Phishing for Phools: Economics of Manipulation and Deception

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OUR FOCUS BOOK (proposed by June Taylor, U/Utah’s Radiology Research Prof & Long-Time Reading Liberally Regular) --

Our focus will be Phishing for Phools: The Economics of Manipulation and Deception by two Nobel-Prize Economists, George A. Akerlof and Robert J. Shiller (official release date 9/22/2015 but available immediately from Amazon.com for 17.94 + shipping or $14.72 Kindle -- 288 pages).

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.

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OUR AUTHORS

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Prof. George A. Akerlof (BA Yale 1962, PhD MIT 1966) won the Nobel Prize in Economics in 2001 for the “analyses of markets with asymmetric information.” He taught economics at U/Cal-Berkeley 1966-2010. At age 70 in 2010, he retired from U/Cal-Berkeley to follow his wife to Washington DC where he became The University Professor at the McCourt School of Public Policy at Georgetown University.

His wife is Janet Yellen, Chairman of the Federal Reserve. They have an adult son who is also an Economics Professor.

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Prof. Robert J. Shiller (BA U/Mich 1967, PhD MIT 1972) won the Nobel Prize in Economics in 2013 for his “empirical analysis of asset prices.” He is the Sterling Professor of Economics at Yale U where he also teaches at Yale Law School and at Yale’s School of Management.

Among his many publications, Prof. Shiller teamed up with Prof. Akerlof in 2009 to co-author the popular book -- Animal Spirits: How Human Psychology Drives The Economy, And Why It Matters For Global Capitalism.
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UtahOwl
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Phishing for Phools: Economics of Manipulation and Deception

Post by UtahOwl »

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Originally posted by UtahOwl » Tue Sep 08, 2015 7:58 pm

In Phishing for Phools, Nobel Prize-winning economists George Akerlof and Robert Shiller deliver a fundamental challenge to the idea that markets always benefit us, operating efficiently as by an "invisible hand" , 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." Published this month by Princeton U Press.

This is a new book, and reviews are scarce. However, there were editorial comments in the Financial Times: http://www.investing.com/analysis/akerl ... ols-264196:

“As the campaign season kicks into gear, it’s perhaps timely to look at one theme in their critique of the Citizens United decision. They write: ‘Our view of free speech closely mirrors our view of free markets. We view both as critical for economic prosperity; and free speech as especially critical for democracy. But just as phishing for phools yields a downside to free markets, similarly, it yields a downside to free speech. Like markets, free speech also requires rules to filter the functional from the dysfunctional.’ (p. 160) The majority opinion, written by Justice Kennedy, ‘seems to treat speaking solely as conveyance of information, without consideration of its role of persuasion, inevitably with its phish for fools. … Speech is also a way to convince other people to act in our interests.’ (p. 161) Phishing for Phools 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.”

Pat
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Posts: 168
Joined: Mon Sep 17, 2007 3:11 pm

Utah Owl’s Erroneous Link To The Financial Times

Post by Pat »

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Utah Owl’s Original Proposal purports to quote from the Financial Times some comments indicating that Phishing for Phools is about Campaign Finance Reform and the U.S. Supreme Court’s decision in Citizens United.

However, Utah Owl’s link to the website containing the quote goes to http://www.investing.com rather than the website for The Financial Times.

[Our bulletin board software compresses long website addresses -- in order to fool the software, it is necessary to drop the “http://www” so that it will then display the remainder of June Taylor’s link, which was investing.com/analysis/akerlof---shiller,-phishing-for-phools-264196.]

Investing.com, per its Facebook page (facebook.com/investingdotcom) “is a leading financial web portal which offers real time quotes, streaming charts, up-to-date financial news, technical analysis, and more.”

Unfortunately, June Taylor’s cross link to investing.com does not produce anything at all.

And neither Google “Advanced Search” (whether “Financial Times ‘Phishing for Phools’” or “Phishing Phools ‘Financial Times’”) nor a search for “Phools” on The Financial Times' own website, produces anything except that The Financial Times has selected Phishing for Phools as one of 15 Best Business Books for its “Long List” for 2015 (to date).

The Financial Times website states IN TOTAL vis-à-vis that selection (ig.ft.com/sites/business-book-award/books/2015/longlist/phishing-for-phools-by-george-akerlof-and-robert-shiller) --

Phishing for Phools
George Akerlof, Robert Shiller

Phishing for Phools 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. — Princeton University Press

Synopsis

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.

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Reading Liberally Editorial Notes:

The text of the Synopsis was quoted without attribution in Amazon.com’s description of Phishing for Phools, and that was quoted on the face of this section of the bulletin board without attribution to Amazon.com.

That text was also quoted 9/12/2015 in our weekly Reading Liberally E-mail that is sent pre-dawn each Saturday to approximately 150 recipients.

Thursday 9/17/2015 update -- Phishing For Phools finally arrived and, interestingly, the text of the Synopsis was printed on the inside flaps of the book’s dust cover!!! Accordingly, the Synopsis did NOT originate with The Financial Times (which quoted it without attribution), and Amazon.com did NOT plagiarize The Financial Times by including the Synopsis in Amazon’s description of the book (again, quoting it without attribution).

Pat
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Posts: 168
Joined: Mon Sep 17, 2007 3:11 pm

The Real Source of June Taylor’s Quotation

Post by Pat »

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June Taylor’s quoted comments in her Original Proposal (which she alleged “were editorial comments in the Financial Times”) were in fact located on www.investing.com.

As explained in my posting of yesterday (Sat 9/12/2015), the only comments about Phishing for Phools in The Financial Times were set forth ver batim in my posting and had nothing to do with the mystery comments quoted by June.

Instead, June’s quotation appears on www.investing.com which does NOT attribute it to any other source.

June’s quotation comprises the penultimate paragraph of the following Book Review on www.investing.com.

The author is NOT identified on that website except solely by name. However, Brenda Jubin is listed with LinkedIn.com where she describes herself simply as an “Independent Investment Management Professional” and, since 2009, as “Blogger - Reading The Markets.”

The Book Review quoted by June Taylor was, in fact, originally posted on ReadingTheMarkets.blogspot.com by Brenda Jubin on 9/6/2015 and www.investing.com picked it up from there without disclosing the source of the original posting, though still giving the author name attribution but with no further information about the author.

ReadingTheMarkets.blogspot.com, upon inspection, contains blogs posted by quite a few different authors. It is not clear what the qualifications, if any, are for someone to post a blog on that website.

Blogspot.com, itself, is provided by Google, but anyone (or any group) can register a website on blogspot.com such as ReadingTheMarkets.blogspot.com and then specify whatever rules (if any) s/he or they want in order to post.

In other words, we have no idea whether Brenda Jubin knows whereof she speaks.


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Book Review: Phishing For Phools
By Brenda Jubin

Their thesis is simple but powerful: that “competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity.” (p. 165) Economies “have a phishing equilibrium in which every chance for profit more than the ordinary will be taken up.” (p. 2) Free-market equilibrium undermines our plans to eat healthily, it makes us pay too much for our cars and houses, it transforms rotten assets into gold.

We have weaknesses that can be exploited (monkeys on our shoulders), weaknesses that free markets by their very nature exploit. Akerlof and Shiller modestly claim to be making only “a small tweak to the usual economics (by noticing the difference between optimality in terms of our real tastes and optimality in terms of our monkey-on-the-shoulder tastes). But that small tweak for economics makes a great difference to our lives. It’s a major reason why just letting people be Free to Choose—which Milton and Rose Friedman, for example, consider the sine qua non of good public policy—leads to serious economic problems.” (p. 6)

In 1930 John Maynard Keynes projected what life would be like in 2030. In one respect he was pretty close: real income per capita in the U.S. was 5.6 times higher in 2010 than it was in 1930. (He predicted it would be eight times higher by 2030.) But in the other, he was dead wrong. People aren’t worrying about how to use their surfeit of leisure; they’re still worrying about how to pay the bills. “[F]ree markets have … invented many more ‘needs’ for us, and, also, new ways to sell us on those ‘needs.’ All these enticements explain why it is so hard for consumers to make ends meet. … Some say that our predicament is a product of the consumerism of the modern world. … But to our minds, the central problem lies in the equilibrium. The free-market equilibrium generates a supply of phishes for any human weakness. Our real per capita GDP can go up five-and-a-half-fold again, and then do it again; we will still be in the same predicament.” (pp. 21-22)

Akerlof and Shiller devote the bulk of their book to providing examples of phishing. They explain how reputation mining contributed to the financial crisis, why the buyers of the rotten mortgage-backed securities were so gullible, and why the financial system was so vulnerable to the discovery that the securities were rotten. They illustrate how advertisers graft stories of their own onto the mental narratives in our minds. They analyze a study showing that blacks and women are charged more for cars—black men a staggering 9% more. This even when, in the study, the testers were chosen to be as similar as possible in age and education, when “they drove similar rental cars to the dealers; wore similar ‘yuppie’ clothes; indicated no need for financing; and gave the same home address.” (p. 61) The authors describe how credit cards entice us to spend a great deal more than we would if we paid with cash. They give examples from the worlds of pharma, food, and lobbying and explore the S&L crisis and junk bonds.

As the campaign season kicks into gear, it’s perhaps timely to look at one theme in their critique of the Citizens United decision. They write: “Our view of free speech closely mirrors our view of free markets. We view both as critical for economic prosperity; and free speech as especially critical for democracy. But just as phishing for phools yields a downside to free markets, similarly, it yields a downside to free speech. Like markets, free speech also requires rules to filter the functional from the dysfunctional.” (p. 160) The majority opinion, written by Justice Kennedy, “seems to treat speaking solely as conveyance of information, without consideration of its role of persuasion, inevitably with its phish for fools. … Speech is also a way to convince other people to act in our interests.” (p. 161)

Phishing for Phools 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.

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