Princeton University Press
By Chris Matthews
October 7, 2015

Adam’s Smith’s “invisible hand” of the marketplace is perhaps the single most captivating metaphor in all of economics. The idea that all of society can be made better off by the self-interested behavior of its constituents was revolutionary for its time, and it undergirds free-market philosophy to this day.

But a growing chorus of economists are taking issue with the degree to which we put our faith in free markets, and just how far the invisible hand can take us as a society. Nobel-prize winning economists George Akerlof and Robert Shiller take up this mantle in their latest book called, Phishing for Phools: The Economics of Manipulation and Deception. The central argument of the book is that though free markets bring wonderful bounties to societies that embrace them, they also yield negative consequences that can be avoided with intelligent modifications. They write:

We see the cornucopia that free markets have delivered. But just as every coin has two sides, so do free markets. The same human ingenuity that produces the cornucopia also goes into the art of the salesman. Free markets produce good-for-me/good-for-you’s; but they also produce good-for-me/bad-for-you’s. They do both, so long as profit can be made. The free market may be humans’ most powerful tool. But like all very powerful tools, it is also a two-edged sword.

The book offers powerful support for a skeptical view of free markets, but it’s also a helpful guide for consumers to avoid getting ripped off in the course of making important purchases. Here are five dangerous scenarios Akerlof and Shiller present in their new book:

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