Princeton University Press, 2015
Two nobel prize winners as authors of a book published by the Princeton University Press raises expectations toward the reading. Akerlof and Shiller herein make the attempt of a new perspective on the free play of market forces.
In numerous examples, they point out how markets can render unwanted effects. The invisible hand described by Adam Smith is also based on the exploitation of psychological weaknesses of the other, on manipulation and deception in the free game of the market forces. “Phishing for Phools” is an immanent element of our economic system consequently. Phising means – derived from the Internet – to make people do things, which are in the interest of the fisherman (phisherman) and not in their own interest. Phishing, however, is not illegal, but renders negative effects for the one, who got “phished”. He or she is becoming the “phool” (fool) finally.
Such a perspective on the economic theory is new and disillusioning at the same time. Akerlof and Shiller are successful in explaining such unwanted phenomenona in simple language. They describe the evolution of the subprime-crisis in a very illustrative way, such as the junk bond-bubble around Michael Milken. They also provide a perspective on politics and lobbying and present examples of phishing in the pharma and tobacco industry. While reading the reader gets a vivid picture, on how prone oneself can be to such kinds of deceptions. Die stories, which we tell ourselves or which we are told, do influence our own decisions only all too often. Those decisions are often far from the ones of a rational “homo oeconomicus”. Akerlof and Shiller do assume a much more fundamental and far-reaching approach compared to the traditional Behavioral Economics.
The conclusions and recommendations for potential counter-measures are sobering simple. During the reading one can get the insecure feeling that many of such phishing-mechanisms are still flourishing in obscurity and, consequently, that the next pus blister in our economic and social system could soon burst.