Monday, October 12, 2015

Peter Klein Smacksdown Janet Yellen's Husband

The husband of Federal Reserve chair Janet Yellen is George Akerlof, who also happens to be a (terrible) economist. 

He is out with a terrible book with Robert Shiller that taken took its logical conclusion would result in us being corerced into living a modern day version of Mao's Revolution, including all of us being required to wear of Mao suits.

Peter Klein explains:

Robert Shiller's column in last Friday's New York Times illustrates the foolishness of the new "behavioral" approach to economic policy. Referring to his new book with George Akerlof, Phishing for Phools,Shiller recites a laundry list of standard (and trivial) business practices like putting candy bars at supermarket checkout lines, touting them as evidence that "manipulation and deception" pervades the market system. Obviously, the solution is government intervention, glibly described by Shiller as "common-sense regulation." 
Shiller's worldview features a caricature understanding of free markets along with a naive and uncomprehending model of government regulation. I suppose we can blame the Times's editorial team, not Shiller, for the headline "Faith in an Unregulated Free Market? Don’t Fall for It." But it nicely illustrates the Shiller crowd's view that support for free markets is based on faith, rather than two centuries of reason and evidence. You might think that Shiller's coauthor George Akerlof could walk down the hall and speak to his UC Berkeley colleague and fellow Nobel Laureate Oliver Williamson for a better understanding of how markets work. Williamson, of course, is famous for explaining how market actors protect themselves against opportunistic behavior from other market actors through contracts, joint ownership of assets, reputation, exchange of "hostages," and similar practices. It is markets, not government, that enable cooperation and joint production in the face of information and incentive problems. (I also wonder if Shiller and Akerlof have bothered to read Coase, Buchanan, or Ostrom; I won't even ask about Mises, Hayek, or Rothbard.) 
As is characteristic of the behavioral policy literature, Shiller is silent on the implications of behavioral economics for the analysis of government intervention. But thoughtful readers will find the basic premise of "Phishing for Phools" -- that firms systematically manipulate and deceive naive consumers, who should then turn to government regulators to protect them -- unintentionally hilarious. What is modern democracy, other than an attempt by candidates to manipulate and deceive voters, in hopes of winning the right to manipulate and deceive them as citizens? I'll take the market, candy bars and all, any day.

It is also noteworthy to keep in mind that the title of the Shiller-Akerloff book, Phishing for Phools, could also be considered "manipulation" from their perspective.

And what about the cover to their book? It sure looks manipulative to me:




Why didn't they title the book: "An Analysis of Business Paractices in the Consumer Marketing Sector" and wrap the book in a brown paper cover with just the title?

Looking at things from their perspective, the only thing I can conclude is that they are self-denying manipulators.


-RW

3 comments:

  1. Check the comments to the NY Slimes article. Talk about having a long way to go. It is the NY Slimes so we should expect a lot of economic ignorance.

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  2. Janet doesn't have to put up all this with George. Her expression was right.

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  3. Janet and George should spend more time as Economists rather than getting into controversies

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