The ‘Phishing For Phools’ Book That Should Have Been Written

mark w. hendricksonBY MARK HENDRICKSON

“Phishing for Phools: The Economics of Manipulation and Deception,” is a trivial work from two bright, kindly, likable scholars, Nobel Prize-winning economists, George Akerlof and Robert Shiller.

The title effectively captures the tenor of the book. Akerlof and Shiller seem to want to revive the undeserved reputation of economics as “the dismal science” with their dark view of humans in market economies tending to fall into two classes—unscrupulous predators (phishers) or helpless victims (phools). Do sellers take advantage of asymmetrical information to the disadvantage of buyers in a free market? Of course they do, so caveat emptor. Do people always act rationally to acquire that which would be considered best for them by rational, objective, expert observers? Of course they don’t, but 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.

Akerlof and Shiller appear not to be conversant with Ludwig von Mises’ work on praxeology in the 1940s. Mises accomplished then what Akerlof and Shiller want now—i.e., to reconcile psychology to economics. Mises explained that people choose what they value more at a given moment than what they value less, whether that choice is wise or in the economic actors’ long-term best interest or not. In Mises’ paradigm, the economist observes that the actor makes choices based on the value hierarchy of the moment and leaves it to the psychologist to address why the actor valued A more than B.

Another early warning that something isn’t quite right about this book comes from the first paragraph of the brief synopsis posted on the website of the book’s publisher, Princeton University Press: “Ever since Adam Smith, the central teaching of economics has been that free markets provide us with material well-being…[but now Akerlof and Shiller] deliver a fundamental challenge to this insight, arguing that markets harm as well as help us.” This is another woeful little straw man. Amidst what the Bible calls the “tares and wheat” of this world inhabited by flawed human beings, of course economic activity will span the range from the beneficial to the baneful, the meritorious to the meretricious, and from the noble to the nefarious. It’s pure hype for the ad-writer to suggest that this book represents a “fundamental challenge” to Smith. Free markets have been a greater blessing than the ad-man gives them credit for, and those benefits are not negated or offset by some unscrupulous market actors’ abuse of freedom.

This book’s bias tilts toward more government intervention and control. In the preface of their 2009 book, “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism,” Akerlof and Shiller endorsed Keynes’ belief that a fairly high level of government intervention is necessary for optimal economic performance. They likened the economy to a home in which children are happiest when parents (the government) are neither too strict with their children, exercising ubiquitous and pervasive control, a la Marx, nor too laissez faire, as in a free market. The same idealistic view of a benignly paternalistic government carries over into “Phishing for Phools.” 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.

Perhaps the most “phoolish” belief held by gullible human beings is a faith that governments are endowed with superior virtue, wisdom, and understanding. Akerlof and Shiller reject the skepticism embodied in the phrase “government is the problem.” Because imperfect human beings are the problem, it follows that humans who wield too much power cause the biggest problems. I’m not referring here only to illiberal political regimes. Democratic governance often discombobulates economies, whether via bureaucratic malfeasance or due to governments intruding into formerly private areas of our lives (retirement, health care, education, wages, incomes, etc.) resulting in heavy national indebtedness, lack of savings, rapidly escalating prices, artificially induced unemployment, the institutionalization of poverty, and other undesirable consequences.

The authors undeniably are correct in pointing out how markets can be exploited for dubious ends. Indeed, one of the challenges of growing affluence will be the increased opportunities for phishers to part phools from their money, even as—lest we forget—the market produces more and more wonders to add variety to and enrich our lives (remember, “tares and wheat”).

Yes, fallible human beings will continue to make unfortunate, ill-conceived, short-sighted, phoolish, and occasionally self-destructive choices. What is needed, however, is not a hyper-regulatory nanny government to try to insulate us from our own shallowness and silliness—especially since the political class is all too skilled at siphoning wealth and freedom from the rest of us. The remedy for “phoolishness” lies beyond the scope of government. It depends upon a cultural consensus in favor of the inculcation of solid values and the development of self-respect, maturity, and character that has risen above obsessive self-indulgence. That is what “Phishing for Phools” should have focused on. Maybe Akerlof and Shiller’s next book will do that.

Editor’s note: This article first appeared at

The Moral Liberal Contributing Editor, Mark Hendrickson, is Adjunct Professor of Economics at Grove City College, where he has taught since 2004. He is also a Fellow for Economic and Social Policy with The Center for Vision & Values, for which he writes regular commentaries. He is a contributing editor of The St. Croix Review, sits on the Council of Scholars of the Commonwealth Foundation, and writes the “No Panaceas” column in the Op/Ed section of

Mr. Hendrickson’s Published books include: Problems with Pickety (2015), America’s March Toward Communism (1987); The Morality of Capitalism(editor, 1992); Famous But Nameless: Inspiration and Lessons from the Bible’s Anonymous Characters (2011); and God and Man on Wall Street: The Conscience of Capitalism(with Craig Columbus, 2012).

Mark Hendrickson’s Archives at The Moral Liberal.