Early on in their brilliantly named takedown on American capitalism, George Akerlof and Robert Shiller describe how the contemporary free market works. To them, it is not the “invisible hand” extolled by of Adam Smith and his disciples, but a cunning fist. “Being aware of the benefits of free markets should not make us blind to their defects,” foremost of which is the market’s tendency to exploit human frailty, the authors assert. Later, they admit pithily: “Do we like free markets? Yes. But.”
The “but” comprises this book, which, disappointingly, fails to achieve the cheeky promise of its title. The PH factor grows wearisome with overuse as the authors go on about phisherman and phood, making the phun trudge on well past its sell-by date. Also vexing is the authors’ insistence on constantly telling the reader what’s coming up next, a device with no discernible purpose beyond thickening an extended magazine article into a hardcover book.
The word “phishing” was coined around 1996 by hackers who induced unsuspecting AOL users to give away their data. Today it merits a listing in the Oxford English Dictionary as any sort of Internet fraud. Akerlof and Shiller take it further: “It is about getting people to do things that are in the interest of the phisherman, but not in the interest of the target.”
And “phools,” well, you know, that’s us.
Both academics and Nobel Prize winners (Akerlof in 2001, Shiller in 2013), the pair collaborated on 2010’s Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, in which they endeavor to bring Keynesian economics to the masses. Phishing attempts a similar gift, explaining how the purveyors of new cars, college diplomas, food, drugs and junk bonds hook and reel us in. Their biggest challenge is how to make the reader care about old news, the “less than scrupulous behavior” that is “incentivized in competitive markets.”
The authors admit as much in a maddening afterword in which they write, “If so much has been written about the naïve and the uninformed in behavioral economics and finance, there remains the question regarding where we come in. Perhaps there is nothing new here.” To which the reader replies, “Great. Now you tell us?” and wonders if he or she has been unwittingly caught up in a grand social experiment.
But Akerlof and Shiller seem content to cluck worriedly about widely known consumer abuse that takes place in the purchase of a car or a house. Unfortunately, there is no useable advice on how to avoid this, only assurance that we are indeed ripped off by car dealerships, banks and credit-card issuers.
The solutionless handwringing continues in chapters about Big Pharma and Big Phood, which conspire to maximize profit with spin-ready advertising firms and lobbyists. The authors examine the enthusiastic marketing of Vioxx, a painkiller developed and sold by Merck between 1999 and 2004, when it was withdrawn after being implicated in between 88,000 and 139,000 heart attacks and 26,000 deaths, as well as countless gastrointestinal problems.
In delving into Vioxx, the authors draw awkward parallels. The pharmaceutical industry employs one drug rep for every six physicians in the U.S. and enjoys generous profits even as it suffers from public contempt over thousand-dollar pills and the loathsome practice of planting favorable articles in medical journals. (A glowing report about Vioxx, published in the New England Journal of Medicine, was based on a study done at Merck’s behest that was selective about what it revealed.)
At any rate, there’s a big difference between a phool parted with her money and one parted with her life, and here the authors labor to conjoin wildly disparate sins of capitalism.
Chapters totter between the obvious (why Facebook makes people unhappy) and the unnecessarily obtuse (the performance of low-grade corporate bonds between 1900 and 1943). The gloom breaks for only 10 pages near the end of the book, when, in a chapter titled “The Resistance and Its Heroes,” the authors concede that, on the whole, this dastardly capitalism thing works remarkably well. Life expectancy is up for most groups, cars and planes are safe with rare exception and the market, for all its “ever more sophisticated manipulations and deceptions,” powers along, extending its bountiful cornucopia of choice. This is because of consumer advocacy groups, government oversight agencies, activist shareholders, the courts and the plethora of local and federal laws, the authors say.
In dissecting the carefully plotted manipulation that induces an unwitting consumer to buy a certain pill or a Cinnabon pastry, the authors want the reader to consider the chasm that unpleasantly yawns between the truth of what they actually want (be it good health or financial security) and what they think they want (a cinnamon roll and as much stuff as they can pack in their cars on Black Friday). Awareness may help close the divide. But the U.S. economy, which relies on consumer spending for 70 percent of its might, bets its life that it won’t. C- — Jennifer Graham