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Why Free Markets Make Fools of Us

73 points by MaysonL 11y ago

jordanchan 11y ago
Anything can make fools of gullible people. Free markets or oligarchies.
- TeMPOraL 11y ago
  The key insight being, every single human being is gullible when you attack from the right angle.
  - jordanchan 11y ago
    Indeed. Everyone has their sensitivities, vulnerabilities and emotional/other needs. A company that has figured out how to push the right buttons in its sales pitch/ad has found its subset of "gullible people" - who will be driven more by animal passions than by reason. Humans are very well capable of overlooking potential long term harm in favor of short term pleasure, or even convincing themselves that the ill effects won't apply to them. That being said, I wouldn't agree that every single human being is gullible when attacked from the right angle. Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. One can peddle snake-oil on the streets, but only a subset of passersby will stop by and an even smaller subset will buy it - this does not imply that only the most afflicted are the ones making the purchase.
    - TeMPOraL 11y ago
      > Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. I wonder if it isn't because companies are severely restricted in their means of convincing people. Consider historical figures[0][1]. Between 1950s and today smoking rates in US dropped from around half of the population to around one in five person. Have the citizens of US suddenly became less gullible, or did their lives became less stressful? Or maybe as smoking changed from being a social custom to something despised (which can be partially attributed to regulations, though some would say[2] they were just following the social trend), 90% of smokers quit. Manufacturing a social custom is hard, but if you can pull it off, it's basically a superweapon. People will buy not because it's good or needed, but because it's expected. De Beers has managed to do that for diamonds[3] decades ago, and guess what people are still buying for engagement rings. That's only one, albeit an extremely effective way to trick people into parting with their money. There are others. Different people have different needs so if they avoid one trap, they'll trip on another. Sometimes the traps are less obvious. Let me give you an example. I can honestly say there's no advertising that could convince me to chose the grocery store on my street over the one little further but much cheaper. And yet I often shop in the former one because they employ mostly nice, pretty students, and I love to chat with them. Simple as that. I've bought many things I didn't need only to have a pretext to go there and talk with the crew. I've made friends with the entire staff, hell, I met my SO there. But the point still stands that I've been tricked into economically worse option by a simple management decision of hiring nice girls. Everyone has their weak spot. [0] - http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig_smoking/ http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig... [1] - http://www.infoplease.com/ipa/A0762370.html http://www.infoplease.com/ipa/A0762370.html [2] - http://www.paulgraham.com/addiction.html http://www.paulgraham.com/addiction.html [3] - http://www.theatlantic.com/past/issues/82feb/8202diamond1.htm http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...
      - jordanchan 11y ago
        Agreed - everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you. As for smoking, if companies were allowed to actually misstate it is good for you, there would be myriad other organizations working to prove it isn't. A reasonable person might well do his own/independent fact finding. Someone can say eating an octopus is yucky [it is actually used with salad in many places] but for a large amount of money you can convince/bribe them to try it. But if Warren Buffet says no, good luck bribing him. You can try another [practical, not theoretical] incentive, but I'm sure he could buy that too. One can say rich people must live certain lifestyles, but Steve Jobs lived an almost monastic life [save the Mercedes and a couple of other things maybe]. That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. Many have the guts to go against the crowd and some even take it as a badge of honor. Valentine's day is a manufactured custom too. Many are religious about it, many others abhor it - despite the concerted, and mostly successful, efforts to create a romantic custom out of the day. Diamonds, I agree - in many cultures, especially the US. But in many other cultures, such as the Nordic, it is less common [1 - a forum thread]. That doesn't mean de Beers doesn't try its level best to manufacture the same kind of social custom in Sweden. That need for extravagantly showing off a romantic pre-commitment just doesn't exist in that market. Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO? Could I sell you an extravagant snake-oil panacea if I were a hot bird? [1] http://www.thelocal.se/discuss/index.php?showtopic=32620 http://www.thelocal.se/discuss/index.php?showtopic=32620
        TeMPOraL 11y ago
        I don't think people like Warren Buffet or Steve Jobs are safe from being manipulated. As you say: > That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. The needs of people safe in monetary ways are often more nuanced and complex, but they are there. Some rich people are still insecure about status, and you can attack that. Others want to do good for the world, so they're perfect targets for various "charitable" organizations (thankfully, GiveWell / Effective Altruist movement tries to do something about that). > Many have the guts to go against the crowd and some even take it as a badge of honor. Yeah, I know. But you know how nonconformists strangely look alike? Capitalism has managed to go meta - being anti-capitalist has also been packaged and shipped to stores. > Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO? You got me here :). Now that my SO no longer works there, I neither feel the need to visit the store that often (though I still pop in from time to time, because I like buying in a place that is friendly to me, but not for extended chats), nor would I like to give her reasons for being jealous :). I guess we're still dancing around the point, so let me restate my assertion. You say: > everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you. I say: everyone may have a different set of weak spots, but everyone has them and market economy does and will exploit all of them. By saying "everyone is gullible if you attack from the right angle" I didn't mean that angle is universal for everyone. Different people respond to different strategies, but there is a way to get to everyone. > Could I sell you an extravagant snake-oil panacea if I were a hot bird? If you were and I wasn't in a relationship, I'd encourage you to try :). Hell, I might buy if it would make you talk some more :).
doorty 11y ago
"If a company can make money by deceiving or manipulating people, someone is going to create such a company, and it will prosper (unless the law regulates it). And if it prospers, companies that do not deceive or manipulate people may well be at a competitive disadvantage." EDIT: I was just quoting the article for discussion purposes. There's no reason to down vote.
- javert 11y ago
  The only companies that I sometimes continue to engage with after they deceive and manipulate me are governmnent-granted monopolies, like Time Warner Cable.
  - doorty 11y ago
    This assumes you know that they are deceiving you. If the company is successfully deceiving you, then you will not know it.
    - javert 11y ago
      This is some really distorted thinking in an attempt to salvage the false notion that we are all helpless without the government protecting us from "evil" companies. 99% of companies I interact with have no way to deceive me in any significant way, and the few that do (e.g. maybe a bank, insurance, or other financial companies) I double check on and I take action to mitigate the risks. Moreover, companies who commit fraud eventually get caught and their people go to jail. That is all part of a free market system, not a command-style, over-regulated Marxist one, which just hurts people in the long run. People who advocate that kind of system are serious evil.
      - MaysonL 11y ago
        Moreover, companies who commit fraud eventually get caught and their people go to jail. Which is why all the bank executives are currently in jail? (Contrast DOJ enforcement after the latest financial blowup to their conduct after the S&L crisis). See Bernanke's take: http://www.usatoday.com/story/news/politics/2015/10/04/ben-bernanke-execs-jail-great-recession-federal-reserve/72959402/ http://www.usatoday.com/story/news/politics/2015/10/04/ben-b...
UK-AL 11y ago
I thought people were naturally pessimistic more than optimistic.
jevgeni 11y ago
I respect Robert Schiller a lot. And I think there are legitimate areas where people are being manipulated into buying expensive things (recent news on pharma companies are a good example of this). But the book (as presented in the article) is incredibly overreaching. There is an easy solution to the phishermen/phools problem in many cases: don't buy what you are pushed by others to buy. Combine that with the proverbial "there is no free lunch" and you are more or less safe. I remember when I was a student during the heyday of the financial swing that led to the 2008 crash, I was walking thorough the Hamburg airport and a young representative of American Express caught me and tried to convince me to sign up for American Express Gold (afaik, a product tier two steps down from the mythical American Express Black). "What is your income?" she asked me. "I don't know. I'm a student, I live off 400 Euros a month." "Alright, I'll write 40 000 EUR annual income in the form." At that point not alarm bells, loud ass alarm sirens were going off in my head and I've politely disengaged and walked on. And that was the suprisingly easy way how I avoided crippling credit card debt. The problem is really not in the free market per se, but industries that don't allow robust competition and that aren't scrutinized by consumers. The first part is achieved by regulation. When was the last time utilities, energy companies, banks, and pharmaceuticals were challenged by a newcomer? The second part is made possible by us not caring what we buy or continuing buying something purely out of emotion. "What's that? Google now allows companies to directly put ultra-targeted adds in your inbox? That surely doesn't sound like legalized spam. And they say they're not evil."
- ZeroGravitas 11y ago
  This is not an individual problem. We may be smart enough, well-rested enough, with enough financial reserves etc. to avoid these scams in most cases, but the whole market is warped by what works on the average person. You shouldn't have even been put in that position, the lady trying to hook people into debt should have been contributing something useful to society, as should the people who get hooked into debt and end up funding the next generation of scams. I believe in the power of market competition, that's why externalities scare me so much.
- bufordsharkley 11y ago
  I've been trying to live by the dictum "anything advertised is not worth buying," and I've rarely been forced to find exceptions. Buy what you need, and only what you need, and one can live very comfortably.
littletimmy 11y ago
Despite this and all other evidence to the contrary, I don't understand how some people still stick to the idea of efficient markets and speak against government intervention. The market system must be our slave, not our master.
- TeMPOraL 11y ago
  Indeed. There is this common meme among religious people that some men make money their god. Sometimes it's even illustrated with people worshipping riches. It always seemed to me to be a stretch. I've never seen anyone worshipping money like they would worship a god. But what I am seeing every day is people worshipping Moloch[0]. Men and women so sure that The Market will save us if we only leave it alone. It's not the money that's the deity, it's the perfect, efficient Market that promises riches if only you could get that pesky government out of the way. [0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
  - pdkl95 11y ago
    You may be interested in Mark Blyth[1]'s take[2] on this, in which he also blames the seductive quality of mathematical models. Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy". Treating "efficient markets" as if it was a law of nature is probably inevitable when you combine a trust of bad models with the greedy side of human nature (Moloch) that is biased to overlook the differences between reality and a model that tells you what you want to hear [1] Prof. Econ. at Brown University, who is probably most well known these days for his warnings about the dangers of "austerity" (e.g. https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 ) [2] https://www.youtube.com/watch?v=hmWbkPezgtU https://www.youtube.com/watch?v=hmWbkPezgtU
    - realquick81 11y ago
      > Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy". I don't know what you folks are talking about on this thread branch (what with "efficient markets") but Keynesian Economics is the "theory" that suffers from this "illusion of accuracy". I don't believe in efficient anything, but I know Free Markets Theory involves no Math (only deductive methods like Praxeology).
TeMPOraL 11y ago
The way we accept this at the level of society is also worrying. See, if a friend tried to do to you the things advertisers do all the time, you'd punch him in the face. But somehow we have no problems being intentionally manipulated, lied to and deceived by companies every day. In fact, we turned it into a legitimate occupation.
- pdkl95 11y ago
  https://www.youtube.com/watch?v=oRzYJullFOs https://www.youtube.com/watch?v=oRzYJullFOs Max Headroom, Season 2, Episode 13 "Lessons" Have you any idea how suc-suc-suc-cessful censorship is on TV? Don't know the answer? Hmm... Successful, isn't it! Before something can be considered a threat (or even worthy of strong opinions), they must first realize it exists. Systems that depend on people forming such opinions - such as democracy and capitalism - should really consider anything that blocks or corrupts the dissemination of knowledge as an existential threat.
  - TeMPOraL 11y ago
    Indeed. Moreover, the fundamental glue of the society - the thing that enables a peaceful governance, whether democratic or not, and flourishing free trade is trust. Trust people have toward each other, trust they have in their companies and officials. Lying is an existential threat to society itself. Many people are surprised by anti-vaccination movements, or anti-GMO and anti-nuclear crowds. One will say: "surely they must be stupid, they reject the science, the well-tested and replicated results of countless of studies". But they aren't, in fact, any more or less stupid than you and I. They had their trust in the system broken. They've seen enough shit pharma does to stop trusting doctors. They've witnessed enough scandals and have been victims of enough frauds to stop trusting the government or the big bio/tech businesses. Those "anti-science" movements are only a symptom of the greater problem, of society losing trust in the authority. The trust that has been eroded by constant and countless lies. So yes, if you're a journalist or an editor who writes and publishes lies to "spice up the story", you're responsible. If you're a marketer or a salesman or a businessman who lies to people to get them to buy your product, you're responsible. If you're a scientist who manipulates results to get publications, you too are responsible. As much and as little as the system may have made you to do it, but you are responsible. Responsible for the blood and the deaths, and the fall of the civilization if it happens.
Asbostos 11y ago
But what's the alternative? In many cases nobody really knows what's in our best interests. So with any protection from "phishermen", you'd suffer from other inefficiencies or harm caused by good opportunities being blocked. Just the fact that research is still ongoing as to the effects of alcohol says that nobody could really decide if it's a net positive or negative for each individual. You only have to look at laws forbidding marijuana use or homosexual acts to realize that governments aren't competent to make these decisions since they just reflect what the popular opinion of the "phools" already is.
- TeMPOraL 11y ago
  > In many cases nobody really knows what's in our best interests. I may not know what is in my best interest, but I know what isn't - someone else lying to me and cheating me to pursue their own interest. The problem is hard because perfect solution is AI-complete and pretty much requires mind-reading. But we can at least try and eliminate the obvious problems. We could, for instance, start punishing marketers and salesmen for lying.
  - Asbostos 11y ago
    I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it. Lies aren't really the problem though, fooling us with truths we don't understand is. About tobacco causing lung cancer? That's been widely known for decades but rates of smoking are increasing globally so it's not just false information.
    - TeMPOraL 11y ago
      > I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it. In principle yes, but in practice the false advertising laws are way, way too lax. > Lies aren't really the problem though, fooling us with truths we don't understand is. True, but companies now tell bullshit that is so obvious to see through that it's often very clear whether they want to scam you or not. This again should be punished but currently isn't.
alienjr 11y ago
On the silly "inequality is getting worse" claim: "Contrary to the author's claim that the rich are getting richer, not due to underlying economic trends, but by using their power and influence to enrich themselves, I have in this column more than once suggested that the real reason is the enormous expansion of the world supply of unskilled and semi-skilled labour brought about by falling transport costs and trade barriers. With globalization, a billion or more rural people in Asia could be recruited into the urban industrial sector and produce the tradeable goods that undersell the goods hitherto produced in the United States and Europe. Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise. Ironically, while this sharpens inequality in the West, it promotes equality on a world scale as Asian and eventually also African peoples are lifted out of misery." http://www.econlib.org/library/Columns/y2012/Jasayinequality.html http://www.econlib.org/library/Columns/y2012/Jasayinequality... + Even if there exits market failures, we don't want to replace them with government failures, which are usually even worse.
- paganel 11y ago
  Which is great for those Asian people, in the last 30 years alone around 500 million Chinese people have been lifted out of extreme poverty. Let that sink in, that's the entire population of present-day Europe. But, as an Eastern European I'm of course biased. I grew up in the economy-controlled '80s when we were experiencing toilet paper shortages, among other things (question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?)
  - alienjr 11y ago
    "I grew up in the economy-controlled '80s" Me too! I'm from Poland. And that's why I'm so sick of all those inteligentsia do-gooders who want to impose their own preferences on everybody else because they know better and this legitimizes them to orchestrate the society.
  - bildung 11y ago

73 points by MaysonL 11y ago

jordanchan 11y ago

Anything can make fools of gullible people. Free markets or oligarchies.

TeMPOraL 11y ago
The key insight being, every single human being is gullible when you attack from the right angle.
- jordanchan 11y ago
  Indeed. Everyone has their sensitivities, vulnerabilities and emotional/other needs. A company that has figured out how to push the right buttons in its sales pitch/ad has found its subset of "gullible people" - who will be driven more by animal passions than by reason. Humans are very well capable of overlooking potential long term harm in favor of short term pleasure, or even convincing themselves that the ill effects won't apply to them. That being said, I wouldn't agree that every single human being is gullible when attacked from the right angle. Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. One can peddle snake-oil on the streets, but only a subset of passersby will stop by and an even smaller subset will buy it - this does not imply that only the most afflicted are the ones making the purchase.
  - TeMPOraL 11y ago
    > Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. I wonder if it isn't because companies are severely restricted in their means of convincing people. Consider historical figures[0][1]. Between 1950s and today smoking rates in US dropped from around half of the population to around one in five person. Have the citizens of US suddenly became less gullible, or did their lives became less stressful? Or maybe as smoking changed from being a social custom to something despised (which can be partially attributed to regulations, though some would say[2] they were just following the social trend), 90% of smokers quit. Manufacturing a social custom is hard, but if you can pull it off, it's basically a superweapon. People will buy not because it's good or needed, but because it's expected. De Beers has managed to do that for diamonds[3] decades ago, and guess what people are still buying for engagement rings. That's only one, albeit an extremely effective way to trick people into parting with their money. There are others. Different people have different needs so if they avoid one trap, they'll trip on another. Sometimes the traps are less obvious. Let me give you an example. I can honestly say there's no advertising that could convince me to chose the grocery store on my street over the one little further but much cheaper. And yet I often shop in the former one because they employ mostly nice, pretty students, and I love to chat with them. Simple as that. I've bought many things I didn't need only to have a pretext to go there and talk with the crew. I've made friends with the entire staff, hell, I met my SO there. But the point still stands that I've been tricked into economically worse option by a simple management decision of hiring nice girls. Everyone has their weak spot. [0] - http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig_smoking/ http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig... [1] - http://www.infoplease.com/ipa/A0762370.html http://www.infoplease.com/ipa/A0762370.html [2] - http://www.paulgraham.com/addiction.html http://www.paulgraham.com/addiction.html [3] - http://www.theatlantic.com/past/issues/82feb/8202diamond1.htm http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...
    - jordanchan 11y ago
      Agreed - everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you. As for smoking, if companies were allowed to actually misstate it is good for you, there would be myriad other organizations working to prove it isn't. A reasonable person might well do his own/independent fact finding. Someone can say eating an octopus is yucky [it is actually used with salad in many places] but for a large amount of money you can convince/bribe them to try it. But if Warren Buffet says no, good luck bribing him. You can try another [practical, not theoretical] incentive, but I'm sure he could buy that too. One can say rich people must live certain lifestyles, but Steve Jobs lived an almost monastic life [save the Mercedes and a couple of other things maybe]. That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. Many have the guts to go against the crowd and some even take it as a badge of honor. Valentine's day is a manufactured custom too. Many are religious about it, many others abhor it - despite the concerted, and mostly successful, efforts to create a romantic custom out of the day. Diamonds, I agree - in many cultures, especially the US. But in many other cultures, such as the Nordic, it is less common [1 - a forum thread]. That doesn't mean de Beers doesn't try its level best to manufacture the same kind of social custom in Sweden. That need for extravagantly showing off a romantic pre-commitment just doesn't exist in that market. Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO? Could I sell you an extravagant snake-oil panacea if I were a hot bird? [1] http://www.thelocal.se/discuss/index.php?showtopic=32620 http://www.thelocal.se/discuss/index.php?showtopic=32620
      - TeMPOraL 11y ago
        I don't think people like Warren Buffet or Steve Jobs are safe from being manipulated. As you say: > That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. The needs of people safe in monetary ways are often more nuanced and complex, but they are there. Some rich people are still insecure about status, and you can attack that. Others want to do good for the world, so they're perfect targets for various "charitable" organizations (thankfully, GiveWell / Effective Altruist movement tries to do something about that). > Many have the guts to go against the crowd and some even take it as a badge of honor. Yeah, I know. But you know how nonconformists strangely look alike? Capitalism has managed to go meta - being anti-capitalist has also been packaged and shipped to stores. > Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO? You got me here :). Now that my SO no longer works there, I neither feel the need to visit the store that often (though I still pop in from time to time, because I like buying in a place that is friendly to me, but not for extended chats), nor would I like to give her reasons for being jealous :). I guess we're still dancing around the point, so let me restate my assertion. You say: > everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you. I say: everyone may have a different set of weak spots, but everyone has them and market economy does and will exploit all of them. By saying "everyone is gullible if you attack from the right angle" I didn't mean that angle is universal for everyone. Different people respond to different strategies, but there is a way to get to everyone. > Could I sell you an extravagant snake-oil panacea if I were a hot bird? If you were and I wasn't in a relationship, I'd encourage you to try :). Hell, I might buy if it would make you talk some more :).

doorty 11y ago

"If a company can make money by deceiving or manipulating people, someone is going to create such a company, and it will prosper (unless the law regulates it). And if it prospers, companies that do not deceive or manipulate people may well be at a competitive disadvantage." EDIT: I was just quoting the article for discussion purposes. There's no reason to down vote.

javert 11y ago
The only companies that I sometimes continue to engage with after they deceive and manipulate me are governmnent-granted monopolies, like Time Warner Cable.
- doorty 11y ago
  This assumes you know that they are deceiving you. If the company is successfully deceiving you, then you will not know it.
  - javert 11y ago
    This is some really distorted thinking in an attempt to salvage the false notion that we are all helpless without the government protecting us from "evil" companies. 99% of companies I interact with have no way to deceive me in any significant way, and the few that do (e.g. maybe a bank, insurance, or other financial companies) I double check on and I take action to mitigate the risks. Moreover, companies who commit fraud eventually get caught and their people go to jail. That is all part of a free market system, not a command-style, over-regulated Marxist one, which just hurts people in the long run. People who advocate that kind of system are serious evil.
    - MaysonL 11y ago
      Moreover, companies who commit fraud eventually get caught and their people go to jail. Which is why all the bank executives are currently in jail? (Contrast DOJ enforcement after the latest financial blowup to their conduct after the S&L crisis). See Bernanke's take: http://www.usatoday.com/story/news/politics/2015/10/04/ben-bernanke-execs-jail-great-recession-federal-reserve/72959402/ http://www.usatoday.com/story/news/politics/2015/10/04/ben-b...

UK-AL 11y ago

I thought people were naturally pessimistic more than optimistic.

jevgeni 11y ago

I respect Robert Schiller a lot. And I think there are legitimate areas where people are being manipulated into buying expensive things (recent news on pharma companies are a good example of this). But the book (as presented in the article) is incredibly overreaching. There is an easy solution to the phishermen/phools problem in many cases: don't buy what you are pushed by others to buy. Combine that with the proverbial "there is no free lunch" and you are more or less safe. I remember when I was a student during the heyday of the financial swing that led to the 2008 crash, I was walking thorough the Hamburg airport and a young representative of American Express caught me and tried to convince me to sign up for American Express Gold (afaik, a product tier two steps down from the mythical American Express Black). "What is your income?" she asked me. "I don't know. I'm a student, I live off 400 Euros a month." "Alright, I'll write 40 000 EUR annual income in the form." At that point not alarm bells, loud ass alarm sirens were going off in my head and I've politely disengaged and walked on. And that was the suprisingly easy way how I avoided crippling credit card debt. The problem is really not in the free market per se, but industries that don't allow robust competition and that aren't scrutinized by consumers. The first part is achieved by regulation. When was the last time utilities, energy companies, banks, and pharmaceuticals were challenged by a newcomer? The second part is made possible by us not caring what we buy or continuing buying something purely out of emotion. "What's that? Google now allows companies to directly put ultra-targeted adds in your inbox? That surely doesn't sound like legalized spam. And they say they're not evil."

ZeroGravitas 11y ago
This is not an individual problem. We may be smart enough, well-rested enough, with enough financial reserves etc. to avoid these scams in most cases, but the whole market is warped by what works on the average person. You shouldn't have even been put in that position, the lady trying to hook people into debt should have been contributing something useful to society, as should the people who get hooked into debt and end up funding the next generation of scams. I believe in the power of market competition, that's why externalities scare me so much.
bufordsharkley 11y ago
I've been trying to live by the dictum "anything advertised is not worth buying," and I've rarely been forced to find exceptions. Buy what you need, and only what you need, and one can live very comfortably.

littletimmy 11y ago

Despite this and all other evidence to the contrary, I don't understand how some people still stick to the idea of efficient markets and speak against government intervention. The market system must be our slave, not our master.

TeMPOraL 11y ago
Indeed. There is this common meme among religious people that some men make money their god. Sometimes it's even illustrated with people worshipping riches. It always seemed to me to be a stretch. I've never seen anyone worshipping money like they would worship a god. But what I am seeing every day is people worshipping Moloch[0]. Men and women so sure that The Market will save us if we only leave it alone. It's not the money that's the deity, it's the perfect, efficient Market that promises riches if only you could get that pesky government out of the way. [0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
- pdkl95 11y ago
  You may be interested in Mark Blyth[1]'s take[2] on this, in which he also blames the seductive quality of mathematical models. Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy". Treating "efficient markets" as if it was a law of nature is probably inevitable when you combine a trust of bad models with the greedy side of human nature (Moloch) that is biased to overlook the differences between reality and a model that tells you what you want to hear [1] Prof. Econ. at Brown University, who is probably most well known these days for his warnings about the dangers of "austerity" (e.g. https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 ) [2] https://www.youtube.com/watch?v=hmWbkPezgtU https://www.youtube.com/watch?v=hmWbkPezgtU
  - realquick81 11y ago
    > Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy". I don't know what you folks are talking about on this thread branch (what with "efficient markets") but Keynesian Economics is the "theory" that suffers from this "illusion of accuracy". I don't believe in efficient anything, but I know Free Markets Theory involves no Math (only deductive methods like Praxeology).

TeMPOraL 11y ago

The way we accept this at the level of society is also worrying. See, if a friend tried to do to you the things advertisers do all the time, you'd punch him in the face. But somehow we have no problems being intentionally manipulated, lied to and deceived by companies every day. In fact, we turned it into a legitimate occupation.

pdkl95 11y ago
https://www.youtube.com/watch?v=oRzYJullFOs https://www.youtube.com/watch?v=oRzYJullFOs Max Headroom, Season 2, Episode 13 "Lessons" Have you any idea how suc-suc-suc-cessful censorship is on TV? Don't know the answer? Hmm... Successful, isn't it! Before something can be considered a threat (or even worthy of strong opinions), they must first realize it exists. Systems that depend on people forming such opinions - such as democracy and capitalism - should really consider anything that blocks or corrupts the dissemination of knowledge as an existential threat.
- TeMPOraL 11y ago
  Indeed. Moreover, the fundamental glue of the society - the thing that enables a peaceful governance, whether democratic or not, and flourishing free trade is trust. Trust people have toward each other, trust they have in their companies and officials. Lying is an existential threat to society itself. Many people are surprised by anti-vaccination movements, or anti-GMO and anti-nuclear crowds. One will say: "surely they must be stupid, they reject the science, the well-tested and replicated results of countless of studies". But they aren't, in fact, any more or less stupid than you and I. They had their trust in the system broken. They've seen enough shit pharma does to stop trusting doctors. They've witnessed enough scandals and have been victims of enough frauds to stop trusting the government or the big bio/tech businesses. Those "anti-science" movements are only a symptom of the greater problem, of society losing trust in the authority. The trust that has been eroded by constant and countless lies. So yes, if you're a journalist or an editor who writes and publishes lies to "spice up the story", you're responsible. If you're a marketer or a salesman or a businessman who lies to people to get them to buy your product, you're responsible. If you're a scientist who manipulates results to get publications, you too are responsible. As much and as little as the system may have made you to do it, but you are responsible. Responsible for the blood and the deaths, and the fall of the civilization if it happens.

Asbostos 11y ago

But what's the alternative? In many cases nobody really knows what's in our best interests. So with any protection from "phishermen", you'd suffer from other inefficiencies or harm caused by good opportunities being blocked. Just the fact that research is still ongoing as to the effects of alcohol says that nobody could really decide if it's a net positive or negative for each individual. You only have to look at laws forbidding marijuana use or homosexual acts to realize that governments aren't competent to make these decisions since they just reflect what the popular opinion of the "phools" already is.

TeMPOraL 11y ago
> In many cases nobody really knows what's in our best interests. I may not know what is in my best interest, but I know what isn't - someone else lying to me and cheating me to pursue their own interest. The problem is hard because perfect solution is AI-complete and pretty much requires mind-reading. But we can at least try and eliminate the obvious problems. We could, for instance, start punishing marketers and salesmen for lying.
- Asbostos 11y ago
  I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it. Lies aren't really the problem though, fooling us with truths we don't understand is. About tobacco causing lung cancer? That's been widely known for decades but rates of smoking are increasing globally so it's not just false information.
  - TeMPOraL 11y ago
    > I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it. In principle yes, but in practice the false advertising laws are way, way too lax. > Lies aren't really the problem though, fooling us with truths we don't understand is. True, but companies now tell bullshit that is so obvious to see through that it's often very clear whether they want to scam you or not. This again should be punished but currently isn't.

alienjr 11y ago

On the silly "inequality is getting worse" claim: "Contrary to the author's claim that the rich are getting richer, not due to underlying economic trends, but by using their power and influence to enrich themselves, I have in this column more than once suggested that the real reason is the enormous expansion of the world supply of unskilled and semi-skilled labour brought about by falling transport costs and trade barriers. With globalization, a billion or more rural people in Asia could be recruited into the urban industrial sector and produce the tradeable goods that undersell the goods hitherto produced in the United States and Europe. Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise. Ironically, while this sharpens inequality in the West, it promotes equality on a world scale as Asian and eventually also African peoples are lifted out of misery." http://www.econlib.org/library/Columns/y2012/Jasayinequality.html http://www.econlib.org/library/Columns/y2012/Jasayinequality... + Even if there exits market failures, we don't want to replace them with government failures, which are usually even worse.

paganel 11y ago
Which is great for those Asian people, in the last 30 years alone around 500 million Chinese people have been lifted out of extreme poverty. Let that sink in, that's the entire population of present-day Europe. But, as an Eastern European I'm of course biased. I grew up in the economy-controlled '80s when we were experiencing toilet paper shortages, among other things (question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?)
- alienjr 11y ago
  "I grew up in the economy-controlled '80s" Me too! I'm from Poland. And that's why I'm so sick of all those inteligentsia do-gooders who want to impose their own preferences on everybody else because they know better and this legitimizes them to orchestrate the society.
- bildung 11y ago