Here’s my review, in Barron’s, of George Akerlof’s and Robert Shiller’s 2015 book, Phishing for Phools. (If you google my name and the title of the article – “Boudreaux” and “Ivory Tower Economics” – you should be able to get around the gate.) A slice – which appears after I explain that Akerlof and Shiller argue that the sweet aroma of Cinnabon’s baked goods and the orange brandname “Sunkist” are examples of businesspeople deviously tempting consumers to buy things that consumers really don’t want to buy:
Suppose it’s true, however, that modern markets are chock-full of devious phishermen preying successfully upon helpless phools who buy too many oranges in the belief that each has been “kist” by the sun. What’s to be done? The authors offer no specific proposals. Yet they clearly imply that more government regulation is a key part of the solution. At one point, for example, they advocate “more generous funding” for the Securities and Exchange Commission; at another, they speak approvingly of greater regulation of slot machines.
Solutions via government are based on a glaring fallacy: that people deficient in choosing for themselves in the marketplace will automatically shed those deficiencies once the government authorizes them to choose for others. Ironically, while citing slot machines, the authors make no mention of a related scam: government-run lotteries. The lotteries are perhaps the most obvious example of how those who are supposed to protect us from phishing scams themselves eagerly phish for phools.
Nothing, indeed, could be more phoolish than for ordinary men and women to submit to elites who are as confident as professors Akerlof and Shiller that they know best how other people should behave. Such elitism poses a far worse danger to society than entrepreneurs offering aromatic pastries for sale.
(I thank Barron’s Gene Epstein for inviting me to write this review.)