Having finished reading George Akerlof and Robert Shiller’s last book, most of which I skimmed through at a clip, I am returning to some of its memorable parts.[1] One of them concerns our monkey-on-the-shoulder tastes, which help explain a major problem with a pure free-market equilibrium. No doubt whatsoever, human tastes are susceptible to phishing of all sorts, which helps explain advertising and marketing in all their forms. Many a profession has been spawned to manipulate human tastes, indeed.

The Nobel laureates start with the experimental research of economist Keith Chen and psychologists Venkat Lakshminarayanan and Laurie Santos, who succeeded in teaching capuchin monkeys how to use money to trade.[2] Remarkably, the monkeys developed an appreciation for prices, and they even exchanged sexual favors for money.[3] Not surprisingly, Chen, Lakshminarayanan, and Santos published their findings in the Journal of Political Economy in 2006.[4]

Akerlof and Shiller propose that we go beyond these experiments and imagine a world in which the capuchins would be endowed with substantial incomes and opened up to trading with humans. We can expect an economic equilibrium, they argue, but the choices made by monkeys would be quite different from what makes them happy, for we already know from the experiments that they love Marshmallow Fluff-filled Fruit Roll-Ups.[5] Thus we can expect that they would eventually become anxious, malnourished, exhausted, addicted, quarrelsome, and sick.

At this point, the Nobel laureates extend the thought experiment by imagining that humans have monkeys on their shoulders when they go shopping or when they make their economic choices.[6] And those monkeys on the shoulder are in the form of the weaknesses that have been exploited by marketers for ages. Because of these weaknesses, humans often want what is actually not good for them, including Marshmallow Fluff-filled Fruit Roll-Ups. As Akerlof and Shiller put it, the monkeys on the shoulder are substantially calling the shots in the absence of some curbs on markets.[7]

This is where I part ways with the Nobel laureates, though. They dedicate an entire chapter to those who dedicate themselves to curbing the market, such as those who enforce quality standards, businessmen of conscience (sic), and government administrators and regulators.[8] All together, they are painted as heroes in the book. Heroes are also susceptible of manipulation and deception, it goes without saying. Nonetheless, this is where Akerlof and Shiller are happy to put all their hopes. Their book would not have a chance in the market without a happy end, I suppose. Which makes it yet another example of phishing for phools, to be sure.

Footnotes

1. Phishing for Phools: The Economics of Manipulation and Deception, Princeton and Oxford: Princeton University Press, 2015.

2. Op. cit., p. 4.

3. Loc. cit.

4. Op. cit., p. 185.

5. Op. cit., p. 4.

6. Op. cit., p. 5.

7. Loc. cit.

8. Op. cit., pp. 136-146.