Phishing For Phools: The Economy Is Rigged Against You – And It’s Kind Of Your Fault by Carlos Lozada, The Washington Post
Review of “Phishing For Phools: The Economics Of Manipulation And Deception” by Nobel Prize winners George A. Akerlof and Robert J. Shiller
Phishing For Phools: The Economics Of Manipulation And Deception
By George A. Akerlof and Robert J. Shiller
Princeton University Press. 272 pp. $24.95
George A. Akerlof and Robert J. Shiller are economics nobility. Both have won Nobel Prizes, Akerlof for explaining how “asymmetric information” between buyers and sellers distorts market outcomes, Shiller for his research on the volatility of prices for stocks and bonds. Akerlof happens to be married to Federal Reserve boss Janet Yellen. Shiller predicted the recent housing collapse. Among dismal scientists, these guys are as respected and connected as it gets.
But with books, as with stocks, timing is everything. Akerlof and Shiller’s first book together, “Animal Spirits,” in 2009, challenged economic orthodoxy — especially the notion that markets reflect the behavior of rational actors — just as confidence in standard economic models was disintegrating with the Great Recession. They argued that emotions involving confidence, fairness, bad faith, corruption and misunderstandings about money exert a powerful influence on behavior and therefore on unemployment, business cycles, financial markets and real estate prices. To cope with all this, they argued, a broader responsibility for government is needed. “The proper role of the parent is to set the limits so that the child does not overindulge her animal spirits,” the authors wrote.
Six years later, Akerlof and Shiller have written “Phishing For Phools,” another attempt to upend our traditional understanding of how economies work. Free markets do not just deliver choices and prosperity, the authors contend, but create irresistible incentives for businesses to manipulate consumers and prey on our emotions and ignorance. “The economic system is filled with trickery,” they assert, “and everyone needs to know that.”
For long stretches, the second book feels far less revolutionary than the first. Its examples are well-known and overly dissected cases of economic misdeeds. Advertising misleads consumers. Credit card firms and car dealers rip us off. Rating agencies and investment banks gave us the subprime loan debacle. Food and pharmaceutical companies finesse regulations to bring unhealthy products to market. Akerlof and Shiller once again rely on behavioral economics to illustrate their cases, but after more than a decade of “Freakonomics”-style books peddling gee-whiz findings, the authors sound a little like the guys still enamored of the hipster trend long after the hipsters have moved on.
Phishing For Phools – Description
Phishing For Phools: The Economics Of Manipulation And Deception by George A. Akerlof and Robert J. Shiller
Ever since Adam Smith, the central teaching of economics has been that free markets provide us with material well-being, as if by an invisible hand. In Phishing For Phools: The Economics Of Manipulation And Deception, Nobel Prize-winning economists George Akerlof and Robert Shiller deliver a fundamental challenge to this insight, arguing that markets harm as well as help us. As long as there is profit to be made, sellers will systematically exploit our psychological weaknesses and our ignorance through manipulation and deception. Rather than being essentially benign and always creating the greater good, markets are inherently filled with tricks and traps and will “phish” us as “phools.”
Phishing For Phools: The Economics Of Manipulation And Deception therefore strikes a radically new direction in economics, based on the intuitive idea that markets both give and take away. Akerlof and Shiller bring this idea to life through dozens of stories that show how phishing affects everyone, in almost every walk of life. We spend our money up to the limit, and then worry about how to pay the next month’s bills. The financial system soars, then crashes. We are attracted, more than we know, by advertising. Our political system is distorted by money. We pay too much for gym memberships, cars, houses, and credit cards. Drug companies ingeniously market pharmaceuticals that do us little good, and sometimes are downright dangerous.
Phishing For Phools: The Economics Of Manipulation And Deception explores the central role of manipulation and deception in fascinating detail in each of these areas and many more. It thereby explains a paradox: why, at a time when we are better off than ever before in history, all too many of us are leading lives of quiet desperation. At the same time, the book tells stories of individuals who have stood against economic trickery–and how it can be reduced through greater knowledge, reform, and regulation.
Phishing For Phools – Review
“As you would expect, it’s a very clearly written book with tons of examples. And it makes a simple and powerful point about the fragility of the normative, welfare economics conclusions economists tend to draw.”–Diane Coyle, The Enlightened Economist
“Akerlof and Shiller present convincing evidence of how tobacco, pharmaceutical, and liquor companies and politicians weasel a chapter of their own into our life stories, abusing the mutual storytelling–with all its signs and wonders–that is elemental to our humanity.”–Peter Lewis, Barnes & Noble Review
“With accessible language and everyday examples, Shiller and Akerlof are taking on the powerful belief that aside from a few blemishes (like widening income inequality) only fools advocate interfering with the free market.”–Chris Farrell, Minneapolis Star Tribune
“The book’s central message is certainly thought-provoking.”—The Economist
“Phishing For Phools: The Economics Of Manipulation And Deception forswears technical language, making this book accessible not only to economists but to consumers and policymakers. It should make everyone rethink the unfettered free-market model.”–Brenda Jubin, Investing.com
“It’s a very clearly written book with tons of examples. And it makes a simple and powerful point about the fragility of the normative, welfare economics conclusions economists tend to draw.”—Enlightened Economist
“Its critique of conventional economics is more powerful and comprehensive–and more paternalistic–than that of Animal Spirits.”–Carlos Lozada, Washington Post
“[Akerlof’s and Shiller’s] insight is a powerful one.”–Economist.com’s Buttonwood blog
Phishing For Phools: The Economics Of Manipulation And Deception by George A. Akerlof and Robert J. Shiller
