We believe that it is wrong—as in the textbooks, and in the standard mental frame of almost every economist—only to picture the healthy or “efficient” working of markets, with economic pathologies depicted as due only to externalities and income distribution. We believe that economies are more complicated—and also more interesting—than this standard view. This division of thought between healthy and pathological, we further believe, is not just sloppy and wrong-minded, but also highly consequential.

Why so? Because it means that modern economics inherently fails to grapple with deception and trickery. People’s naïveté and susceptibility to deception have been swept under the rug. Economists now, in 2015, are looking back at the 2008 world financial crisis; and at least some of us are asking the question: why? We are not just asking why the crash itself occurred, which we now understand in general terms. But, additionally, we economists are looking at ourselves. We wonder why so few of us had predicted it. It is truly remarkable that so few economists foresaw what would happen. (…)

We believe this huge lacuna tells us that economists, including those in finance, systematically ignore or downplay the rôle of trickery and deception in the working of markets. We have already put our finger on a simple reason why they were so ignored: economists’ understanding of markets systematically excludes them. (…) But that fails to see that competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity. Had we economists appropriately seen free markets as a two-edged sword, we would all but surely have delved into the ways in which financial derivatives and mortgage-backed securities, and also sovereign debt, would turn out badly. More than a handful of us would have sounded the alarm.

From George Akerlof and Robert Shiller’s Phishing for Phools: The Economics of Manipulation and Deception, Princeton and Oxford: Princeton University Press, 2015, pp. 164-165.