Are You Being Phished?

Economists seem to think you are…

You may recall awhile ago I reviewed Fatal Equilibrium, a mystery book written by two economists back in 1985.

One of its most memorable characters was a woman professor from the Soviet Union, named Sofie Ustinov. Sofie, along with Henry Spearman, the detective in the book, was a member of the tenure committee at Harvard University:

Sofie Ustinov, the chemistry professor from the Soviet Union, doesn’t like the candidate’s paper about finding an “optimal number of brands.” Although she buys the “most expensive caviar-type” dog food for her pet, she believes that only one brand for all other commodities is quite sufficient.

This week, Robert Shiller, in The Nobel Prize winning economist who ate cat foodput paid to Sofie’s belief. Shiller’s cat too preferred caviar-type pet food. Upon tasting the ordinary fare in the expensive can, Shiller, understandably, felt “he had been ‘phished for a phool” – i.e., “manipulated into buying something.”

Of course, as an academic, Shiller couldn’t leave the matter there. He and another behavioral economist, George Akerlof wrote a book, Phishing for Phools: The Economics of Manipulation and Deception

This book appears to be a new and much broader take on Vance Packard’s The Hidden Persuaders, written in 1957. The two behavioral economists, however go far beyond that 1957 critique of product marketing in the US.

They argue that the global Financial Crisis of 2008 was a result of phishing of buyers of financial products such as mortgages, mortgage-backed securities, and other new kinds of derivative investments.

Economist Alex Tabarrok of George Mason University, a libertarian blogger, is rather of the opinion that the buyers phooled themselves.

However, as I see it, both of those things could’ve been true at the same time. Some of the phishers as well as their phishees were phools.

As anthropologist, Gillian Tett, implies in chapter three of her new book, The Silo Effect: the Peril of Expertise and the Promise of Breaking Down Barriers, those who created the silos (rigid bureaucratic divisions) within big banks for selling mortgage-backed securities seem to to have been phools.

They themselves were trapped in a phishbowl of their own making by the belief they were selling securities that were secure when they weren’t.

Truth is, the degree of cynicism abounding in these times makes me believe that even those of us who aren’t academics or economists know perfectly well that we are all being phished—all of the time.

The key question for Ivory Tower folks is: what the frick can we, the phishees, do about it?


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