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Saturday, April 1, 2017

"Phishing for Phools" by George A. Akerlof and Robert J. Shiller. A Review

Phishing for Phools: The Economics of Manipulation and DeceptionPhishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof
My rating: 4 of 5 stars

They come in your email, those promises that look too good to be true. Like the one from a lawyer in Nairobi, the widow of a high-placed Government official from Uganda, the U.S. Army Sergeant in Afghanistan, even from Director James Comey of the FBI; all pledging hundreds of thousands or even millions of dollars just for the taking. By now you know the scam, called phishing, well enough to disregard them without even opening the emails. George A. Akerlof and Robert J. Shiller, both Co-Winners of the Nobel Prize in Economics in different years and professors of Economics at prestigious Ivy League universities, have taken the notion of phishing and moved it to the area of economics in their 288 hardcover “Phishing for Phools: The Economics of Manipulation and Deception.” This disarming title covers a fairly technical dossier purportedly for non-technical readers, “consumers…business people…government officials…volunteers…young people” (vii).

In “Phishing for Phools” the authors define phishing beyond email scams to those incidents where others get “people to do things that are in the interest of the phisherman, but not in the interest of the target” (xi); and they note that a phool is anyone who gets phished. By the end of the book it’s clear that every reader has been phished, and the authors also include themselves in the same category. We can be psychological phools, where our emotions have co-opted our common sense or our mental preconceptions bring us to misinterpret what is before us. Or we can be information phools who act on intentional misinformation. Akerlof and Shiller guide their audience through various samples of phishing that will be easiest to see: advertising, big-item purchases, “Phood, Pharma, and Phishing,” three sample innovations, tobacco and alcohol, bankruptcy and junk bonds, and a new national story in America.

The main point of the “Phishing for Phools” is to temper the euphoric notions that an unregulated free market is inherently a good thing, where there is an economic equilibrium that fosters everyone’s financial and existential wellbeing. Such a market has numerous benefits, bringing about prosperity and decent advances. But the author’s build the case that we as consumers are vulnerable to being phished, and therefore an unregulated free market incentivizes phishermen, for “if we have a weakness – if we have a way in which we are phishable – the phishermen will be there waiting” (171). Akerlof and Shiller are constructing the justification for incorporating (1) behavior, (2) the ubiquity of phishing and phoolishness, and (3) the significance of narrative on consumers’ decisions in analysis and projections of economic trends and conclusions. They propose, for example, that if these three characteristics had been in the economists’ tool kit, then they would have been more keenly aware and prepared for 2008 world financial crisis, and “would have sounded the alarm” (165). Since I am neither a professional, nor amateur, economist, some of the material and discussion went well beyond my comprehension; but I think I got the gist of their discussion.

“Phishing for Phools” was an informative exposé on how often, and in what ways, we get phished. Sometimes not too friendly to the non-technical, nevertheless the authors give readers fodder for reflection and consideration. It’s a book worth reading.


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