“You mean on top of everything else this ship is rigged?” –Stan Freberg Presents: The United States of America Volume One: The Early Years
By Lambert Strether of Corrente.
I have a pile of books I’ve more or less finished, and since book reviews — along with
Christmas Xmas holiday gift-giving ideas — are a sadly neglected aspect of reader service at Naked Capitalism, I’m going to review a few of them in the coming days and weeks. The reviews will be in no particular order, but I’m going to start with George A. Akerlof and Robert J. Shiller’s Phishing for Phools: The Economics of Manipulation and Deception, mostly because the ideas of “phishing” and “phishing equilibrium” have a lot of explanatory power, and readers might like to be able to use them right away, perhaps even around the Thanksgiving table, when that pesky relative goes into a “because markets” conversational doom loop. Akerlof and Shiller’s book, and I mean this as a compliment, is so darn readable that it’s almost unnecessary to explicate it; so I’m going to quote great slabs on phishing and the phishing equilibrium. Then I’ll offer a few critiques of the sort that any lay reader might make, and conclude.
Here’s how Akerlof and Shiller define “phishing” (page xi):
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.
Another example that might occur to NC readers is Obama’s HAMP program; billed as a program to help homeowners (the lure) it was actually designed, in Tim Geithner’s notorious phrase, to “foam the runway” for the big banks, and the homeowners who actually got sucked into it were, in the main, harmed rather than helped. Leading us to what we might call an operational definition of phishing (page xii):
We anticipate that this book will be unpopular (to say the least) with those who think that people all but invariably make the best decisions for themselves. Who are Bob and George, they will ask, to say that individual people are not themselves — always and invariably–the best arbiters of the decisions that affect them? … We do not have to be presumptuous to see that people are making such [phoolish] decisions. We know because we see people making decisions that NO ONE COULD POSSIBLY WANT [all caps in the original].
For example, the cancer from the cancer sticks that R. J. Reynolds, et al., purvey is a decision that “NO ONE COULD POSSIBLY WANT”; the operational definition of a phished-for outcome. But the acolytes of Edward Bernays — and their owners — have done quite well with their artificial lures. (I’ll have more to say about Akerlof’s definition of “phishing” below.)
Here’s how Akerlof and Shiller define “phishing equilibrium” (page 1). I said I’d quote great slabs and I meant it:
The fundamental concept of economics is … the notion of market equilibrium. For our explanation, we adapt the example of the checkout lane at the supermarket. When we arrive at the checkout at the supermarket, it usually takes at least a moment to decide which lane to choose. This decision entails some difficulty because the lines are — as an equilibrium — of almost the same length. This equilibrium occurs for the simple and natural reason that the arrivals at the checkout are sequentiallly choosing the shortest line.
The principle of equilibrium, which we see in the checkout lanes, applies to the economy much more generally. As businesspeople choose what line of business to undertake — as well as where they expand, or contract, their existing business — they (like customers approaching checkout) pick off the best opportunities. This too creates an equilibrium. Any opportunities for unusual profits are quickly taken off the table, leading to a situation where such opportunities are hard to find. This principle, with the concept of equilibrium it entails, lies at the heart of economics.
The principle also applies to phishing for phools. That means that if we have some weakness or other — some way in which we canbe phished for fools for more than the usual profit — in the phishing equilibrium someone will take advantage of it. Among all those business persons figuratively arriving at the checkout counter, looking around, and deciding where to spend their investment dollars, some will look to see if there are unusual profits from phishing us for phools. And if they see such an opportunity for profit, that will (again figuratively) be the “checkout lane” they choose.
And economies will have a “phishing equilibrium,” in which every chance for profit more than the ordinary will be taken up.
I don’t see how there’s any way to read this other than as a foundational assault. And it’s on page 1 (PAGE ONE!!!). This really is, at least in academic terms, an assault on the Winter Palace (or, dare we say, an attempted paradigm shift). Here’s an example of the principle of equilibrium expressed in the classic joke:
The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!”
Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”
However, if we think in terms of phishing, we might consider that the bill really was there, but was thought to be counterfeit; that is, a phishing failure, rather than a market failure (although, as we all know, the market can never fail; it can only be failed). Here, I wish I could add a clip from the classic Howard Hawks screwball comedy His Girl Friday, where Cary Grant phishes Ralph Bellamy by giving him $450 to give to Rosalind Russel, and then pulls a few strings to have Bellamy arrested and jailed “for passing counterfeit money,” an outcome NO ONE COULD POSSIBLY WANT — except Grant, who is Bellamy’s rival for Rosalind Russel’s affections. Clearly Grant, who for whatever reason has a stack of funny money ready-to-hand, has a different model of the world from Bellamy’s — and the two economists’ — a world much more like Akerlof and Shiller’s.
Not content with quite exploding market equilibrium, Akerlof and Shiller also undermine the conventional wisdom in two other ways. The first is by undermining Samuelson’s notion of “revealed preferences.” Pages 170-171:
A common precept of standard economics is that people only make the choices that maximize their welfare. This assumption even has a fancy name: “revealed preferences”: that people reveal what makes them better off by their choices. Such a concept, of course, is exactly at odds with our concept of the difference between what people really want (what is good for them) and what they think they want (their monkey-on-the-shoulder tastes).
Cancer sticks, being addictive, are a classic example of a “monkey-on-the-shoulder” instance of phishing. NO ONE COULD POSSIBLY WANT the cancer. But the monkey wants the fix.
The second is by introducing “a new variable.” Pages 172-173:
We have obtained this greater generality [as opposed to lists of cognitive flaws beloved by behavioral economists] by ourselves giving a picture to the mental frames that inform people’s decisions. We have called them “the stories people are telling themselves.” This description… enables us to see, entirely naturally, how most phishing for phools occurs. This phish is a way to get someone to make a decision that is to the benefit of the phisher, but not to the benefit of the phool. Since our decisions are usually based on the stories we are telling ourselves about our situation, this gives us a transparent characterization of motivation that allows us to understand how most phishing for fools happens. It also brings into economics a new variable. That variable is the story that people are telling themselves.
The Marlboro man would be one fine example of an instance of this variable; and since thousands died at least partly as a result, this story cannot be said to have no economic impact. People who’ve been doing political blogging for a long time know another, called “the narrative.”
It’s important to recognize how bold this claim is. The first Google hit for “economic variables” is a PowerPoint used at Stanford. Examples of economic variables are real GDP, the unemployment rate, the inflation rate, the interest rate, the level of the stock market, and the exchange rate. So when Akerlof and Shiller say that “the stories we tell ourselves” are an economic variable, they are saying stories are, analytically, on a par with, say, the unemployment rate. (And looking at the prevalance and impact of stories like, say, “Government is like a household, and so we must _____,” it’s hard to argue otherwise.)
Critique of Phishing for Fools
As the Acknowledgments show (page 175 et seq.), Phishing for Fools‘ smooth surface is carefully burnished to resist assault. (One might also wonder if the plethora of examples was designed not only to entice the civilian reader, but to distract the professional one.) And since I don’t even play an economist on TV, I’m hesitant to proffer a critique. That said, here are four points that I think should obvious enough to most readers, so I’ll lay them out here so we can go on to deeper issues.
1. The Definition of Phishing is Weak. Look again at the “definition” under the “Phishing” subhead. You’ll see what I can only call weasel words like “creating” (not “have created”?), “something,” “metaphor,” “about getting,” “about,” “about.” But what I don’t see, can’t find, and a check of the pages indexed under Phishing does not reveal to me is a formal definition. That’s odd, and all the more odd because Shiller (with Akerlof), in a 2013 PowerPoint presentation at Yale pleasingly titled “Neoclassical Finance and Reality,” does give a definition:
- For us, phishing is different: sophisticated, professional behavior of large organizations that is designed to exploit either psychological or informational weaknesses of consumers.
(This is bullet two of the slide. Bullet one is the OED material; bullet three is the angling with lure metaphor.) Phishing for Phools, for whatever reason, elides the institutional focus demanded by “large organizations.” I think that’s unfortunate, since the elision makes it more difficult to connect phishing and phishing equilibria to important work like William R. Black’s notion of accounting control fraud, which fits the above formal definition exactly, but not the definition in the book.
2. A Phishing Typology is Absent. As many of the reviewers complain, Phishing contains many, many examples. My view is that some of the examples are clearly phishing, others are simply sharp practice, and others are examples subsumed under Miss Marple’s all-purpose gerund phrase: “Human nature being what it is.” The boundaries of market behavior to be deemed phishing seem quite fuzzy to me, and the lack of a formal definition doesn’t help. What I think would help — consumers, especially, but also economists and, dare I say it, law enforcement — is a typology: The financial equivalent of design patterns. A Ponzi scheme would be an example of one such pattern. Another example: Three-card monte, the confidence trick. Somewhere (can’t find the page!) Akerlof and Shiller describe the game, but only in terms of the dealer (the phisherman) and the mark (the phool). However, in “real life,” the players are: The dealer, the mark, the shills (confederates of the dealer, who rope in the mark), and a lookout, who (the mark having just been successfully phished) seemingly spots the cop on the beat, whereupon the dealer pockets his cards, folds up the cardboard box on which the cards were dealt, and silently steals away. The cop is, of course, also a player, having been handed a twenty to let the game proceed. Discussing the game, Akerlof and Shiller omit the cop; see above on the lack of institutional focus. And note also that if the cop is omitted, an essential feature of the design pattern is omitted, and a successful account of the game cannot be given.
3. A Commitment to Equilibrium is Unmotivated. Here I will speculate even more freely than usual. Akerlof and Shiller’s metaphor of the “checkout line” is powerful, but what if “the economy” is less like a checkout line than it is like the weather? That is, what if the economy is an ever-changing, never-changing chaotic system whose behaviors converge on strange attractors, and in which multiple equilibria are possible? (There is probably an entire school devoted to this model, but, like I said, I’m not a professional economist.)
4. Evil is Not Necessarily Evenly Distributed. Akerlof and Shiller acknowledge the reality of goodness in their Afterword:
This book may be about manipulation and deception, but we must acknowledge that there is also a great deal, and we repeat for emphasis, a great deal of goodness in the world. It is full of the heroes that we described in Chapter 11. A large number of such generous heroes underlie this book
(I think Graeber would call this heroism an example of everyday communism). And I agree with them! However, it must also be conceded that the phisherman, if not evil, are at least ungood. But Akerlof and Shiller seem to regard the ungood as randomly distributed throughout “the economy.” But what if — again, speculating very freely — “the economy” were organized rather like a self-cracking tower, in which forms of evil become more and more refined while being processed toward the top, and then extracted? (In the same way, one might imagine, the prolific use of lie detectors at intelligence agencies must select for lying sociopaths and filter them upward, all other things being equal, given that such persons will be disportionately able to pass the tests.) If that’s true, than phishing “rigs” the game in a way for which Akerlof and Shiller cannot give an account (and here again we see how the lack of an institutional focus may trip them up).
On these notes of gross speculation I must close. I think Phishing for Phools both dulce, since it’s a beautifully written, fun, and easy to read, and utile, in that it tends to undermine the basic tenets of economics as currently practiced — a heroic and excellent act.
I suppose I should have done a review of the reviews, or even a review of the reviewers, but all that material ended up in these notes.
 Alex Tabarrok of the squillionaire-endowed Mercatus Center engages with “phishing equilibrium” by the simple strategy of pretending it’s not there, which makes me think it’s the most powerful idea in the book, while complaining at length of the books “tired” and “very old” examples. Odd, that; I wasn’t aware that fraud, as a concept or as a practice, had a sell-by date. Another example of neoliberal economists enforcing rules on others they grant themselves impunity for, I suppose.
 Unlike the Economist, which writes that “[i]t mostly consists of other peoples’ research, helpfully boiled down into titbits that are perfect material for cocktail-party chatter.” Were this true, one might regard it as pretty rich that one of the anonymous clever (wannabe) Brits at the Economist complains about others helpfully boiling material down to tidbits for the chattering classes. These guys thought they had a monopoly?
 Even sympathetic reviewers — for example, at the London School of Economics — seem to miss the fact that the book is an assault on many of the foundational assumptions that undergird economics as it is currently taught and practiced:
Akerlof and Shiller give a detailed and highly accessible account of the short-sightedness of the free market equilibrium thesis as a putative Pareto optimal situation maximising the economic welfare of everyone.
That’s not quite it; Akerlof and Shiller are not arguing that the [genuflects] free market equilibrium thesis is “short-sighted”; they’re arguing that it’s wrong, that it’s a bad model, and its badness has real policy implications.
Perhaps the assault is so obvious that, in practice, it’s subtle; or only lay readers of the sacred text can see it, as opposed to the ordained.
 The Washington Post reviewer, perhaps unsurprisingly, since WaPo lives in a world where economists exercise real power, recognizes Akerloff and Shiller’s intent:
[They] aren’t just saying that emotions distort economic outcomes or that free markets feature imperfections that devious actors exploit at the expense of consumers. No, they are arguing that such exploitation is inherent to the system, that the equilibrium economists worship — whereby any opportunities for unusual profits are quickly seized and taken off the table — also means that chances to take advantage of our weaknesses, to counter our true preferences, are soon identified and abused.
The mechanism for this abuse is “phishing.”
However, even they miss out on “phishing equilibrium.”
 Making it all the more remarkable, or not, that “nudge theory” policy entrepreneur Cass Sunstein ignores it in his review. Having failed to mention “phishing equilibrium” at all, Sunstein concludes:
In his great marginalia to Sir Joshua Reynolds’s Discourses, William Blake wrote, “To Generalize is to be an Idiot. To Particularize is the Alone Distinction of Merit.” Blake exaggerated, of course, and Akerlof and Shiller are the furthest thing from idiots; their extraordinary book tells us something true, and profoundly important, about the operations of the invisible hand. But the largest views can lose focus. If we seek to understand how the invisible hand goes wrong, and whether some kind of intervention is required, there is a lot to be said for specifying mechanisms and testing concrete hypotheses. If we do that, we might go far beyond a mere list, and we will find phishing of many different kinds.
Page one, dude. Page one.
 Snappy dialog:
BURNS (to Louis) I need four hundred and fifty dollars in counterfeit money. You know where I can get it?
LOUIS It’s awful funny — I happen to have some on me.
 The literature of confidence games affords a virtual argosy of such patterns. In the realm of psyschology, see Eric Berne’s Games People Play.
 Graeber’s everyday communism, from “On the Moral Grounds of Economic Relations” (PDF):
Whenever action proceeds “from each according to their abilities, to each according to their needs”—even if it is between two people—we are in the presence of “everyday communism”. Almost everyone behaves this way when collaborating on a common project. If someone fixing a broken water pipe says “hand me the wrench”, their co-worker will not usually say “and what do I get for it?”, even if they are working for Exxon-Mobil, Burger King or Royal Bank of Scotland. The reason is efficiency (ironic, given the conventional wisdom that “communism just doesn’t work”): if you want to get something done, allocating tasks by ability, and giving people what they need to do the job, is the most effective way to go about it.
I’m glad that Princeton University Press did the right thing when composing the footnote section; they included running footers like “NOTES TO PAGES xv-1.” Thank you!
It’s almost like economists forgot that the word “exploit” (also itself a conveniently contemporary computer security term meaning vulnerability) commonly thrown around as a perfectly normal verb in the context of business, has an extremely negative connotation and, in fact, accurately represents what really happens.
Back in the 80s, when greed became good, exploit became a virtue. That is how the term is used in Neoliberal business and economics.
As I am getting older and more decrepit by the second, I will save my fingers the effort of keystroking and just paste my previous comment….
October 13, 2015 at 10:57 am
“Casual evidence and personal experiences suggest that banks and intermediaries tend to distort their customer choices towards high-fee products or products they have on their shelves and want to get rid of. For instance, one of the authors of this column once asked his own bank for advice on how to invest a sum of money. He was recommended to put all in a bond issued by Cirio – a company that soon after would have gone bankrupt. Cirio was exposed to the bank and the bank was also Cirio’s advisor in the bond placement. Later it was discovered that the money from the placement was meant to repay first the loan to the bank. No doubt, the advice was meant to benefit the bank not the customer.”
Wicked Italian banks – I’m glad our good old American banks aren’t like that….
Akerlof and Shiller believe that once we understand human psychology, we will be a lot less enthusiastic about free markets and a lot more worried about the harmful effects of competition. In their view, companies exploit human weaknesses not necessarily because they are malicious or venal, but because the market makes them do it. Those who fail to exploit people will lose out to those who do. In making that argument, Akerlof and Shiller object that the existing work of behavioral economists and psychologists offers a mere list of human errors, when what is required is a broader account of how and why markets produce systemic harm.
Akerlof and Shiller are aware that skeptics will find their depiction of human beings as “phools” to be inaccurate and impossibly condescending. Their response is that people are making a lot of bad decisions, producing outcomes that no one could possibly want. In their view, phishing for phools “is the leading cause of the financial crises that lead to the deepest recessions.”
Akerlof and Shiller make related arguments about the marketing of pharmaceuticals (with reference to the Vioxx scandal), the success of Facebook (which, they argue, is a mixed blessing for young people in particular), the sale of junk bonds, and the democratic process. With respect to the latter, they are concerned about a clever electoral strategy commonly used to hook “phishable voters.” With this strategy, politicians endorse policies that “appeal to the typical voter on issues that are salient to her, and where she will be informed,” while also adopting a “stance that appeals to donors” on issues on which the typical voter is uninformed. Because of the largely unregulated system for corporate donations, lobbyists can enjoy spectacular returns, as when they give money with the hope of extracting votes, or favors, on high-stakes issues (such as regulation of savings and loan companies or highly technical tax questions) that are too complex to attract the attention of most voters.
From all of these examples, Akerlof and Shiller offer a general account, which is that phishing occurs because of the “manipulation of focus.” Like magicians and pickpockets, phishermen are able to take advantage of “an errant focus by the phool.” Indeed, the idea that free markets work, and that government is the problem, “is itself a phish for phools,” a kind of story, one that does not capture reality. With respect to Social Security reform, securities regulation, and campaign finance reform, the United States has suffered from false and skewed claims that fail to account for the fact that free markets make people free not only to choose but also “free to phish, and free to be phished. Ignorance of those truths is a recipe for disaster.”
NY Books is Sunstein; see note . I think Sunstein, as a behavioral economist, wants to reduce the phishing to its psychological dimension. But he misses the notion of phishing equilibrium, a phrase that does not appear in the article.
Free Marketutopians – free will(TM) – includes the argument that to deny an entity the rights of becoming a victim – is – a diminishment of basic intrinsic human [including natural law entities] rights…..
Binary [barter] atomatistic optics concocted out of antiquity ad hoc with a dash of esoterica….
To infringe on one side of the balance sheet is to negate the force of the other…. and presto equilibrium(TM)…
Skippy…. Without it we would all be flung into the far reaches arm chair thunkit…. no gravity to anchor and no pathological paranoia to kettle the great unwashed….
“Those who fail to exploit people will lose out to those who do”
The not so funny thing about this statement is that it’s pratically viewed as physics like science
These ‘stories’ that Akerlof & Shiller talk about as an economic variable are ‘mindsets’. eg. work by Dweck (sociology). Except in Akerlof & Shiller’s case it is a ‘temptation mindset’.
So what I cannot square is that Akerlof is Yellin’s husband.
Well, it’s not like any of the venture capitalists floating on the flood of QE are phishing… Or any of the startups… Or any of the unicorns…
Well it becomes clear when you realise that her (the Fed’s) raison d’etre is to provide the rod, reel, & line.
Thanks for providing their clearer definition of pfishing:
Couldn’t that be used to describe most marketing, PR and political activities, which are fundamentally all about “spin” with the goal of manipulating pfools like us–to buy something, to vote (or not vote) for someone, or to believe a certain narrative of the latest news event, so that we will trust/distrust/respond/not look in some other direction? This all look like phishing to me.
It extends far beyond economics.
This excellent review reveals how much of modern “advanced” society is based on the phishing tools of deception and manipulation–particularly at the top. The higher up one “ascends”, the more these skills become a required feature.
There are exceptions–but they prove the rule.
Hence the importance of, for example, the ongoing PE series, showing how crucial it is for people to get involved in requiring, loudly, that changes be made to the existing system. The phools have to decide to be phools no more, and must let the phishers know they are no longer playing long with this game.
The “stories we tell ourselves” — for some definition of all those four words — are a new variable.
* * *
And on the definition; I thought it was curious that a definition so clear wasn’t in the book.
A cool place to take a look at this outside economics (while still being about economics, really) is Lauren Berlant’s Cruel Optimism. Affect theory gets wacky but i find stuff in that book really explanatory especially with regards to the cultural dimension of these sorts of things (the like, meta-PR).
Hehehe your joke about the $20 bill reminds me of an incident many years ago when I thought I had found a $20 bill on the sidewalk in New York. I squealed and picked it up and unfolded it to discover it was an ad for a hair salon. A guy walking in front of me turned around and told me, quite gleefully, that he had found the fake money before me and decided to drop it back on the ground to watch the next passerby get fooled. I was so disappointed and angry that I vowed never to patronize that salon (not that I was ever likely to go there–I HATE having people cut my hair). I thought at the time it was a really stupid way to advertise a business–to excite and then disappoint some random stranger on the street.
It’s a pretty good joke, but I like the “assume a can opener” one better.
Lambert, in regard to the absence of a typology of phishing, your mention of design patterns reminded me of the excellent darkpatterns.org put together by UX designer Harry Brignull in the U.K. Admittedly, his patterns capture a very narrow subset of phishing by interface/user experience design, but he does a great job of creating a useful and thoughtfully designed typology. I mean, who can forget what a “Roach Motel” or “Privacy Zuckering” are once they’ve been exposed to the concepts? I can’t help but think this is exactly the sort of approach you are looking for here.
Actually the example of the checkout line fits the chaotic model. You choose a line by its length. However, you have know way of knowing if one of the people in the line with only three items will have a problem that will require the manager to come to the cash register to decide some deep legal issue with the buyer that eventually leads to runners going back to the aisle where the item was picked up to check for the pricing of every item there and bring back the one that has an accidental lower price. Meanwhile the people who came into the line after you are picked off by cashiers from another line that is not experiencing problems or a line that has just opened.
This is exactly why the new queuing concept was invented, where there is but a single line served by multiple cashiers. The next person in line is served by the next available cashier.
Leading to that wonderful contortion of English and the single thing I most miss about Borders Books: “Can I help who’s next?”
The equilibrium idea is also undeveloped, for failing to account for stable and unstable equilibrium scenarios. The latter would lead to chaotic attractor approximations Lambert alluded to.
Another factor to consider is the phoolish narratives the phishers tell themselves, to rationalize their exploitation, much like slave trading companies and misogynists use “lesser human” rationales etc. to justify cheating others.
This is a great overview of an important subject. Thank you for your efforts, Lambert!
Excellent thinking material many thanks. To the three card monte example I propose that the media plays the part of shill and lookout both giving cues that the game has become too obvious combined with NPR style baby talk to feign complexity where there is only a shell game. Haven’t figured who plays the cop… Back in the “free market” of seattle so it will unquestionably be useful! Thinking of some people I’d get it for but I won’t kindle and they won’t paper. Speaking of Mrs. Marple I picked up a dollar paperback by Agatha Christy at the ferry terminal and read it while waiting. I read a couple hours a day of NC etc… but noticed a weird sort of brain reaction to reading paper that was confusingly fatigue combined with a real relaxed almost high feeling I don’t get from internet reading. Does anyone recognize that feeling and have any thoughts about it?
Using the internet / other devices releases dopamines, endorphins, etc.
Similar to other addictions.
This could impact energy levels as well as “high” sensation.
I can imagine various health implications.
I saw a doctor talking about this on My Digital Addiction documentary by Phil Lavelle.
Some experts suggest it’s an issue in relation to only specific kinds of internet activity, e.g. twitter, text messaging, porn, games.
Here’s a particularly interesting article about recently-discovered dopamine/endorphin loops and how this plays out in our use of texts, twitter, google, etc.
There a lot of charm in these exposes, however, the public might be better served by these characters getting a backbone and calling for the closing of all duly recognized “Economics” Departments in the US, in favor of a reopening the “How nothing is for Free except the Sun and every day we will prove and research every instance where it seems to be not the case’ Departments. Good bless America, and may the President pardon all the turkeys who grew up taught by meritritious fools, for all time already served in ignorance.
It would be nice if there were a school of economics that was founded on the chaotic nature of real world economics. I’ve been looking for it for years. There is a little here and there, the best that I know of being the non-linear dynamical systems of the limits-to-growth studies.
In addition many people, e.g., George Soros, recognize that boom and bust markets are a non-linear, chaotic type phenomenon. But what is needed is, as you say, “a school” . In particular, the phenomena described by Akerlof and Shiller are a natural part of a dynamical system with feedback loops, not a classical equilibrium system. In fact, there is a constant and somewhat unpredictable churn, never an equilibrium (except in a dead market, like the equilibrium of a dead person).
Strong regulation and enforcement is the key to minimizing the scams. The only problem is that it is sometimes not easy to distinguish between a scam and a creative new idea of solid economic value. Often it depends on how the idea evolves. Bitcoin?
The classic samurai story line involves a sword master weary of killing, who upon deep reflection realizes that all his duels were unfair, due to the perfection of his art, he had inadvertently become a murderer.
He tried to make things otherwise by using only a wooden sword.
Nothing changed, he now understood that even with a wooden sword, he would win every fight.
The samurai decides to retire and practice calligraphy and write poetry…
There used to be a premium on businessmen with strong ethics, men and women who would not dream of taking advantage of a customers vulnerabilities.
Big money knows how to phish for candidates who, mostly, not entirely out of youthful naivety, will enthusiasticly embrace their part in the companies plans to defraud and cheat their customers.
At some point, anybody might start paying attention to the moral weight of their actions, and some people even become embarrassed at the thought of making a living out of cheating vulnerable people out of their money.
The problem with coming to this realization is that your boss will know it before you do because he sees you trying to “use a wooden sword” and you either get fired, or, if you are a great salesperson, asked how much it would cost to pay off your conscience.
In our country, at this time, hardly anybody can make a living out of calligraphy, or writing poems.
The classic samurai story is basically [lambert blushes modestly] how I feel about comments. Think I’m a little sharp now? You should have seen me back in the day, a decade or so ago :-)