By George Akerlof and Robert Shilling

Phishing for Phools; The Economics of Manipulation and Deceipt
Part of the books by Robert B. Schiller series:
Editions:Hardcover: £ 24.95
ISBN: 9780691168319
Pages: 288
Paperback: £ 16.95
ISBN: 9780691173023
Pages: 288
ISBN: 9781400873265

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.

Reviews:Cass R. Sunstein on The New York Review of Books wrote:

"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. [...] 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."

Robert Harding on Financial Times wrote:

"Phishing for Phools has a host of examples — from used car dealers to credit card usurers, from junk food to junk credits — where the authors feel free markets exploit consumers’ lack of knowledge or self-control and turn them into the “phools” who fall for the sales ploys. This line of argument has a long history. Where Akerlof and Shiller break new ground is the sweeping application of the idea of the “phishing equilibrium” to finance. But for two such insightful economists, the concept is curiously under-developed. [...] The style of Phishing for Phools will be familiar to fans of Shiller’s work: light on jargon and pacy enough not to outstay its welcome. The authors tell some engaging tales, although usually at the remove of a fellow academic’s research. There is not much grime or anguish, dialogue or doubt. [...] They give their readers a breezy ride through some modern behavioural economics — and if they leave them hungry for a little more nutrition, well, what clever marketer does not?"

Florian Bon on LSE Review of Books wrote:

"The true quality of the book lies in the fact that it acts as a reminder of the deception mechanisms at play in our daily lives. However, the demonstration of this faces three major pitfalls. The first is that Akerlof and Shiller cover an extremely broad range of topics, which often prevents them from delving into details. [...] The second pitfall is that Phishing for Phools quite often generalises notions. The authors classify human beings, whatever their awareness or brainpower may be, into two distinct categories of phools: psychological and informational phools. [...] There is also no mention of the most recent technological changes. [...] Phishing for Phools is an entertaining book with valuable anecdotes and pieces of evidence on a subject every citizen should bear in mind, yet is not an indispensable read as most of its insights will probably sound extremely familiar. The reading will, however, prove useful as a vital reminder that capitalism in the twenty-first century is – more than ever – not a zero-sum game.

Carlos Lozada on The Washington Post wrote:

"Its examples are well-known and overly dissected cases of economic misdeeds. Advertising misleads consumers. Credit card firms and car dealers rip us off. Rating agencies and investment banks gave us the subprime loan debacle. Food and pharmaceutical companies finesse regulations to bring unhealthy products to market. Akerlof and Shiller once again rely on behavioral economics to illustrate their cases, but after more than a decade of 'Freakonomics'-style books peddling gee-whiz findings, the authors sound a little like the guys still enamored of the hipster trend long after the hipsters have moved on."

Mark Hendrickson on Forbes wrote:

"Phishing for Phools is a trivial work [...] the authors’ debunking of the classical economists’ theoretical construct of “homo economicus”—the idealized, cool, calculating, profit-maximizing, always-rational human—is unnecessary. That straw man bit the dust generations ago. [...] This book’s bias tilts toward more government intervention and control. [...] The prevalent assumption is that humans in the marketplace are phishers or phools, whereas humans working for government are cut from a purer ethical cloth."

6-Minute Intro Video to the Book

TED-Talk by Shiller on the Book

And if you have even more time, you may want to watch this 17-minute talk or this 50-minute lecture by George Akerlof on the book

Further Reading

About George Akerlof and Robert Shiller

Akerlof and Shiller

Picture from

George A. Akerlof is University Professor at Georgetown University and the winner of the 2001 Nobel Prize. Robert J. Shiller is Sterling Professor of Economics at Yale University, the winner of the 2013 Nobel Prize in economics, and the author of the New York Times bestseller Irrational Exuberance (Princeton). Akerlof and Shiller are also the authors of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Princeton).

Table of Contents

  • Introduction

Part One - Unpaid Bills and Financial Crash

  1. Temptation Strews Our Path
  2. Reputation Mining and Financial Crisis

Part Two - Phishing in Many Contexts

  1. Advertisers Discover How to Zoom In on Our Weak Spots
  2. Rip-offs Regarding Cars, Houses, and Credit Cards
  3. Phishing in Politics
  4. Phood, Pharma and Phishing
  5. Inovation: The Good, the Bad, and the Ugly
  6. Tobacco and Alcohol
  7. Bankruptcy for Profit
  8. Michale Milken Phishes with Junk Bonds as Bait
  9. The Resitance and Its Heroes

Conclusion and Afterword

  1. Examples and General Lessons; New Story in America and Its Consequences
  2. The Significance of Phishing Equilibrium