February 15, 2023
“Why do we need three thousand brands of deodorant?”
You’ve seen this complaint leveled against capitalism before. To the economically illiterate, the endless proliferation of products—hardly differentiated, if at all—seems like a bug of the capitalist system. It seems wasteful. In fact, in the name of “scientific production” (production for “use,” not “profit”), the Soviets abolished brand names altogether in 1917.
Not as devastating as their decision to abolish money, but prohibiting brands is also highly destructive to a well-functioning market economy.
Why?
It’s because having a gazillion brands is a feature, not a bug, of capitalism. For starters, it’s evidence of intensely rivalrous competition between sellers, competition which is always goading them to offer better products at lower prices. And secondly, (some) people really do prefer to make distinctions between products along the infinite margins of color, ingredients, size, durability, risk, etc…
Advertising and brands are not inventions of the era of mass production. Certainly not if this report from The Economic Times has merit. From the article:
“David Wengrow claims that bottle stops used 5000 years ago in ancient Mesopotamia, the birthplace of cities and writing, were stamped with symbols that marked them out as the earliest evidence of branded goods.
Wengrow believes that they were promotional logos, along the lines of those used by Microsoft and Nike.
He said that around 8000 years ago, village-dwelling Mesopotamians started making personalized stone seals, which they pressed into the caps and stoppers used to seal food and drink.
Originally these marked commodities would have been traded directly with neighbours and travellers, reports New Scientist magazine.
But they turned into brands when urbanisation began in Mesopotamia - a little over 5000 years ago - when traders encountered more strangers and city residents increasingly had to deal with products of uncertain origin.
Wengrow said the symbols in caps and stoppers came to play an important role in telling people about the quality and origins of products such as oils and wine.”
It would be interesting to consider what’s endogenous to what here, but certainly we’d expect the expansion of trade to go hand-in-hand with widespread use of brands if the discipline of repeated dealings is doing what we think it is. In small communities, memory and kinship substitute for governance by brands. See the end of this paper for how governance evolves as the extent of the market expands. As Art Carden and I put it in Mere Economics:
“Social phenomena persist because they solve problems, and brand names solve significant information problems.”