Wednesday, August 11, 2010

Is this a car advertisement for economists?

Here's the text of the ad:
Can utility be a poster? Can utility keep you up at night, dreaming? Can utility put thoughts in your head? Depends on what you mean by utility. The new Cayenne Utility Hybrid, born from Porsche intelligent performance to be lighter, more agile, more efficient. More Porsche than ever.
Here's the video:

For the non-economists who read this blog, economists define utility to be something like happiness (and we assume that individuals maximize utility). Viewed in this light, the poster yields some amount of utility, so do the dreams that keep us up all night. Even "thoughts in my head" can add to my overall utility (if they are good thoughts).

But, what is not seen in this advertisement is the foregone utility of these actions (the price isn't stated either, but that's a different story). The poster of a car takes up space that could be used for some other decoration (maybe a mirror to make the space seem bigger). Staying up all night dreaming likely means that you will be tired for your morning meeting tomorrow. You'll be less effective and you might not get that promotion. Finally, just thinking "happy thoughts" might mean that you will take less precaution against bad outcomes. That is, there are cases where putting good thoughts in your head isn't optimal (such as "my car is so awesome that I can drive recklessly up a winding road in the mountains" just like the commercial).

So, is this an advertisement for economists or something different? Depends on what you mean by utility.

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