Phishing for Phools
George Akerlof and Robert Shiller Princeton University Press, 272 pages, $24.95
"Competitive markets by their very nature spawn deception and trickery." This is not the hyperbole of a die-hard Marxist, but the contention of two Nobel Prize winners in economics in a new book, "Phishing for Phools: The Economics of Manipulation and Deception."
Economic models tend to assume that people are informed about the decisions they make. This supposedly enables consumers to make markets work to their advantage. But Robert Shiller of Yale University and George Akerlof of Georgetown University argue instead that this assumption is false. There are plenty of market equilibria, the authors find, where one party is being deceived, or "phished." Econo-nerds have been waiting eagerly for this book. Shiller and Akerlof have devoted their enormous collective brainpower to these ideas for years. They have been writing the book itself since 2010. You might think that, as a result, it would be dense; in fact the opposite is true. It mostly consists of other people's research, helpfully boiled down into tidbits that are perfect material for cocktail-party chatter.
For example, the book talks about credit card spending and car sales tricks. Although these topics are interesting, the book also has flaws. The authors fail to properly analyze any of the topics satisfactorily. Although very readable, consumers are left with the impression that there are lots of nasty people about — and perhaps that they may themselves have been phished.