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Nothing wrong with being gullible

One serious contender for the title of History’s Most Gullible Person is a man from New York who is suing a psychic on the grounds that she’s a total fraud. Priscilla Delmaro stands accused of fleecing her anonymous customer of more than £450,000, which she’d promised to use to help him win the heart of a woman he loved. (Her expenses included £19,000 for a time machine, plus £50,000 for an 80-mile bridge made of gold.

 Coincidentally, the object of the man’s affection died midway through this process, but Delmaro allegedly kept plugging away, promising that the dead woman would be reincarnated, at which point the man’s impressively elastic credulity snapped. “This caused me to start thinking,” he wrote in a statement provided to detectives, “that Delmaro wasn’t everything she was purporting to be.” Delmaro has denied the allegations.

 If what he said is true, Delmaro’s customer, it’s reasonable to conclude, was a fool. And he certainly counts as a “phool”, as defined in Phishing For Phools, a forthcoming book by the economists George Akerlof and Robert Shiller. Technically, “phishing” is the scam whereby fraudsters persuade you to part with your financial details, using emails and websites that look trustworthy. But Shiller and Akerlof argue that deception and manipulation aren’t confined to the fringes of the economy; instead, they’re central to how consumer capitalism works.

We’re being phished all the time (making us, in their terminology, phools). In a free market, one set of profit opportunities comes from exploiting people’s psychological weaknesses. Trickery is so commonplace, the authors show, that the line we draw between sleazy or illegal behaviour and canny business practice is pretty arbitrary. Almost as arbitrary, in fact, as the line between a fraudulent psychic and a non-fraudulent one.

Take gyms. They advertise themselves as routes to fitness, yet in most cases their business model rests on monetising laziness: if most people made good use of their monthly subscriptions, the cost of providing space and equipment would lead to bankruptcy. Another example: insider traders get prosecuted, because they profit from secret data that others can’t access. But when Facebook uses internal data from millions of users to display the perfect ad for you – targeted to push psychological buttons you didn’t know you had – is that so different? Some sites now display different prices to different shoppers, based on what their online behaviour suggests they’ll be willing to pay, which is somehow both; a) entirely sensible and b) utterly outrageous.

The point isn’t that any of this is necessarily wrong; rather, Shiller and Akerlof want us to think of our susceptibility to manipulation as a resource – which, in a market economy, someone is naturally going to try to exploit. From this bleak perspective, the salesman who shows you the £2,000 TV first, so that the £800 model feels like a bargain, isn’t a con artist – he’s just doing his job. Yours is never to forget that he’s doing it.

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