Advertising, Welfare Economics and Ethics

It is a fact of life that economic resources are used to alter other's preferences over commodities. Yet this is seldom taken into account in basic economic theory, explanatory or normative. It is shown here how a certain type of advertising is readily allowed for in the Edgeworth exchange box, in the small country foreign trade model, etc.. It is found, in welfare terms, that exchange/trade with advertising can involve some agents gaining at the expense of others; there need not be mutual gain. To deal with sales promotion, welfare economics needs to step outside the familiar Paretian framework to face difficult (and perhaps contentious) ethical issues, some of which are raised here.