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Phishing for Phools

The Economics of Manipulation and Deception

By George A. Akerlof and Robert J. Shiller
12-minute read
Audio available
Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof and Robert J. Shiller

Phishing for Phools (2015) reveals the ways in which modern free-market systems, so often praised as the epitome of rational exchange, are fueled instead by willful deceit, with the goal of pushing you to act against your self-interest.

  • Economists or students examining free-market systems
  • Any consumer interested in how the market works
  • Socially-conscious business owners

Nobel laureate George A. Akerlof is an economist and professor at Georgetown University. He was awarded the Nobel Prize in economics in 2001.

Nobel laureate Robert J. Shiller is the Sterling professor of economics at Yale University. He was awarded the Nobel Prize in economics in 2013. Shiller is the author of the bestselling book, Irrational Exuberance.

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Phishing for Phools

The Economics of Manipulation and Deception

By George A. Akerlof and Robert J. Shiller
  • Read in 12 minutes
  • Audio & text available
  • Contains 7 key ideas
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Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof and Robert J. Shiller
Synopsis

Phishing for Phools (2015) reveals the ways in which modern free-market systems, so often praised as the epitome of rational exchange, are fueled instead by willful deceit, with the goal of pushing you to act against your self-interest.

Key idea 1 of 7

Far from being rational, free markets are full of irrational temptations for the “phool” consumer.

While we like to think of free-market economic systems as places where individuals make mutually-beneficial trades based on rational decisions, the reality is much different.

In today’s free market, people are constantly being phished for phools. But what do we mean by this?

Phishing is a process of getting a person to do something that is in the interest of the “phisherman” but not necessarily beneficial to that person.

Someone who has been successfully phished is then called a phool. And contrary to popular opinion, markets that are based on supply and demand with little to no government interference – essentially free-market systems – are actually ideal phishing grounds.

Yet most economic textbooks will tell you that most buying decisions in such markets are indeed rational. A typical example goes like this: you go to a supermarket to buy apples and oranges. The catch is that you have only a limited amount of money to spend.

The amount of apples and oranges you purchase depends on both the price of the fruit and on your personal preference for either apples or oranges.

But does this example reflect reality? Do we really make our buying decisions based on a rational assessment of a particular good’s price?

Certainly not. Free markets constantly create temptations to exploit consumer weaknesses.

Think about your local supermarket. Where are the eggs and milk located? In all likelihood, they’ve been placed strategically at the back of the store.

As milk and eggs are common items that most people purchase, every customer is forced to walk through the whole store to find them – all the while being reminded of the other things on the store shelves that could be purchased.

We’re also similarly manipulated by our own desires when making purchasing decisions.

For example, companies that sell cake mixes appeal to an individual’s subconscious desire to make something “homemade.” Instead of just including egg in the mix, they require the buyer to add a fresh egg himself, playing on the illusion that with this addition, the cake was made from “scratch.”

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