Galbraith on Advertising, Credit, and Consumption: A Retrospective and Empirical Investigation with Policy Implications

Douglas Lamdin

Review of Political Economy, 2008, vol. 20, issue 4, 595-611

Abstract: Throughout his life, John Kenneth Galbraith wrote on a large range of topics. One of the most important issues that he addressed was the role of advertising and credit in stimulating consumer expenditure. This paper examines Galbraith's view of how advertising and consumer credit help drive consumption, and then examines subsequent empirical research on this topic. This review reveals a limited recognition by researchers of Galbraith's important contributions. Then, an empirical examination of US aggregate time series shows that advertising and credit both have economically and statistically significant positive influences on consumption, consistent with Galbraith's hypothesis. The paper concludes with some insights into how Galbraith would approach the current lack of savings in the US and the sort of policies he might support to increase US savings rates.

Date: 2008
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DOI: 10.1080/09538250802308984

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