Final answer:
Advertising is generally not considered socially wasteful as it adds to the economy by informing consumers, increasing demand, and fostering competition. Both critiques and support exist in the economic literature regarding the value and effects of advertising.
Step-by-step explanation:
The question asks if it's true or false that advertising is socially wasteful because it only adds to the cost of producing a product. This statement is typically considered false. An evaluation of the social utility and economic implications of advertising can be multi-faceted. Advertising has the ability to inform consumers, contributes to economic growth by increasing product demand, and can foster competition.
Economist A. C. Pigou suggested in his 1920 book, The Economics of Welfare, that advertising expenditures by competitors might simply neutralize each other, leaving the industrial position unchanged. This may seem wasteful, but it doesn't consider the potential benefits of advertising, such as increasing brand recognition and consumer information. Naomi Klein's 1999 text No Logo looks at corporate branding and its effects, suggesting that in a post-millennial society, advertising also shapes consumer culture. Moreover, the inclusion of social and environmental costs, commonly referred to as environmental externalities, affects market price and consumer behavior.
Furthermore, while some critics argue that advertising causes unnecessary product differentiation and socially wasteful outcomes, defenders claim that this differentiation can benefit consumers by providing more choices and driving innovation. This debate involves the role that advertising plays in monopolistic competition and consumer preferences for variety.