Updated: Apr 1, 2020
… many problems come from the nature of the economic system itself. If business people behave in the purely selfish and self-serving way that economic theory assumes, our free market system tends to spawn manipulation and deception. The problem is not that there are a lot of evil people. Most people play by the rules and are just trying to make a good living. But, inevitably, competitive pressures for businessmen to practice deception and manipulation in free markets lead us to buy, and to pay too much for, products we do not need; to work at jobs that give us little sense of purpose; and to wonder why our lives have gone amiss. …We write this book as admirers of the free-market system, but hoping to help people better find their way in it…Free markets are products of peace and freedom, flourishing in stable times when people do not live in fear
(Akerlof and Shiller, 2015, p. vii)
The title of the Akerlof and Shiller (2015) book points the direction: “Phishing and Phools: The Economics of Manipulation and Deception,” and uses the well-known tune about “How much is that doggie in the window…” to point to how, in a free to choose, free no-holds-barred capitalism, we are constantly stirred to buy, buy, and buy some more, whether it is good for us (and for capitalism in general) or not. It is no small wonder that most Americans would have difficulty finding $400 in cash for an essential need: The Market is emptying their pockets, inducing expenditures often not needed?
As in Metaeconomics, the contention is that the Friedman call for “free to choose” misses the point due to not seeing the need to temper and condition the Market, working to do the right (moral, ethical) thing, and that Phooling is not part of a truly Moral Community… widely embraced across all people… perhaps even suggesting the need for Government nudging and controls. It is seemingly about walking (and talking) softly and carrying a big stick, and using the stick when necessary, if nudging does not work to restrain both Phishing and Phooling.
Metaeconomics, too, is also about seeing people as fundamentally not evil, but very much seeing that the Market-failure in Self-discipline, Self-control to Temper ones more primal Self-interest could lead to being Phools. Government, if representing a truly Moral Community, could also work to inform and otherwise nudge consumers to be less Phoolish.
As Akerlof and Shiller (2015) explain, Phishing is “about getting people to do things that are in the interest of the phisherman, but not in the interest of the target… a phool is someone who, for whatever reason, is successfully phished.” Phishing, too, is about stirring that more primal, hedonistic, egoistic tendency… with Phishers often working from a less than ethical, less than Moral Community frame, working to nudge, perhaps lure, the Phool onto their Self-interest only, especially hedonistic path. As Akerlof and Shiller (2015) point out, the Phool tends to buy things not really needed (“How much is that doggie in the window…” an example illustrating the fact of Phishers all around us, all the time!), strictly in their hedonistic Self-interest, and, as a result, not having enough wealth left to buy the really important things, like a reasonable retirement, or health care, reflected in their longer term Other-interest. In the case of retirement, it would be the shared Other-interest with a significant other during the “Golden Years,” and, perhaps the shared Other-interest with children who will not have to bear the financial burden of taking care of the person in retirement, if that person has the Self-discipline, Self-control to not be a Phool. Also, saving for retirement reduces the draw on Government; balance in spending in the Self&Other-interest, rather than being a Phool, means less need for Government support in the retirement years.
For the economics trained reader, but anyone can follow along (and learn some economics in the process!), we can use the indifference curve figure in Phools 1 to help make specific sense of the contentions. Regarding retirement, think of Good e as a bundle of Retirement Content Goods, as the bundle of goods bought with more consideration for the shared Other-interest, i.e. paying attention to a Moral Community which suggests perhaps living a more modest life style; reasonable saving levels, including perhaps buying of mutual funds, bonds, and real estate; wishing to reduce the burden on Government and/or the family, on other taxpayers (especially the younger taxpayers), including one’s own children, when one retires, as a partial list, by saving more money. In turn, think of Good d as composed mainly of (but not necessarily exclusively) the kind of goods the Phishers stir the Phools to buy, things you just “have to have” …that boat, cruise in the Caribbean, fancier clothing, houses and automobiles …. due to Phishing style promotions, and often even using deceptions and manipulations to stir the hedonistic drives which are so primal, based in the Self-interest (historically, many TV ads come to mind, in the “infomercials” as well as during regular, hour after hour, commercials that appeal to base instincts like being macho, sexy, healthy, a fast and daring driver, “cool”, among others; social media is evermore the place for the Self-interest Framing, which is also likely driving the rapid increase in narcissism).
Both Good d and Good e contribute to Self&Other-interest, simultaneously; both goods are nonallocable, nonseparable in contributing to both interests, often done unconsciously within the Own-self, albeit in that case, the Self-interest will likely win. Notice how in Phools 2 the Value works to Temper the response to the Price of the Money Valued Goods. The issue is about consciously, mindfully choosing the best balance, with Value perhaps overriding Price, while applying the self-discipline, self-control to make it happen. It is understood that being very Phoolish puts one on the Self-interest path 0G (or, perhaps even in the irrational zone above path 0G, even the vertical axis!), choosing point A type outcomes.
In contrast, Metaeconomics (as do Akerlof and Shiller, 2015) points to a more reasonable path 0Z: It is about doing the best thing, the right thing. Path 0Z is influenced by the shared Other-interest, which is often Priceless, as in the idea of a Value V of non-money valued goods not being equal or even commensurable with the Price P of money valued goods. Yet, it is internalized, as it is not about what others want. It is about what you want, within one’s Own(Self&Other)-interest. The Moral Dimension, Moral Community, and the Ethical System conditioning and tempering the Market is represented on the Other-interest path 0M.
Metaeconomics, then, to emphasize, points to the challenge of Self-discipline, Self-control to stay away from the Self-interest only path 0G. Using the retirement case, it brings reason to the matter of retirement, while not sacrificing too much in the way of Self-interest represented in current style and level of consumption. It allows for "livn now," at a reasonable level, also Valuing things that have Value (like family) not convertible into Price. It is about working for balance, sacrificing a bit in both the domain of Self-interest and in the Other-interest, while maximizing the joint Self&Other-interest point somewhere on path 0Z. We are no longer Phools: At minimum, our Phoolish behavior has been Tempered a bit, on 0Z, at point B.
Tomer (2017a, pp. 144-145) points to how Dual Interest Theory (he refers to it as Dual Motive Theory, but, for practical purposes, they are the same thing, thinking here of the Interests leading to Motives) and the notion of Phishing for Phools from Akerlof and Shiller (2015) actually complement each other. Tomer (2017a, p. 144) suggests that the Dual Interest/Motive Theory of Metaeconomics “leads us to the conclusion that economic decision-makers are to blame for the outcomes that are not good for us.” The focus of Phishing for Phools is somewhat different, focusing on “how strong market competition can lead businesses to take advantage of their customers… customers who are more to blame because they have a strong tendency to make bad decisions for reasons related to their emotions, their cognitive biases, or their possession of misleading or false information (Tomer, 2017a, p. 144).” The potential complementarity arises from Phishing for Phools not recognizing “that business decisions are too often made in an excessively self-interested manner and that such businesses are often quick to take advantage of customer weaknesses…” and Dual Interest/Motive Theory not adequately recognizing “customers’ poor decision-making and customers’ inability to understand or appreciate what is really good for them.” So, Tomer (2017a, p. 145) suggests a productive integration, and that “these two perspectives should both be an important part of behavioral economics – a behavioral economics that aspires to have humanistic values, and that aspires to make the economy function more humanely.”
Actually, it is easy to differ with the contention that Dual Interest Theory does not recognize “poor decision-making”, and “customers’ inability to understand or appreciate what is really good for them.” Metaeconomics explains why consumers (and producers) find themselves running on primal urges on path 0G rather than a reasoned path 0Z influenced by the Moral Community represented on path 0M. Metaeconomics, however, fits well with the Tomer (2017a) contention that integrating propositions from Phishing for Phools and Dual Interest Theory can play a substantive role in building a Humanistic Behavioral Economics. Metaeconomics can help in assuring our economic lives do not go amiss.
Akerlof, George A. and Shiller, Robert J. Phishing for Phools: The Economics of Manipulation and Deception. Princeton, NJ: Princeton University Press, 2015.
Tomer, John F. Advanced Introduction to Behavioral Economics. North Hampton, MA: Elgar, 2017.