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Individually Innocent . . . But Cumulatively Guilty

Yesterday’s report that personal income rose less-then-expected, while personal spending rose more-than-expected, made me wonder about our rate of savings.

As everybody knows, cigarette companies were held legally responsible for the misfortunes caused by smoking, even though the cigarette companies didn’t hold a gun to anybody’s head.  Smokers smoked because they chose to do so.  So, why did cigarette makers owe damages?  And, why did all cigarette makers owe damages?  Why should the manufacturer of Marlboro cigarettes have to pay damages for someone smoking Salem cigarettes?

So, why do Americans save so little?  Financial planners like to see clients save 10% of their income, and Americans have often done that but not since the early 1980s.  During the financial crisis of 2008/9, our savings rate briefly touched a respectful 8%.  Today, it is only 2.5%.

Graph of Personal Saving Rate

Compounding the problem of declining savings, companies have discontinued most pension plans.  When Americans need to save more, they are saving less.  This is bad for individuals, bad for families, and bad for America.  Many see this problem as a moral issue, i.e. that people don’t have to self-discipline to save.

Another theory is that, as Americans spend more and more time watching hundreds of cable channels, they are not only getting fatter but also more susceptible to advertising, which means they can “have it all” by charging more on their credit cards or they can “find happiness and fulfillment” by again charging more on their credit cards.  Stated starkly like this, the stupidity shows.

Of course, people could spend less and save more, if they wanted to.  People could also exercise and live longer, if they wanted to.  Instead, they engage in harmful practices, like spending and smoking.
Some make the distinction that addiction is only physical — never emotional nor spiritual.  Cigarettes create a physical addiction, and their manufacturers had to pay damages.  But, psychologists tell us there are different types of addiction.  Some have deep-seated needs I cannot pretend to understand but accept.  I do know that some people are more susceptible to advertising than others.
So, should the Madison Avenue advertising agencies pay damages for harm done to people who spent too much and saved too little?  If advertising does this, shouldn’t they pay?  If advertising doesn’t do this, why do companies spend billions to advertise?
No one advertiser wants to hurt anybody, but doesn’t the cumulative effect of billions of dollars spent to influence behavior . . . actually influence behavior?

Of course, Madison Avenue advertising agencies convinced us that smoking was sexy and sophisticated, before convincing the courts that the manufacturers were the guilty parties.  Now, they have convinced us that spending is sexy and sophisticated, before blaming it on the victims.

Does the advertising industry have any liability for anything they do?  Do they have a moral compass?