The Nobel Prize winning economist who ate cat food
Once upon a time a Nobel Prize winning economist had a cat called Lightning.
Now, Lightning appeared to like his cat food, a rather pricey gourmet dish which claimed to be a cut above the rest.
But maybe, thought the Nobel Prize winning economist, I have been fooled into thinking this cat food is a cut above the rest - when it isn't.
There is only one way to find out, said the economist.
And that is to eat it myself. And so he did. It was, he said with a giggle, pretty much like any other cat food.
And the moral of this tale, he says, is that he had been "phished for a phool" - or manipulated into buying something.
Now the economist in question, Robert Shiller and his fellow Nobel laureate George Akerlof, have written Phishing for Phools, about how the sellers of cat food and thousands of other products and services "phish" us into buying things we do not want or need.
"Of course they do it," he says. "If you had a cat food company you wouldn't say 'Dried Dead Fish' on the label...we live in a constructed world that's filled with deception like this."
Fools or not
"Phishing" was initially coined to describe internet fraud, but Profs Shiller and Akerlof use it more broadly to cover a world of deception, and add the term "phools" to describe its victims.
Being gulled into paying more for cat food is hardly a serious affair. But the two economists see it as a microcosm of something much bigger in society.
The financial crisis of 2008 was caused in part, says Prof Shiller, by buyers being manipulated into buying financial products that were ultimately destructive to them and to society.
So the sale of deeply flawed mortgage-backed securities and their accompanying credit-default swaps flourished on the back of free markets and the reputations of the banks and finance house that sold them.
Not everyone goes along with this. "A bigger cause of the financial crisis than people fooling others was that everyone fooled themselves," says George Mason University economist, Prof Alex Tabarrok.
"From government regulators to mortgage bundlers to home buyers, people simply came to believe that house prices could never fall and they acted accordingly."
Profs Shiller and Akerlof argue that if people were fooling themselves there were plenty of others happy to help them on their way.
The two authors are behavioural economists, who inject psychology and sociology into their economics.
There's nothing new about that, but this latest foray into the "dismal art" has a distinctly dismal view of human nature.
"Most people will pick little shortcuts, little dishonesties," says Prof Shiller.
"You are pushed [to dishonesty] by many pressures, one is a sense of responsibility to your investors, another is to your employees. And you think everybody does this.
"Nobody's making a stink.... of course you do it, and the ones who don't do it are failing and going out of business. That's a phishing equilibrium."
Prof Tabarrok's view couldn't be more different: "If you look around the world it's the capitalist societies that are the high trust societies.
"There is no question that overall capitalism generates trust, honest dealings, customer service and good will. Distrust and cheating are the human norm and they have declined with the extension of the capitalist, 'trader values'."
Not so, say the behavioural economists.
Profs Shiller and Akerlof argue that the free markets persuade us to do things with results that no one could possibly want.
The blame, they say, lies in our "monkey-on-the-shoulder" tastes - those pernicious voices that tell us to buy what we think we want, rather than what we really want.
Prof Tabarrok takes issue with this difference.
"I do not think it is so simple. People disagree, sometimes violently, about which decisions are the ones that no one in their right mind could possibly want.
"Consider the different reactions around the world to Bruce Jenner's transition to Caitlyn Jenner [the transgender US athlete].
"Moreover, what's wrong with the monkey on the shoulder? Isn't a bit of monkeying around also a part of the good life?"
But Profs Shiller and Akerlof say this world of "phishers" pervades everything, from pharmaceutical companies that sell us drugs, politicians whose power is manipulated by the wealth of their backers, and tobacco companies that defend their right to sell their wares as seductively as possible.
On alcohol Prof Shiller talks passionately of how it destroys marriages and lives: "We have TV adverts showing beautiful young people enjoying liquor.
"We live in a society now where it's difficult to say no to a drink. But we would be in a much better society if we did that - because of the problems of alcohol.
"I am not saying we should all stop drinking but I can see the forces that make it much worse than it could be."
Regulators as heroes
So what to do about it?
Perhaps surprisingly, both economists are still fervent believers in the free market, and the power it has to improve lives.
What it needs is better regulation, they say.
But regulation is a hard sell to those who believe in the free market.
"How can the preferences of a regulator, or even a set of regulators, be superior to those of the ones being regulated?" wrote Siddharth Singh, the editor of Mint, India's second largest business magazine.
"What is needed," said Mark Hendrickson in Forbes magazine, "is not a hyper-regulatory nanny government to try to insulate us from our own shallowness and silliness. The remedy for 'phoolishness' lies beyond the scope of government."
But says Prof Shiller, "our civilization has gotten so complicated we do need complex regulation.
"It's not that the government knows better, it's that civil society knows better. Civil society is a concept, a civilization of responsible adults who do not delegate all decisions to 'the government'.
"In a civil society, society doesn't just take it for granted that whoever is, say, prime minister, is right. We are personally responsible. And that's why things work - it's not just because of free markets."