Oren Bar-Gill, On Phishing and Seduction: Law, Economics and Psychology in Consumer Markets (PolicyShop Blog, Oct. 5, 2015).
Abstract: In an important new book, Phishing for Phools, George A. Akerlof and Robert J. Shiller demonstrate, through a series of examples, the prevalence of manipulation (“phishing”) in consumer markets and in society more broadly. Manipulation is inevitable, they argue. It is the equilibrium outcome. High-road sellers will soon lose out to their low-road competitors and disappear from the market. You must manipulate to survive: phish or perish. As Akerlof and Shiller recognize, their book builds on a now rich literature in behavioral economics. Their contribution lies in the generality of their claims and in their ambition to present market failure – the bad phishing equilibrium – as the rule, rather than the exception. This short post does two things: First, it discusses consumer contracts as an example of phishing. Second, it considers different policy responses to the unhappy picture that Akerlof and Shiller so vividly paint.