Markets and Manipulation: Time for a Paradigm Shift?

30 Pages Posted: 28 Apr 2016

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: April 27, 2016

Abstract

There is a growing appreciation in economics that people have emotional vulnerabilities, commitments to social norms, and systematic irrationalities, which impact their decision making and choice in the marketplace. The flip side of this is that human beings are susceptible to being manipulated by unscrupulous agents who are single-minded about marketing their services and wares. This paper reviews George Akerlof and Robert Shiller's book, Phishing for Phools: The Economics of Manipulation and Deception, alongside other writings in the field, and discusses how this research agenda can be taken forward. The paper shows how this new research can shed light on the ubiquity of corruption in so many societies, and proposes ideas for controlling corruption.

Keywords: Regulatory Regimes, Legislation, Social Policy, Judicial System Reform, Equity and Development, Legal Reform, Achieving Shared Growth, Pro-Poor Growth, National Governance, Government Policies, Public Finance Decentralization and Poverty Reduction, Legal Products, Public Sector Economics, Youth and Governance

Suggested Citation

Basu, Kaushik, Markets and Manipulation: Time for a Paradigm Shift? (April 27, 2016). World Bank Policy Research Working Paper No. 7653. Available at SSRN: https://ssrn.com/abstract=2771472

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
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IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
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