ABSTRACT
In this chapter, the authors explore George A. Akerlof and Robert J. Shiller’s (A&S) Phishing for Phools for its being primarily a neoclassical theory of the inevitability of market model failure. They draw the essential dividing lines among the concepts of negative externalities, social costs, lemons, and phishes. The authors offer a succinct presentation of the conceptual distinctions that arise when dealing with market misbehavior. They explain how deceptions based on psychological biases and on consumer’s ignorance should be incorporated in a broader model of phishing equilibrium. The authors examine how the embedding of phishing into a general equilibrium framework is applied to the analysis of phishing in advertising, financial and production markets – the cases of Big Pharma, Big Phood, Big Tobacco, and Alcohol. Resurging to Karl William Kapp’s long neglected critique of monetary calculation in a hypothetic or effective price system helps throwing light in the debate concerning the limits of markets in the modern information economics.
