Watkins described his predictions as seeming “strange, almost impossible”; but, remarkably, free markets, with their incentives to produce what people want, as long as a profit can be made, have made his predictions come true, and more.
However, free markets do not just deliver this cornucopia that people want. They also create an economic equilibrium that is highly suitable for economic enterprises that manipulate or distort our judgment, using business practices that are analogous to biological cancers that make their home in the normal equilibrium of the human body. The slot machine is a blunt example. It is no coincidence that before they were regulated and outlawed, slot machines were so common that they were unavoidable. In so far as we have any weakness in knowing what we really want, and also in so far as such a weakness can be profitably generated and primed, markets will seize the opportunity to take us in on those weaknesses. They will zoom in and take advantage of us. They will phish us for phools.
The word phish, according to the Oxford English Dictionary, was coined in 1996 as the web was getting established. That dictionary defines phish as “To perpetrate a fraud on the Internet in order to glean personal information from individuals, esp. by impersonating a reputable company; to engage in online fraud by deceptively ‘angling’ for personal information.” We are creating a new, broader meaning for the word phish here. We take the computer definition as a metaphor. Rather than viewing phishing as illegal, we present a definition for something that is much more general and goes much further back in history. It is about getting people to do things that are in the interest of the phisherman, but not in the interest of the target. It is about angling, about dropping an artificial lure into the water and sitting and waiting as wary fish swim by, make an error, and get caught. There are so many phishers and they are so ingenious in the variety of their lures that, by the laws of probability, we all get caught sooner or later, however wary we may try to be. No one is exempt.
This is an excerpt from Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof Robert J. Shiller. © 2015 by Princeton University Press. Reprinted by permission. George Akerlof is an economist and at the McCourt School of Public Policy at Georgetown University. Robert Shiller is a Nobel-prize-winning economist and a professor at Yale University.
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