Table of Contents
Preface
This book is pretty much what you’d expect from a behavioral economist. It’s full of entertaining stories that track the age‑old conflict between opportunistic entrepreneurs and the governments trying to shield us from our own predictable mistakes.
Profit Seeking and Morality
The book’s core idea is simple: humans aren’t 100% rational, and everyone has weak spots that can be exploited by those chasing profit without regard for the suffering they cause. The authors aren’t against profit itself, they acknowledge many honest businesspeople with good intentions. But they also stress there are plenty who’ll do anything for a gain, no matter the human cost.
Personally, I think markets and morality are two different things, and maybe it’s better if they stay that way. Businesspeople aren’t philosophers. They can be great at spotting and filling demand, but they can be completely delusional about everything else.
Take drug cartels. I don’t think buying or selling drugs is inherently immoral, but killing people in the process definitely is. So who’s to blame? Should we fault business for discovering and satisfying this demand? Should we blame consumers for creating it? Or should we blame governments for outlawing it, which handed the market to the most ruthless criminals?
Morality is complex. Profit-seeking, at its base, is simple.
Irrational Behavior
One of the most interesting stories in Phishing for Phools is about the gambling industry. Gambling was far more widespread in the past, and countless people lost everything to addiction. Is gambling rational in a cold utilitarian sense? Of course not, people have known that for thousands of years, yet they still do it.
Gambling addiction takes many forms: lotteries, casinos, slot machines in a corner store. People will bet on anything: sports, chicken fights, crypto. The authors credit governments for outlawing many gambling activities, which has helped shrink the pool of addicts. Thanks to those regulations, plenty of potential gamblers never lost their money in the first place.
Should We Enforce Rationality?
I think those stories are great, and they make a lot of sense. It’s hard to deny the positive effects of regulations. Gambling is prohibited in most of the countries, which prevents a lot of suffering. Anti tobacco campaigns have saved many lives but, unfortunately, it’s not the whole story. The war on drugs, for example, was lost and there is a lot of evidence that it only made things worse.
I think it’s very dangerous to make decisions for other people, and it’s tempting for any government to say “I know better!” and ban something. It’s disturbing that the governments treat people as idiots who do not know what they really want. I don’t doubt the benefits of certain restrictions, but the negative effects of centralization of power and control can greatly outweigh those benefits. History shows us that idiots can reach pretty high places in politics and force their will on others.
Another issue I have with such a solution is the moral one: should we make the lives of some people harder in order to make the lives of other people easier? Let’s take taxes on alcohol as an example: alcohol is not bad in moderation so why are we taxing it more than bananas? The regulation proponents would say it’s because some people can’t drink in moderation. Yea, that’s a good point, but why should the rest of us pay for that?
Conclusion
Phishing for Phools is a great book that makes a familiar behavioral‑economics point: we’re not as rational as we think. It’s packed with compelling stories about profiting from deception and how governments try to counter those “immoral” practices.
Behavioral economists are often brilliant at weaving anecdotes into a good narrative, I just wish they were as productive at building credible financial models.
Personally, I don’t see regulation as a one‑size‑fits‑all fix, and I think we should be cautious about unnecessary government intervention. The recent push to restrict free speech is a telling example. It’s tempting to label those who disagree with us as either evil or stupid, but reality is more complicated. More rules and censorship often backfire. Paternalism tends to create unintended consequences, and it’s surprisingly easy to end up doing more harm than good.