I had occasion recently to read some of Akerlof and Shiller’s new book Phishing for Phools. I found it, to be perfectly blunt, infuriating. The book is paternalistic. It assumes that free markets reward cheaters. It equates marketing with fraud. It engages in a score of other offenses.
But the aspect of the book that inspired my most emphatic marginalia is its contempt for the decisions made by people who are poorer and from a lower social class than the authors.
For example, the popular airport chain Cinnabon comes in for a lot of critique in the book for using the appealing smell of fresh cinnamon rolls to appeal to consumers’ appetites, while occluding the nefarious truths that a “Cinnabon is made with margarine; it has 880 calories; and it is slathered with frosting.”
Unsurprisingly, the bakery at Whole Foods isn’t mentioned.
Akerlof and Shiller also enjoy reminding us that “even if we are careful 99 percent of the time, the remaining 1 percent, when we act as if ‘money does not matter’ can undo all that prior rectitude.” And they have nothing but contempt for the businesses that are “keenly aware of those 1 percent moments.” These businesses, which they say often focus on rites of passage like weddings and funerals, “target” consumers ‘when love (or other motivations) trump our budgetary caution.’
One of their primary examples of this is the funeral business.
The parlor director carefully lays out the caskets to induce the choice, for example, of the Monaco ‘with Sea Mist polished finish, interior richly lined in 600 Aqua Supreme velvet, magnificently quilted and shirred.’
Their contempt for consumers who would be tempted by such a object, and for businesses that would provide it, is evident in every adjective. They don’t want that kind of funeral for themselves or for their loved ones. It’s overdone. It’s a waste of money. It’s…tacky.
But Akerlof and Shiller’s opinon of that funeral shouldn’t count for much if they aren’t the ones planning the funeral.
Back in 1913, Maude Pember Reeves took on exactly this same topic in her book Round About a Pound A Week, which looked at the living expenses of London’s working poor. She devotes an entire chapter, called “Thrift,” to the then-common and often-disparaged practice among the working poor of purchasing funeral insurance–for up to 10% of the whole household budget. She notes:
One of the criticisms levelled at these respectable, hard working, independent people is that they do like to squander money on funerals. It is a view held by everyone who does not know the real circumstances. …[The working poor] are likely to lose one or more of their children. The poorer they are, the more likely are they to lose them…the pauper funeral is wanting in dignity and in respect to their dead.
Pember Reeves then gives, in heart-breaking detail, the budgets used by families for the burial of their children. Generally, they seem to spend about two weeks salary. Is this extravagance? Who gets to decide?
Who are Akerlof and Shiller to say that the Monaco Casket is too much?
And yet they say it. And Pember Reeves reminds us that puritanical busy bodies have been saying the same thing for well over a century:
Experience shows how fatally easy it is for people to label all poverty as the result of drink, extravagance, or laziness. It is done every day in the year by writers and speakers and preachers, as well as by hundreds of well-meaning folks with uneasy consciences. They see, or most often hear of, people whose economy is different from their own. Without trying to find out whether their own ideas of economy are practicable for the people in question, they dismiss their poverty as ‘the result of extravagance’….Or they see or hear something which seems to them bad management. It may be, not good management, but the only management under the circumstances. But as the circumstances are unknown, the description serves, and middle class minds, only too anxious to be set at rest, are set at rest.
Towards the end of their book, Akerlof and Shiller tell the story of Shiller’s being caught by his own susceptibility to marketing. He was persuaded to buy gourmet cat food for his cat. Wondering if the advertised deliciousness of the cat food was accurate, Shiller tasted it and was horrified to discover it was gross. He takes this as proof that businesses depend on “shrouded attributes” to make money.
Akerlof and Shiller do note that this test was not definitive. “If only Lightning could have spoken, we could really know” if the cat food was any good or not. Lightning of course, is perfectly capable of indicating a preference. All Akerlof and Shiller needed to do was to offer her a choice between two dishes of cat food.
But they don’t want to do that. Because she might choose the one they don’t approve of.
And if they don’t recognize that even a cat can express preferences that might not replicate their own, why would they recognize that other people may as well?