The financial crisis suggests there’s a strong argument for the BBC remaining state-owned and not carrying adverts.
Yes, this claim looks bald. But the reasoning’s simple.
Let’s start from the assumption (which might be questionable) that high levels of personal debt were a contributory factor to the recession, and/or that a desire to pay down this debt might hold back the recovery.
The question then arises: why is debt so high?
TV advertising, that‘s one reason. A new paper by Matthew Baker and Lisa George establish this very cleverly. They exploited the fact that TV’s spread across the US in the 1950s was uneven, with some areas getting it earlier than others. They show that, in those areas where TV reception arrived earlier, households were more likely to take on debt.
In other words, TV - and TV advertising - contributes to household borrowing. This is because adverts don’t just raise demand for one good relative to another. They raise demand for goods generally relative to leisure. And because we can’t increase our labour supply quickly, this demand for goods leads to increased borrowing.
In this sense, commercial TV is one cause of high debt. So the existence of a licence fee-funded BBC is a bulwark against households becoming over-indebted. It’s a force for economic stability.
Except for one thing. Baker and George also show that areas which got commercial TV earlier also saw men (though not women) be more likely to get jobs. This is because the same adverts that caused people to borrow more also caused them to get jobs to pay off the debt.
Whether this mechanism is sufficiently strong to offset the incentive to stay at home caused by Holly Willoughby being on daytime TV is, however, doubtful.
Yes, this claim looks bald. But the reasoning’s simple.
Let’s start from the assumption (which might be questionable) that high levels of personal debt were a contributory factor to the recession, and/or that a desire to pay down this debt might hold back the recovery.
The question then arises: why is debt so high?
TV advertising, that‘s one reason. A new paper by Matthew Baker and Lisa George establish this very cleverly. They exploited the fact that TV’s spread across the US in the 1950s was uneven, with some areas getting it earlier than others. They show that, in those areas where TV reception arrived earlier, households were more likely to take on debt.
In other words, TV - and TV advertising - contributes to household borrowing. This is because adverts don’t just raise demand for one good relative to another. They raise demand for goods generally relative to leisure. And because we can’t increase our labour supply quickly, this demand for goods leads to increased borrowing.
In this sense, commercial TV is one cause of high debt. So the existence of a licence fee-funded BBC is a bulwark against households becoming over-indebted. It’s a force for economic stability.
Except for one thing. Baker and George also show that areas which got commercial TV earlier also saw men (though not women) be more likely to get jobs. This is because the same adverts that caused people to borrow more also caused them to get jobs to pay off the debt.
Whether this mechanism is sufficiently strong to offset the incentive to stay at home caused by Holly Willoughby being on daytime TV is, however, doubtful.
Great tits - it is getting like page 3 here.
Greatly improved.
Posted by: Guido Fawkes | October 02, 2009 at 03:23 PM
perhaps households borrowed to buy the telly?
Posted by: Luis Enrique | October 02, 2009 at 03:44 PM
@ Luis. Not just the telly. The paper says: "Television access is associated with a greater tendency to purchase and incur debt for new cars." And debt continued to rise in the years after TV arrived. If people only borrowed to buy a TV, it would have fallen in those years, as the TV loan was repaid.
Posted by: chris | October 02, 2009 at 05:57 PM
sorry, I was being flippant.
there is another paper that takes a similar approach and looks at the effect of receiving Western television on consumption patterns in Eastern Germany
http://lehre.wiwi.hu-berlin.de/Professuren/vwl/wtm2/seminar-schumpeter/cantoni.pdf
Posted by: Luis Enrique | October 03, 2009 at 05:40 PM
Well we know that you enjoy the Sun now Guido. ;)
Anyway, I don't think you've shown what you think you've shown here, Chris.
You've shown that TV increases the willingness to borrow (at least during the 1950s, the culture causes of borrowing may have changed since then). I haven't read the paper, but from your summary, you haven't shown that this was due to advertising. It may have been, or it could have been the programming. Furthermore, nothing like the BBC was compared, so there is no reason to believe that "the existence of a licence fee-funded BBC is a bulwark against households becoming over-indebted".
I subscribe to the hypothesis that the media (in a chicken and the egg kind of way) contributed to the crisis, particularly with regard to the housing bubble. But there were certainly property shows on the BBC, and not just on ITV, C4 etc, so I see no reason to believe, from your summary of this study, that the BBC was a force acting against the borrowing. It may have done but you haven't presented the evidence.
Posted by: Alex | October 04, 2009 at 02:14 AM
As Alex has said, the BBC has become pretty good at creating aspirational television at our expense in more ways than one.
Aspirational Television doesn't need advertising for it to thrive. I think a BBC programme puts it in a nutshell nicely. God bless 'em.
http://www.youtube.com/watch?v=m10GYS9cunc
The fact I don't own a goggle box myself doesn't protect me from its influence, but I'm not complaining, they are right, my life is much better with Holly in it (and Charlie).
Posted by: Ricci Coughlan | October 04, 2009 at 09:01 AM
Chris I think you should do a paper correlating the number of commets you get with the size of the boobs and the pulchritude of the stunna displayed...
Posted by: kinglear | October 05, 2009 at 08:16 AM
nice post...
i really like this...
thnks...
http://www.pnrinfoline.com
Posted by: Sarah Danes | October 05, 2009 at 11:09 AM