Beware of Nobel Laureates Bearing Snake Oil

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The search for profits is good. Competition is good. Markets are good. This is obvious. Life is better, we have better cars, computers, toothbrushes, and everything else because of free enterprise. Where there is no free enterprise, no markets, no competition, no search for profits, people suffer. This is the too long history of economic management.

But the managers do not learn it seems, since they must have something to manage. It’s very hard for someone trained in the august halls of the world’s “greatest” economics departments to just say – “Hey, mostly this stuff works on its own.” No, that almost never happens. That would take too much humility.

(From Real Clear Markets)

Behind every capitalistic door they see a self-interested individual looking to swindle us. But most of us appreciate—and many around the world would give anything to be able to share—the “quiet desperation” of stores being open on Sundays, diners and restaurants open 24 hours, cars, computers and apartments getting better and better thanks to competition for our business.

Not only that, our gyms get nicer with better equipment year after year. Yet to Akerlof and Shiller, even gyms are out to get us. Since we “do not do what is really good” for us, gyms take advantage of our optimism by convincing us to buy workout plans that we don’t need.

Business owners who read Phishing for Phools will marvel at the business environment constructed by these two economists. While in the real world, store owners strive mightily to win and maintain business, these eminences are here to point out that all that’s happening is we’re being bamboozled into emptying our pockets. Readers are solemnly told of the “predatory” food retailer that is Cinnabon (apparently the ExxonMobil of the 21st century): “They carefully placed the outlets, with placards and mottos, in the track of people who would be vulnerable to that smell.”

Yes, businesses want to win our business. How tawdry, think Akerlof and Shiller. They believe that “modern economics inherently fails to grapple with deception and trickery.” Actually, it deals with both quite well. As consumers we know this. We take our business elsewhere if our needs are not met, or if we feel scammed. We also know this by virtue of the fact that we get up and go to work every day. We’re working so that we can buy—if it were all a swindle, we wouldn’t work in the first place.

To call Phishing for Phools a bad economics book is to give it way too much credit.

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