Caught in the phishing net: why we buy what we don't need

The authors of Phishing For Phools are right that people are being duped into buying stuff they don't need, says Vicky Pryce. But is it too late to do anything about it?

by Vicky Pryce
Last Updated: 25 Sep 2015

Phishing is a new word that entered the Oxford Dictionary in 1996 as a direct result of the web. It is defined as: 'To perpetuate a fraud on the internet in order to glean personal information from individuals, esp. by impersonating a reputable company; to engage in online fraud by deceptively angling for personal information.' We have all heard of receiving unsolicited requests for money from our friends supposedly stranded in a remote city after a mugging. Someone must fall for it as it continues to happen. Nobel-prize winners Akerlof and Shiller have taken this further and define phishing as 'getting people to do things that are in the interest of the phisherman, not the target'. And because there are so many and the variety of lures is vast, we all at some point get caught.

We were conned by Enron for example, which used 'financial engineering' that gave a false impression of its profitability. We are still seeing the repercussions of PPI mis-selling, and the Libor and foreign exchange scandals, which have had direct impacts on the markets while enriching the financial institutions involved. Relying on inadequately transparent information or plain misinformation, we make decisions that are bad for us.

The authors argue that people 'buy what they think they want rather than what they really want' through a mix of clever psychological ploys and misleading information. Or even more dangerous, people think they are buying what they want but in fact are buying something which is not at all what they need. Examples include the spreading of the belief that the cost of a good wedding is equivalent to an average annual salary, and make everyone think that this is what they must spend and then end up miserable while trying to pay back the debt incurred. Or the positioning of enticingly smelling bakery products (very fattening) at strategic points in a supermarket. Or falling for the lure of a cheap mortgage, which helps the salesman meet their target, but which you know you won't be able to service to the full. The general argument of the book is that once an individual moves outside their comfort zone, the phishers step in and take advantage of that by selling us what they want, often with disastrous consequences for all concerned. It makes for compulsive reading. But is this concept new? As Galbraith famously said in The Affluent Society, 'One cannot defend production as satisfying wants if that production creates the wants.' Of course, he was thinking more of manufactured products but the new ability to reach the consumer in the digital age, study their habits, play on their insecurity and thus influence and then meet their 'desires' makes the problem a more urgent one to address.

Government can play a positive part here. As the authors argue, freedom to 'phish' uncontrolled is not really an acceptable option. Misinformation aimed at duping people is a classic market failure and needs to be addressed. Nobody - except the phishers of course - wants to see completely unregulated markets that allow this phishing to continue unchecked. But it may be too late.

Phishing for Phools: The Economics of Manipulation and Deception by George A Akerlof and Robert J Shiller is published by Princeton University Press at £16.95

Vicky Pryce is chief economic adviser at CEBR and is the co-author of It's the Economy, Stupid: Economics for Voters. Follower her on Twitter: @IamVickyPryce

Hear Vicky Pryce talk at Inspiring Women, on 19 November. Get a 30% discount if you book before 30 September. Quote code: IW30E

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