Phishing for Phools
In their book “Phishing for Pools. The Economics of Manipulation and Deception” Nobel-prize-winning economists George Akerlof and Robert Schiller argue that in a free economy when opportunities appear, phishers are always there to manipulate and deceive customers. The book engagingly documents this phenomenon in the markets for alcohol, tobacco, gambling, food, houses, cars, pharmaceuticals, and on the financial markets.
Akerlof and Shiller identify two main sources of phishing: one is distorted information and the other is psychological bias. In the case of information pools, customers act on information that is intentionally crafted to mislead them. With psychological pools, the emotions of customers override the dictates of common sense, or their cognitive biases lead them to base their action on a misinterpretation of reality. Economists believe that regulation may help customers to avoid information pools but they are rather puzzled about how to reduce the impact of psychological pools.
Mindful consumption is one of the potential solutions to the problem of psychological pools. Developing a mindful consumer mindset and behavior seems to be a precondition for a well-functioning market economy. Otherwise, we will be forever fooled by phishers against our own best interests.