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Phishing for Phools: The Economics of…

Phishing for Phools: The Economics of Manipulation and Deception

by George A. Akerlof, Robert Shiller, J. (Author)

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"Free market equilibrium" is always maintained to the extent that there is always someone willing to sell you what you want to buy, or point out things you haven't even thought about buying, but now that they've come to your attention, you find irresistable. However, if what you want to buy makes you sick, fat, drunk, broke or dead from lung disease, it's not the fault of that juggernaut-like free market. You have been phished for a phool.

I admire the authors' attempt to level the playing field by pointing out to consumers the areas where they are most likely to be successfully phished: houses, cars, "phood and pharma", tobacco, liquor, and mortgage-backed securities based on subprime loans with phony Triple A ratings. Unless you are very canny, as the Scots say, or have better powers of resistance than most of your fellow-men, you will be phished.

The reminder that "phishing for phools" is built into the system, and we have to negotiate that system more or less successfully every day, is depressing but very real. In other words, "There's a sucker born every minute - and one to take him". There really is nothing new under the sun.

I was amused by the image of a "monkey on your shoulder", egging you on to make bad decisions, but in general, I didn't find this book as interesting as I thought it might be. ( )
  booksandscones | Mar 20, 2016 |
Whirlwind tour of many of the ways people can be fooled by other people, such as ready access to credit cards (people spend more than when they have to part with cash) and campaign advertising. Not much new if you are into behavioral economics; ends with a defense of government regulation to disrupt “phishing equilibria,” where a certain amount of exploitation of everyone is just accepted as normal. ( )
  rivkat | Mar 7, 2016 |
Nice commentary. It is an effort to "combine economic theory, which forms the basis for each chapter, with examples that illustrate its application."

"The phish is a way to get someone to make a decision that is to the benefit of the phished, but not to the benefit of the phool."
  ddonahue | Oct 29, 2015 |
Another Phine Mess

It seems that the capitalist world is divided into two kinds of people: phishers and phools. Those who phish look for leverage and advantage and milk it; the phools pay for it, even when they don’t need to, don’t want to, and can’t afford to. The result is financial crises, on the national level, the local level and the individual level. And it never stops. We buy too much, we buy the wrong things, and we overpay all the time. Shiller and Akerlof say the very first phool was Eve. The serpent phished her into taking something she did not want, did not need, and which she knew in advance she should not take. The cost was going to be too high. So it has been ever since, whether it’s cable bundles or junk bonds.

There’s a lot going on in this little book. It ranges from individual (struggling) bill payers to government lobbyists, drug marketing and financial services. It is of necessity cursory, and therefore incomplete. In the chapter on credit cards, which treats both merchants and consumers as phools, spending $150 billion annually for the privilege, the authors neglect the fact that to use cash is even worse. While true that credit card users tip more and spend more freely, it is also true stores price in the cost of credit cards and the premiums they give to holders. So paying cash means paying more than we should, making us even bigger phools. Similarly the War on Cancer assumes cancer is internally sourced, making it difficult if not impossible to overcome. That’s because the focus is on treatment. But even the UN says 75% of cancers today are environmental, not genetic; they can be prevented. We can reduce cancer by a whopping 75% by not polluting ourselves, our food, our air, water and soil. The phoolish analysis is leading us to the pill phishers.

“Government is the problem” is a phish for phools, the authors say. It is not only taken out of a very specific context, it diverts attention from the scammers to the government agencies that protect us from the scammers, be they financial, consumer, chemical or environmental. This is diversion and diversion is the number one tool of phishing. The book is an entertaining litany of blatant and subtle examples. Caveat emptor is still the order of the day.

The last word should go to Robert Benchley, who also said the world is divided into two kinds of people: those who divide the world into two kinds of people, and those who don’t.

David Wineberg ( )
  DavidWineberg | Jul 23, 2015 |
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Amazon.com Product Description (ISBN 0691168318, Hardcover)

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, 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 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 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.

(retrieved from Amazon Thu, 23 Jul 2015 12:42:18 -0400)

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