to reside in the heart of the system. When Rosenberg begins delving into the period’s own reflections on the threat of enchantment, she turns to contemporary economists and their internal disagreements. Rosenberg offers an analysis of Canon Masterman and Alfred Marshall’s concerns that advertising might be “wasteful” because “it persuaded people to buy things they were not conscious of wanting.” (342) Advertisers (and economists who sometimes spoke for them) answered this charge by claiming it was good to develop the consumer’s desires beyond his “elementary conscious wants,” so actually advertising was solving an information problem. But in this framing, the specter of wastefulness seems relatively contained, and focused still primarily on whether individual consumers will be able to act rationally. Economic discourse here plays the same role as legal discourse.

Now, consumer rationality surely is important, and fraught for economic theory. I say fraught because on the one hand, it is based on the subjectivity of value, and yet at the same time on a taming of idiosyncrasy at the heart of value-making. In other words, people must differ in their values and valuations, but they all must function under the same kind of ends-means rationality that ties their particular valuations to their own use-value for commodities. The reason, after all, is that as they shop, consumers create the meaning most important to the market place, by offering (or in economic parlance, taking) prices. Their role is that of producers of the information (the price system) that allows the marketplace to do its magic, that is, to route human effort into mutually beneficial welfare enhancement, to generate self-interested other-regarding behavior. The price system drives overall efficiency, as it were, by ensuring that everyone’s subjective value is recorded, it allows all consumers to order their preferences, and it is this ordering that ensures that each voluntary transaction is a net welfare gain. So, an enchanted (read, irrational) consumer threatens to distort the price system. That is, if advertising is information, it lowers transaction costs, rather than changing preferences, and all is well; whereas if advertising changes preferences by undermining their rational comparison, it undermines the welfare calculus that justifies market ordering. That might seem like enough of a threat. But on some level, it is indeed answered by the advertisers and by the law, in a model of consumer resilience – the enchantment is contained, it becomes itself part of value, it is a bit like a taste for entertainment. Consumers willingly and rationally purchase small thrills, little experiences of wishing for special luck, they have a taste for a bit of experience of the fairy tale within life, in much the same way they are willing to buy fantasy novels (or today, spend money on fantasy role playing games).

But perhaps there is an even deeper magic at work. 

Beyond the consumer, there is the question of the extent to which economy itself is enchanted, how the market is magical, or how the justification of the market is only ostensibly rational. In fact, at the very heart of this justification lies an enchanted vision, truly an invisible sleight of hand, a magic trick that turns self interest into the common good. We might be critical, or even cynical, regarding the myth of the invisible hand, the fairy tale that markets actually succeed in advancing the common good. But even we if wholeheartedly believed in the providence of the invisible hand, advertising poses a problem. Advertising, viewed rationally, seems to undermine the possibility of such magic, or perhaps the other way around – it is only by disavowing the economics of advertising that it can be comprehended within market logic, if that logic adheres to socially beneficial magic.

I’ll try to explain quickly via Thorstein Veblen’s The Theory of Business Enterprise. Published in 1904, Veblen’s book points to a gap between the modern working of the business corporation and what he considered the accepted view and justification of the corporation. The accepted view grew out of a theory developed around the time of Adam Smith, according to which market activity had the potential to harness individual self-interest to other-regarding behavior, insuring that economic activity would ultimately accrue toward the benefit of the community. The business corporation on this view simply aggregates investment toward activities too large for the wealth of a single individual, but acts within the same harmony of interests as individual market players. The corporation is just an aggregated and larger version of Smith’s baker or brewer, who acts out of self interest, but in a way that benefits society. However, according to Veblen, this view “had its significance for economic theory a hundred years ago; but since corporation finance has come to pervade the management of business this view is no longer of particular use for a theoretical handling of the facts.”[1] Veblen is willing to concede, for the sake of argument, that while economic activity was organized in a regime of handicraft, corporations pursued business in much the same way as individuals: with an orientation toward livelihood. But there was little overlap between that orientation and then current business practice.[2]

The transformation of business stemmed from a number of factors, details of which can only be presented telegraphically. Their results, however, are far-reaching indeed. According to Veblen, corporations were no longer driven by the impulse to make production more efficient in order to be able to sell their products most advantageously (as the baker or brewer in the Smithian mythology were). Instead, the goal of the corporation was to increase its stock value, or capitalization. The basis for capitalization of the corporation is not tied directly to its production capacity, but is based rather on “an ever recurring valuation of the company’s properties, tangible and intangible, on the basis of their earning-capacity.” This capitalization is in essence simply the price of the company’s stock. But the “nucleus” of that capitalization is the corporation’s intangible assets, and in particular its “good-will.” The items included in good-will are “immaterial wealth,” assets that are “not serviceable to the community, but only to their owners.” Veblen explains with a partial list comprising “franchises and privileges, trade-marks, brands, patent rights, copyrights, exclusive use of special processes guarded by law or by secrecy, exclusive control of particular sources of materials. All these items give a differential advantage to their owners, but they are of no aggregate advantage to the community.”[3] Highlighting the role of good-will in capitalization is just a way of locating, in the practice of capital accounting, Veblen’s more general point: modern profit seeking is a matter of jockeying for position (“differential advantage”) that limits, rather than augments the production of social benefit. Importantly for our purposes here, advertising is itself the most prominent in a list of unproductive avenues attractive as modes of securing profit; profit-seeking loses its role as a proxy for community benefit. From a social perspective, the whole is smaller than the sum of its parts. Rosenberg’s advertisers themselves had a good idea of where the value of their activity lay, as she quotes from Advertiser’s Review: “The best asset of a business is a well-known trade-mark. Do you realise what that means? It means that in the convolutions of thousands or millions of human brains that trade-mark is indelibly impressed. You can’t see it, but it is there and it is property – you can capitalise it.” (354)

Veblen’s economic logic may have surprised early twentieth century readers, but today it seems undeniable. There is of course some advertising that presents consumers with new information, lubricating, as it were, their consumption decisions (in economics talk, reducing transactions costs, primarily what are called ‘search costs’). But the bulk of advertising as we know it is devoted precisely to the generating the kind of “good-will” that exercised Veblen. Advertising geared toward grabbing market share of functionally similar products (Coke or Pepsi?) is always about corporations jockeying for position. And generating trade-marks, or more generally, the work of branding, is all about creating little monopolies (think again of Coke and Pepsi: they don’t need to advertise so people know about their respective qualities – they spend billions to make it harder for unknown firms to enter the market, because competitive advertising would be impossibly expensive). These “intangible assets” raise the value of a corporation because they add to the likelihood of its profitability – but that profit is based on limiting, rather than increasing, social welfare. Corporations could produce more and sell for less, but they undermine industrial and social efficiency by doing what it takes to position themselves as profit machines. Advertising is the core activity that undermines the standard story of how corporate self interest in market activity would generate social benefit.

So perhaps the attention to advertising’s enchantment at the level of the individual is itself a bit of enchantment. The fundamental threat behind recognizing the true role of advertising lies not at the level of individual rationality, but at the normative level of justifying the market. The point would be that even if we assume that consumers retain their rationality at every stage, advertising injects an element of irrationality into the workings of the market, or more specifically, throws a wrench into the justifications of the market as a rational system for increasing welfare. Advertisers’ discourse, as well as legal discourse, perform a sleight of hand to make sure that the invisible hand remains a plausible story, and the focus on consumer rationality helps us forget that the threat to economic rationality is structural, rather than individual.


[1] Thorstein Veblen, The Theory of Business Enterprise 69 (1904).

[2] “Under the old regime the question was whether the community’s work was adequate to supply the community’s needs; under the new regime that question is not seriously entertained… Under the old order, industry and even such trade as there was, was a quest of livelihood; under the new order industry is directed by the quest of profits.” Id. at 87.

[3] Id. at 70-71.