Question

Amidst the affluence of post-industrial societies exist some unsettling paradoxes:

a. Rather than being dedicated to disease research or pursuit of environmentally friendly production techniques, the talents of many researchers are channeled toward making existing products distinct from each other. Is the level of product innovation excessive in market economies?

b. Further resources, including artistic talent, are devoted to advertising campaigns with the same seemingly wasteful objective of attracting customers from rival firms. Does free competition lead to the socially efficient level of advertising in market economies? Should public policy limit advertising and research?

Answer 1

A) No, there is never an excess of product innovation in market economies. This is because new and innovative products are the need of the hour and consumers are always willing to demand and consume new and updated products at every possible price they are willing to pay.

Researchers, even if dedicated towards making existing products distinct from each other are still contributing to the economy and its research and development.

B) Yes, free competition leads to socially efficient level of advertising in market economies due to the large number of buyers and sellers aimed at attracting maximum sales.

This makes them engage in advertising till the point the profits equal cost of advertising. This makes the level of advertising socially efficient.

No, public policy must not limit advertising and research because Innovation and research are the backbone of an economy, and producers must continuously engage in R&D to bring innovative products to the economy and meet different arising consumer needs.