Petty fraud

Lawsuits are not free. Even in free markets, lawsuits are likely to be costly.

Now, since the opportunity cost of taking a fraud to court frequently exceeds the opportunity cost of accepting the loss, in the absence of regulation, won't there be an abundance of petty fraud?

Or is anyone here going to argue that under Anarchism, you could sue someone for under $20?

Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing.

 The risk of fraud is always present. Consumers are wary. Overcoming risk-aversion is one of the most difficult tasks of businesses. It's what makes low-cost brands so strong. Who would trust a product this cheap if there wasn't a name brand on it?

Stranger:

 The risk of fraud is always present. Consumers are wary. Overcoming risk-aversion is one of the most difficult tasks of businesses. It's what makes low-cost brands so strong. Who would trust a product this cheap if there wasn't a name brand on it?

 

 

"Fraud" is not simply risk.

It's a violation of the non-aggression principle and it's an economic loss that stems from deception, not chance. 

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

There is a psychological explanation for this: "buyer's remorse."

 Also, even if people followed what you just said, then that would lead to economic inefficiency in the pareto sense, as people would end up avoiding cheap goods that were perfectly OK and spend more on brand names, just because of snake oil salesmen.

Nathyn:

It's a violation of the non-aggression principle. 

You lost me there, how is someone being agressed against if someone sells them a 'Rolex' for $20 and they honestly believe that they are buying the real deal?

Nathyn:

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

How's that fraud though?

There is a certain amount of truth to the saying 'you get what you pay for'.  

Anonymous Coward:

You lost me there, how is someone being agressed against if someone sells them a 'Rolex' for $20 and they honestly believe that they are buying the real deal?

Well clearly, if someone sells a fake watch that they misrepresent as the genuine article, it's fraud. Just because most people would realize that you couldn't possibly buy a Rolex for that price doesn't make it any less of a fraud.  And fraud is aggression.

Nathyn:

Lawsuits are not free. Even in free markets, lawsuits are likely to be costly.

Now, since the opportunity cost of taking a fraud to court frequently exceeds the opportunity cost of accepting the loss, in the absence of regulation, won't there be an abundance of petty fraud?

Or is anyone here going to argue that under Anarchism, you could sue someone for under $20?

Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing.

 

 

 i'm assuming by fraud you mean misrepresentation.  for what it's worth, here in australia to pursue a consumer claim for misrepresentation requires quite a bit of paperwork with the  dept of consumer affairs (dept of fair trading).  these state government bodies seek to mediate claims, but if there is no reconciliation between the parties, it's off to the civil courts.  try doing that on the cheap!

 for $5  you ain't going anywhere, either now or in an hypothetical anarchical future.  try screaming, at least you'll get it off your chest.  there is probably a moral hazard argument to be had here, too.  were the nanny-state not around, people would wise up more.  a little bit more circumspection in business dealings mightn't be a bad thing.

leonidia:

Well clearly, if someone sells a fake watch that they misrepresent as the genuine article, it's fraud. Just because most people would realize that you couldn't possibly buy a Rolex for that price doesn't make it any less of a fraud.  And fraud is aggression.

I understand what fraud is, hence the example, what I don't understand is how you guys are equating fraud with aggression.

I think I more associate aggression with coercion like 'buy this magazine or I shoot this dog' or 'buy my protection to make sure bad things don't happen' instead of 'I got this real good deal on a Rolex that my girlfriend's uncle asked me to sell so he can pay for his cancer treatment'. 

Anonymous Coward:

what I don't understand is how you guys are equating fraud with aggression.

"Aggression" in this context is defined as any act that violates the natural rights of another. It doesn't necessarily involve physical violence or the threat of physical violence. Theft and fraud are both examples of aggression.

Anonymous Coward:

Nathyn:

It's a violation of the non-aggression principle.

You lost me there, how is someone being agressed against if someone sells them a 'Rolex' for $20 and they honestly believe that they are buying the real deal?

He says he'll give you a rolex for $20. If it's not a rolex, he's violated a contract.

Anonymous Coward:

Nathyn:

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

How's that fraud though?

It isn't. I just explained how branding isn't a solution, because people will still tend to buy cheap non-brand name products. And even if they mostly only bought brand name products, that's pareto inefficiency.

Anonymous Coward:

There is a certain amount of truth to the saying 'you get what you pay for'. 

As a general principle, avoiding products which are surprisingly cheap is a good way for an individual to avoid fraud. But, as noted above, whether or not every individual did or did not follow that course of action, either way there is a problem: Either mass amounts of fraud or people only buy expensive goods.

newson:

Nathyn:

Lawsuits are not free. Even in free markets, lawsuits are likely to be costly.

Now, since the opportunity cost of taking a fraud to court frequently exceeds the opportunity cost of accepting the loss, in the absence of regulation, won't there be an abundance of petty fraud?

Or is anyone here going to argue that under Anarchism, you could sue someone for under $20?

Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing.

 

 i'm assuming by fraud you mean misrepresentation.  for what it's worth, here in australia to pursue a consumer claim for misrepresentation requires quite a bit of paperwork with the  dept of consumer affairs (dept of fair trading).  these state government bodies seek to mediate claims, but if there is no reconciliation between the parties, it's off to the civil courts.  try doing that on the cheap!

 for $5  you ain't going anywhere, either now or in an hypothetical anarchical future.  try screaming, at least you'll get it off your chest.  there is probably a moral hazard argument to be had here, too.  were the nanny-state not around, people would wise up more.  a little bit more circumspection in business dealings mightn't be a bad thing.

Wait, wait, are you actually agreeing with the idea of proactively going after fraud as a criminal offense?

Because that's one thing I was going to bring up: The government can go after such people. One good example is the FTC going after Kevin Trudeau.

leonidia:

Anonymous Coward:

what I don't understand is how you guys are equating fraud with aggression.

"Aggression" in this context is defined as any act that violates the natural rights of another. It doesn't necessarily involve physical violence or the threat of physical violence. Theft and fraud are both examples of aggression.

OK, so if I don't pay my phone-bill, I haven't aggressed against anyone?

Again, I get the impression that if I had used an example of a large firm being defrauded by Tiny Tim, some of you guys would all be enraged at how the firm had been so unjustly wronged.

 Apologetics for fraud is vulgar libertarianism.

leonidia:

Anonymous Coward:

You lost me there, how is someone being agressed against if someone sells them a 'Rolex' for $20 and they honestly believe that they are buying the real deal?

Well clearly, if someone sells a fake watch that they misrepresent as the genuine article, it's fraud. Just because most people would realize that you couldn't possibly buy a Rolex for that price doesn't make it any less of a fraud.  And fraud is aggression.

 

 

you may enlist rolex to go after the bad guy. they've very interested in pursuing counterfeiters, both the little and big fish.  the amount they spend on goodwill makes prosecution of counterfeiters worthwhile.  as for your redress as a fraud victim, your chances are zip, both under the current codes, and the hypothetical, anarchic-future scenario.   be thankful you're not in present-day europe, where even purchasers of knock-offs have been prosecuted, along with the vendors.  (there's assumed to be complicity between the parties).  anyway some of those fake rolex' keep pretty good time,  probably  a good deal for $20!

Nathyn:

newson:

Nathyn:

Lawsuits are not free. Even in free markets, lawsuits are likely to be costly.

Now, since the opportunity cost of taking a fraud to court frequently exceeds the opportunity cost of accepting the loss, in the absence of regulation, won't there be an abundance of petty fraud?

Or is anyone here going to argue that under Anarchism, you could sue someone for under $20?

Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing.

 

 i'm assuming by fraud you mean misrepresentation.  for what it's worth, here in australia to pursue a consumer claim for misrepresentation requires quite a bit of paperwork with the  dept of consumer affairs (dept of fair trading).  these state government bodies seek to mediate claims, but if there is no reconciliation between the parties, it's off to the civil courts.  try doing that on the cheap!

 for $5  you ain't going anywhere, either now or in an hypothetical anarchical future.  try screaming, at least you'll get it off your chest.  there is probably a moral hazard argument to be had here, too.  were the nanny-state not around, people would wise up more.  a little bit more circumspection in business dealings mightn't be a bad thing.

Wait, wait, are you actually agreeing with the idea of proactively going after fraud as a criminal offense?

Because that's one thing I was going to bring up: The government can go after such people. One good example is the FTC going after Kevin Trudeau.

 

 

don't get too excited.  when i say it's off to the civil courts for redress, it's out of your pocket.  not joe taxpayer's.  bottom line, the absence of government would make no difference. small claims are likely to be written off to experience.

Nathyn:

Wait, wait, are you actually agreeing with the idea of proactively going after fraud as a criminal offense?

How exactly do you think it's possible to have a Free Market without protections against fraud? It's one of the three things necessary along with protections against theft and coercion.

I don't know how proactive you could really be, you have either defrauded someone or you haven't. Intent to defraud seems a little iffy in my book.

Oh, and fraud is almost certainly a civil matter to be resolved between the two parties involved and not a criminal matter where the State is the one seeking restitution.

Nathyn:

OK, so if I don't pay my phone-bill, I haven't aggressed against anyone?

Again, I get the impression that if I had used an example of a large firm being defrauded by Tiny Tim, some of you guys would all be enraged at how the firm had been so unjustly wronged.

 Apologetics for fraud is vulgar libertarianism.

You have 'aggressed' against the owners of the phone company.

So in some way it's fine to commit fraud against an impersonal entity such as the phone company in your universe? I guess it's not the act of fraud that's wrong but the intent, if it's a wealth redistribution scheme (steal from the rich firm to give to poor Tiny Tim) then it's just a form of guerrilla welfare huh.

You, my friend, have a seriously broken moral compass. 

 

Grasping at straws. 

Nathyn:

"Fraud" is not simply risk.

It's a violation of the non-aggression principle

It is, no one denies that.

What's your point? That petty fraud will run rampant and the streets will be filled with wild fake rolex dealers if there is no leviathan to prevent it?

Like I said earlier, grasping at straws.

Nathyn:

and it's an economic loss that stems from deception, not chance.

Talk about deception.

Petty fraud is not a significant economic loss, certainly not enough of one to just come out and call it a plain economic loss.

Nathyn:

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

They're crap to you. Not to her.

 

I suggest you buy your own food, mooch.  

 

Nathyn:

There is a psychological explanation for this: "buyer's remorse."

 Also, even if people followed what you just said, then that would lead to economic inefficiency in the pareto sense, as people would end up avoiding cheap goods that were perfectly OK and spend more on brand names, just because of snake oil salesmen.

 

*** Pareto.

As an Italian economist, let me inform you that Italian economists really suck.

Nathyn:

Stranger:

 The risk of fraud is always present. Consumers are wary. Overcoming risk-aversion is one of the most difficult tasks of businesses. It's what makes low-cost brands so strong. Who would trust a product this cheap if there wasn't a name brand on it?

 

 

"Fraud" is not simply risk.

It's a violation of the non-aggression principle and it's an economic loss that stems from deception, not chance. 

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

There is a psychological explanation for this: "buyer's remorse."

 Also, even if people followed what you just said, then that would lead to economic inefficiency in the pareto sense, as people would end up avoiding cheap goods that were perfectly OK and spend more on brand names, just because of snake oil salesmen.

who says these cheap and cheerful shoppers are irrational?  you?  regardless of gratuitous  value judgements, the fact that these products consistently sell is all the justification that's required.  you sound high maintenance! but importantly you forget that although the products may not be branded, the hosting retail outlet has got its reputation on the line.  anyway, i see this all as a red herring, unless you can point out where the fraud is?

  Some people here seem to be confused as to what fraud is.  Fraud is a crime and involves deception for personal gain.   It is theft by deception.   It is more than a simple contract violation,  which is not necessarily fraud.   The key distinguishing feature of fraud is deception. 

Personally I doubt that under Anarchism you'll be able to sue anybody at all...

 Let me remember that frauds are long-running and really dangerous only when governments become accomplices: the average con-man is usually run out of town or caught after a short time. But large scams (like Parmalat or the Argentinian bonds) will only burst when they reach a critical mass, too large even for governments to handle, and even then suing will not solve anything since government will step in "to tutelate the meek" and turn the lawsuit into yet another scam. Just ask who sued Parmalat on both sides of the Atlantic.

Anonymous Coward:

You lost me there, how is someone being agressed against if someone sells them a 'Rolex' for $20 and they honestly believe that they are buying the real deal?

Depends.

Whereas being dishonest is not a violation of natural law or the non-aggression axiom, using deceit to convince a person to buy something he/she might not otherwise have bought is clearly fraud and a violation of the non-aggression axiom.

If you sell me a fake Rolex for $20, but don't tell me "it's a Rolex," then you have not aggressed against me.  I have assumed it was a Rolex, and it is my own fault.

But if you sell me a fake Rolex for $20 and tell me "this is a Rolex," then you have committed a crime, for I gave you money in exchange for something I did not receive, i.e. a real Rolex.  In other words, the seller has committed theft, which is clearly aggression.

Anonymous Coward:

Nathyn:

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

How's that fraud though?

I agree, that's not fraud at all.

Niccolò:

Nathyn:

"Fraud" is not simply risk.

It's a violation of the non-aggression principle

It is, no one denies that.


What's your point? That petty fraud will run rampant and the streets will be filled with wild fake rolex dealers if there is no leviathan to prevent it?

Like I said earlier, grasping at straws.

Yes, actually. And I think the 19th century, with the rampant use of adulterants, is evidence to support it.

Niccolò:

Nathyn:

and it's an economic loss that stems from deception, not chance.

Talk about deception.

Petty fraud is not a significant economic loss, certainly not enough of one to just come out and call it a plain economic loss.

Not significant? You mean, sometimes fraud is OK if it's really, really small?

newson:

who says these cheap and cheerful shoppers are irrational?  you?  regardless of gratuitous  value judgements, the fact that these products consistently sell is all the justification that's required.  you sound high maintenance! but importantly you forget that although the products may not be branded, the hosting retail outlet has got its reputation on the line.  anyway, i see this all as a red herring, unless you can point out where the fraud is?

They're irrational, even by their own subjective standards, because they regret making the purchase afterwards, after realizing they overvaluated the item up to the point of sale.

http://en.wikipedia.org/wiki/Buyer%27s_remorse

Psychologically, in the phase before purchasing, the prospective buyer feels the positive emotions associated with the purchase (desire, a sense of heightened possibilities, and an intimation of the enjoyment that will accompany using the product, for example): afterwards, having made the purchase, he or she is more fully able to experience the negative aspects: all the opportunity costs of the purchase; and the reduced purchasing power remaining.

Nathyn:

You mean, sometimes fraud is OK if it's really, really small?

Isn't that exactly what you were implying with your Tiny Tim vs. Big Firm statement?

Which is it, right or wrong for Tiny Tim to defraud the Big Firm... Or is it wrong to defraud *and* wrong to defend the rights of Big Business?

Nathyn:

They're irrational, even by their own subjective standards, because they regret making the purchase afterwards, after realizing they overvaluated the item up to the point of sale.

Still not fraud...

What's that got to do with anything that has been discussed anyway? You really aren't even making a point here.

If someone regrets their pruchase after they and the seller came to an agreement, that at the time was beneficial to both parties, and the buyer goes home and realizes that they didn't get exactly what they expected -- or were acting irrationally when they purchased the item -- what does this have to do with the seller? If the seller's nice they might refund the money in the hopes of keeping them as a future customer but that's as far as their responsibility in the matter goes.

What are you proposing here that the seller interviews the potential buyer to ensure they are both a rational individual and that they fully understand what they are purchasing. Or perhaps the state needs to step in and protect irrational people from themselves.

As I posted in another discussion on another site -- marginal utility accounts for 99.999% of all economic valuations while the 0.001% accounts for the people who are truly irrational actors -- or something to that effect...It made much more sense in its original context.

I'm starting to get the opinion that you are displacing *your* irrationality onto your mother's 'crap' purchases. 

Nathyn:

Yes, actually. And I think the 19th century, with the rampant use of adulterants, is evidence to support it.

I'd be surprised to see if the "rampant use of adulterants" has had any decrease within the past century.

 

Adulterants, are not incorrect, or even bad. Some may be, others may be as simple as a switch from sugar to splenda. Pure logic suggests that adulterants, if not followed upon with suits or class action suits, possess no harm enough for people to really care, in which case it is neglectable. 

 

Nathyn:

 
Not significant? You mean, sometimes fraud is OK if it's really, really small?

Again, talk about deception.

"Petty fraud is not a significant economic loss, certainly not enough of one to just come out and call it a plain economic loss."

 

You aren't very bright, are you? What do you think "petty" means? What do you think economic loss means? Is economic loss "ok"? That's not really applicable. Is fraud ok? No. It clearly violates a contract. Is fraud tolerable? Just as tolerable as a man telling me he wants only to discuss as opposed to needlessly agitate with foolish statements and reductio ad absurdums.

Isn't the easiest solution simply to impose the cost of litigation on the perpetrator, as well as the cost of the original fraud?

After all, they're responsible for the litigation being needed...

 

 

 "Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing."

I do not neccesarily have to sue, I could just tell everybody I know that you defrauded me and you could lose potential clients or friends that way.  So, based on your own reputation there is an incentive not to defraud someone even in anarchism. 

 

 Nathyn, why are you dragging buying cheap brands into a thread about fraud (the seller has no obligation to force the consumer to be 'rational'; if the consumer repeatedly buys a product they claim to not like, they clearly prefer it to other alternatives, for whatever reason)? You're entangling two distinct issues.

Anonymous Coward:

Nathyn:

You mean, sometimes fraud is OK if it's really, really small?

Isn't that exactly what you were implying with your Tiny Tim vs. Big Firm statement?

Which is it, right or wrong for Tiny Tim to defraud the Big Firm... Or is it wrong to defraud *and* wrong to defend the rights of Big Business?

Fraud is always wrong. I made the Tiny Tim vs. Big Firm statement because many Libertarians sometimes seem to be apologists for the same "corporate socialism" they allegedly oppose.

Anonymous Coward:

Nathyn:

They're irrational, even by their own subjective standards, because they regret making the purchase afterwards, after realizing they overvaluated the item up to the point of sale.

Still not fraud...

What's that got to do with anything that has been discussed anyway? You really aren't even making a point here.

You already asked this question and I already answered it. In case you forgot, here is my answer again:

Nathyn:

Anonymous Coward:

Nathyn:

A lot of people trust non-brand name products that are cheap, because they're irrational. My mother frequently brings home products that she found that were "on sale." Often, they're crap, especially when they're food. The fact that they are consistently crap hasn't stopped her from purchasing them.

How's that fraud though?

It isn't. I just explained how branding isn't a solution, because people will still tend to buy cheap non-brand name products. And even if they mostly only bought brand-name products, that's pareto inefficiency.

Niccolò:

Nathyn:

Yes, actually. And I think the 19th century, with the rampant use of adulterants, is evidence to support it.

I'd be surprised to see if the "rampant use of adulterants" has had any decrease within the past century.

It has, because of government-required product labeling.

Niccolò:

Adulterants, are not incorrect, or even bad. Some may be, others may be as simple as a switch from sugar to splenda. Pure logic suggests that adulterants, if not followed upon with suits or class action suits, possess no harm enough for people to really care, in which case it is neglectable.

Not bad?!

So, if I advertise that I'm selling butter, which is 80% butter and 20% urine and you purchase it, I haven't committed fraud?

Niccolò:

Nathyn:

 
Not significant? You mean, sometimes fraud is OK if it's really, really small?

Again, talk about deception.

"Petty fraud is not a significant economic loss, certainly not enough of one to just come out and call it a plain economic loss."

You aren't very bright, are you? What do you think "petty" means? What do you think economic loss means? Is economic loss "ok"? That's not really applicable. Is fraud ok? No. It clearly violates a contract. Is fraud tolerable? Just as tolerable as a man telling me he wants only to discuss as opposed to needlessly agitate with foolish statements and reductio ad absurdums.

So, petty theft should be ignored, then?

Inquisitor:

 Nathyn, why are you dragging buying cheap brands into a thread about fraud (the seller has no obligation to force the consumer to be 'rational'; if the consumer repeatedly buys a product they claim to not like, they clearly prefer it to other alternatives, for whatever reason)? You're entangling two distinct issues. 

 

Read the bold text above. Somebody claimed petty fraud won't happen because of branding.

I'm explaining how branding isn't a solution.

It doesn't do a very good job of it, at all, as others have pointed out.

Inquisitor:

It doesn't do a very good job of it, at all, as others have pointed out.

 

So far, it's just been a denial of my argument. "Pareto is an idiot!!" etc..

 OK, let's assume branding is a solution to petty fraud. There's a dilemma:

If people follow that solution, they will pay more for goods than they need to, in order to achieve their own subjective utility.  This is pareto inefficient. People overall are worse off just because of how the system is set up.

Is that clear? And by clear, I don't mean transparent. 

Anyway, I'm out for now. Gotta do some stuff.

It's clear, and yet it is wrong. From their point of view, the action is preferable, hence they act upon it, hence they and the seller both expect gains from trade, ex ante. If they did not prefer it, they'd consume some other good had their expectations been shattered. They may claim they are disatisfied with the product, yet they buy it over and over. Why assume they're irrational and not lying?

nathyn:

newson:

who says these cheap and cheerful shoppers are irrational?  you?  regardless of gratuitous  value judgements, the fact that these products consistently sell is all the justification that's required.  you sound high maintenance! but importantly you forget that although the products may not be branded, the hosting retail outlet has got its reputation on the line.  anyway, i see this all as a red herring, unless you can point out where the fraud is?

They're irrational, even by their own subjective standards, because they regret making the purchase afterwards, after realizing they overvaluated the item up to the point of sale.

 

buyers remorse doesn't explain why customers return to buy "crap", as you call it.   this would be irrational, indeed.  the fact that people don't agree with your choices is neither here nor there. as regards the latest red herring, the "adulterants" issue - even the  language is loaded.  what about stabilizers, preservatives, emulsifiers, colours ?  margarine is naturally white, but people baulked at buying something that didn't look butter-yellow.  the consumer got what was asked for.  many additives serve health as well as aesthetic functions.  and anyway, as a market participant, you can  go to the fresh food stall in the supermarket and diy!  see, no government!  these are all tangents to the original question, which was a good one.

Nathyn:

Fraud is always wrong. I made the Tiny Tim vs. Big Firm statement because many Libertarians sometimes seem to be apologists for the same "corporate socialism" they allegedly oppose.

OK...that makes perfect sense???

Nathyn:

It isn't. I just explained how branding isn't a solution, because people will still tend to buy cheap non-brand name products. And even if they mostly only bought brand-name products, that's pareto inefficiency.

So I went to the wikipedia:

An economic system that is Pareto efficient implies that no individual can be made better off without another being made worse off.

Wouldn't 'pareto inefficiency' imply that it is a system that all individuals could be made better off? Just asking...

Nathyn:

So, if I advertise that I'm selling butter, which is 80% butter and 20% urine and you purchase it, I haven't committed fraud?

WTF -- the fact that you would even *have* to ask such a question shows your complete lack of comprehension of even the basic concepts of logic. 

Nathyn:

So, petty theft should be ignored, then?

If the cost of recovering the 'petty' amount was less than what was lost personally I would just ignore it. I would also try to decrease my exposure to further theft of the same kind.

Perhaps we could call this 'the disutility of pettiness'.

Nathyn:

Lawsuits are not free. Even in free markets, lawsuits are likely to be costly.

Now, since the opportunity cost of taking a fraud to court frequently exceeds the opportunity cost of accepting the loss, in the absence of regulation, won't there be an abundance of petty fraud?

Or is anyone here going to argue that under Anarchism, you could sue someone for under $20?

Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing.

I will try my hand at this, although I'm still new and not as well learned as others here on the board.

My reponse: Free market systems have one Latin phrase which seems to go amiss at times: Caveat emptor: 'let the buyer beware'.  In your proposed anarchic system, if you make a transaction, or otherwise engage in business with someone, you run the risk of not having whatever your expectations may have been to be fulfilled at the completion of the transaction.  Therefore, fraud is a risk that is faced by the buyer/consumer.

However, there is an equal risk faced by the seller/producer.  If you (or I, or anyone for that matter) were defrauded by someone, we are quick to let others know.  We tell our friends and family, 'Hey!  That guy's a thief!  This is what he did..."  I say this because human interaction is the strongest means of gaining information.  We learn from our experiences.  That personal knowledge is something that is easily shared with others, and we normally do so freely so that others may benefit from our experience(s).

So, your defrauder runs the risk of exposure, and will either (1) 'clean up their act', and begin to transact with others in a more honest manner; or (2) continue to defraud people until such time that no one will transact with them.  It may be costly to take them to court over $5, but it's very easy (and free) for me to tell others who may do business with him or her and say, "That shmoe ripped me off!"

My response may not be the best, but that's how I see it.  This is a means of the market regulating itself.

baxter:

Isn't the easiest solution simply to impose the cost of litigation on the perpetrator, as well as the cost of the original fraud?

After all, they're responsible for the litigation being needed...

 

That's one possibility. However, time and effort are themselves valuable, as established by the Austrian theory of time-preference.

Imagine if someone defrauded you by just a couple dollars. Even if the cost of litigation is imposed upon the perpetrator, you're not going to take legal action, anyway. Even if it's a small amount, too, frauds can profit substantially, the same way that a fraud who steals a fraction of a penny from millions of bank accounts can profit substantially.

Plus, are you going to modify the legal system in that way, just to prevent fraud? Or should all losers in civil suits have to pay their opponents' legal fees?

This could be pretty scary, in practice. Imagine if it were like this in America right now and the RIAA sued you for downloading music.

I know you oppose government and intellectual property, but there would still be large businesses in anarchy, right? What should the limit be on the amount of lawyer fees a person can pass on to the loser?

maikol:

 "Say that you defraud me out of $5. I'm not going to sue you over it, because it's not worth it. As a result, there is an incentive in anarchism to commit fraud up until the point that the opportunity cost of accepting the loss exceeds the opportunity cost of suing."

I do not neccesarily have to sue, I could just tell everybody I know that you defrauded me and you could lose potential clients or friends that way.  So, based on your own reputation there is an incentive not to defraud someone even in anarchism.

 

"Ostracizing" doesn't work because you never have any means of being certain if those other people attacking the product are being sincere.

In the case of consumer protection agencies, for all you know, they're bank-rolled by the butter companies.

Plus, when you're buying something like milk, eggs, bread, and butter, who is going to engage in such intensive research for every product you buy?

Inquisitor:

It's clear, and yet it is wrong. From their point of view, the action is preferable, hence they act upon it, hence they and the seller both expect gains from trade, ex ante. If they did not prefer it, they'd consume some other good had their expectations been shattered. They may claim they are disatisfied with the product, yet they buy it over and over. Why assume they're irrational and not lying?

From their POV, the action is not preferable.

Say that you like butter. You see two butter products which seem to be physically identical, but one is substantially cheaper.

If the cheaper butter is, in fact, legitimate, then that is what you'd want, obviously. But since you don't know whether the butter is legitimate, you have to choose the more expensive butter merely out of the fear of being defrauded.

And this is more than just "risk," because it isn't caused by random circumstance. It's caused by large amounts of people engaging in petty fraud because the opportunity of suing them is so great.

newson:

nathyn:

newson:

who says these cheap and cheerful shoppers are irrational?  you?  regardless of gratuitous  value judgements, the fact that these products consistently sell is all the justification that's required.  you sound high maintenance! but importantly you forget that although the products may not be branded, the hosting retail outlet has got its reputation on the line.  anyway, i see this all as a red herring, unless you can point out where the fraud is?

They're irrational, even by their own subjective standards, because they regret making the purchase afterwards, after realizing they overvaluated the item up to the point of sale.

 

buyers remorse doesn't explain why customers return to buy "crap", as you call it.   this would be irrational, indeed.  the fact that people don't agree with your choices is neither here nor there. as regards the latest red herring, the "adulterants" issue - even the  language is loaded.  what about stabilizers, preservatives, emulsifiers, colours ?  margarine is naturally white, but people baulked at buying something that didn't look butter-yellow.  the consumer got what was asked for.  many additives serve health as well as aesthetic functions.  and anyway, as a market participant, you can  go to the fresh food stall in the supermarket and diy!  see, no government!  these are all tangents to the original question, which was a good one.

Because I'm not talking about any specific product, just products, in general. Obviously, if they buy a product and they're dissatisfied with it, they won't purchase it again.

Also, when the item is simply described as "butter," if it includes many things which are not butter, that is misleading and in extreme cases, clearly and obviously fraudulent.

An adulterant is not simply something added to improve the product. By definition, it's something secretly added in order to cut costs.

Anonymous Coward:

So I went to the wikipedia:

An economic system that is Pareto efficient implies that no individual can be made better off without another being made worse off.

Wouldn't 'pareto inefficiency' imply that it is a system that all individuals could be made better off? Just asking...

Yes. You know how giving welfare doesn't necessarily help the poor, because they just end up squandering it and losing it all, in the long-run? Even if you give them money, they don't have any real net gain.

Sometimes, at least theoretically, the reverse can be true: If markets are naturally pareto-inefficient, effective regulation which addresses the problem may involve taking wealth away from one person and giving it to another but it doesn't create any net loss for the person who's wealth was lost, because it creates a net gain for the economy and everyone in it.

Imagine, for a moment, if "statist" arguments are true: If anarchy isn't inherently chaos and you need, at a minimum, a government which establishes basic security. In this instance, anarchy could be said to be pareto-inefficient and though government, even minarchism, is coercive, there is no actual net loss by anybody because everybody benefits.

Anonymous Coward:

Nathyn:

So, if I advertise that I'm selling butter, which is 80% butter and 20% urine and you purchase it, I haven't committed fraud?

WTF -- the fact that you would even *have* to ask such a question shows your complete lack of comprehension of even the basic concepts of logic.

No, it doesn't, because several people here suggested that adulterants are not fraudulent. Why should an adulterant like cow urine be worse than an adulterant like lard?

Anonymous Coward:

Nathyn:

So, petty theft should be ignored, then?

If the cost of recovering the 'petty' amount was less than what was lost personally I would just ignore it. I would also try to decrease my exposure to further theft of the same kind.

Perhaps we could call this 'the disutility of pettiness'.

You would ignore it, but is that right? Again, the fraud would profit substantially.

Nathyn:

newson:

 

buyers remorse doesn't explain why customers return to buy "crap", as you call it.   this would be irrational, indeed.  the fact that people don't agree with your choices is neither here nor there. as regards the latest red herring, the "adulterants" issue - even the  language is loaded.  what about stabilizers, preservatives, emulsifiers, colours ?  margarine is naturally white, but people baulked at buying something that didn't look butter-yellow.  the consumer got what was asked for.  many additives serve health as well as aesthetic functions.  and anyway, as a market participant, you can  go to the fresh food stall in the supermarket and diy!  see, no government!  these are all tangents to the original question, which was a good one.

Because I'm not talking about any specific product, just products, in general. Obviously, if they buy a product and they're dissatisfied with it, they won't purchase it again.

Also, when the item is simply described as "butter," if it includes many things which are not butter, that is misleading and in extreme cases, clearly and obviously fraudulent.

An adulterant is not simply something added to improve the product. By definition, it's something secretly added in order to cut costs.

 tiresome though it is, i've highlighted a couple of points to make your life easier.  first, i'm not talking about butter, just margarine coloured to make it look what market research said people liked!  in fact, in the early days of margarine,  the dairy industry got the government onside to proscribe colouring margarine for the very reason that all the consumer tests revealed people liked yellow.  which are these "nasties' you say are in butter, anyway?

contents, including fillers, are listed on  products.  otherwise there is a risk of litigation should a purchaser suffer  shock via an allergic reaction (eg. msg/peanuts)

i'm saving the best till last...nobody buys products "in general".  every product is the result of a specific, conscious decision. 

Nathyn:

Plus, are you going to modify the legal system in that way, just to prevent fraud? Or should all losers in civil suits have to pay their opponents' legal fees?

This could be pretty scary, in practice. Imagine if it were like this in America right now and the RIAA sued you for downloading music.

You do realize that this is generally the case in the US and in other parts of the world that it is standard, England for one IIRC.

Nathyn:

Plus, when you're buying something like milk, eggs, bread, and butter, who is going to engage in such intensive research for every product you buy?

Hey I have an idea, maybe we could use branding to solve that problem... People trust Kraft so if given a choice they will buy Kraft milk, eggs and butter so they don't have to do intensive research for every product.

OK, I lied -- it's not really my idea.

Nathyn:

If the cheaper butter is, in fact, legitimate, then that is what you'd want, obviously. But since you don't know whether the butter is legitimate, you have to choose the more expensive butter merely out of the fear of being defrauded.

Maybe you could trust that the store values repeat customers more than the limited advantage of defrauding its customers by selling inferior products.

Nope, not my idea either.

Nathyn:

And this is more than just "risk," because it isn't caused by random circumstance. It's caused by large amounts of people engaging in petty fraud because the opportunity of suing them is so great.

Do you have any idea what a companies 'name' is worth to them? Once it gets out that they sell inferior products they have to regain the consumer's trust all over again. Who's going to buy an 'exploding tire' when given a choice for example.

Anyway I thought you said that selling cheap products wasn't 'fraud', you were quite adamant about it actually.

Nathyn:

Yes. You know how giving welfare doesn't necessarily help the poor, because they just end up squandering it and losing it all, in the long-run? Even if you give them money, they don't have any real net gain.

Who's talking about welfare?

I was asking if pareto efficient means that someone loses then does the opposite, pareto inefficient, mean that no one loses.

Nathyn:

Sometimes, at least theoretically, the reverse can be true: If markets are naturally pareto-inefficient, effective regulation which addresses the problem may involve taking wealth away from one person and giving it to another but it doesn't create any net loss for the person who's wealth was lost, because it creates a net gain for the economy and everyone in it.

*cough*Broken Window Fallacy*cough*

Nathyn:

Imagine, for a moment, if "statist" arguments are true: If anarchy isn't inherently chaos and you need, at a minimum, a government which establishes basic security. In this instance, anarchy could be said to be pareto-inefficient and though government, even minarchism, is coercive, there is no actual net loss by anybody because everybody benefits.

What makes you think I'm an anarchist? Maybe I believe in a constitutional democratic republic and that, even though government is inherently destructive, it's the best that I could ever hope for in my lifetime assuming it can be changed from its current course to more constitutional grounds.

What I don't believe in are BS economic theories that are trivially disproven.

Nathyn:

No, it doesn't, because several people here suggested that adulterants are not fraudulent. Why should an adulterant like cow urine be worse than an adulterant like lard?

Have you ever considered that some 'adulterants' may actually *add* value?

Wait, that was already said by someone else too...

Nathyn:

You would ignore it, but is that right? Again, the fraud would profit substantially.

Live and learn... If they need the money that bad let them have it. I can afford to lose $5 here and there, call it my form of guerrilla welfare. You don't think I've never been 'defrauded' fully well knowing they were scamming me but figured they needed the money? I'm not going to just hand over money to a bum but if they 'work' for it then hey, they earned it.

Unless you mean getting defrauded in a consumer transaction then I just don't go there again. Like Blockbuster, I'll never step foot on their property again for the rest of my life.

Is any of that 'right'? Hell, I have no problem with it. 

newson:

Nathyn:

newson:

 

buyers remorse doesn't explain why customers return to buy "crap", as you call it.   this would be irrational, indeed.  the fact that people don't agree with your choices is neither here nor there. as regards the latest red herring, the "adulterants" issue - even the  language is loaded.  what about stabilizers, preservatives, emulsifiers, colours ?  margarine is naturally white, but people baulked at buying something that didn't look butter-yellow.  the consumer got what was asked for.  many additives serve health as well as aesthetic functions.  and anyway, as a market participant, you can  go to the fresh food stall in the supermarket and diy!  see, no government!  these are all tangents to the original question, which was a good one.

Because I'm not talking about any specific product, just products, in general. Obviously, if they buy a product and they're dissatisfied with it, they won't purchase it again.

Also, when the item is simply described as "butter," if it includes many things which are not butter, that is misleading and in extreme cases, clearly and obviously fraudulent.

An adulterant is not simply something added to improve the product. By definition, it's something secretly added in order to cut costs.

 tiresome though it is, i've highlighted a couple of points to make your life easier.  first, i'm not talking about butter, just margarine coloured to make it look what market research said people liked!  in fact, in the early days of margarine,  the dairy industry got the government onside to proscribe colouring margarine for the very reason that all the consumer tests revealed people liked yellow.  which are these "nasties' you say are in butter, anyway?

contents, including fillers, are listed on  products.  otherwise there is a risk of litigation should a purchaser suffer  shock via an allergic reaction (eg. msg/peanuts)

i'm saving the best till last...nobody buys products "in general".  every product is the result of a specific, conscious decision.

My point is that the fact that I can choose to avoid one "good" (I use that term loosely) because you find out it's fraudulent the first time you purchase it doesn't actually stop the fraud itself from ever occuring.

I said "in general" because even if every good is just one sale, people do buy many goods.

You only need to pay once to be defrauded. What you're saying amounts to arguing petty fraud is OK and not a problem for the market, because unless you're an idiot, you'll only be defrauded once per each item.

Anonymous Coward:

Nathyn:

Plus, are you going to modify the legal system in that way, just to prevent fraud? Or should all losers in civil suits have to pay their opponents' legal fees?

This could be pretty scary, in practice. Imagine if it were like this in America right now and the RIAA sued you for downloading music.

You do realize that this is generally the case in the US and in other parts of the world that it is standard, England for one IIRC.

Is it? It's not standard in America. Also, what you just said, says nothing of its justice. If the government does something evil right now, that's no justification for a similar evil in Anarchy, because government can be reformed.

Anonymous Coward:

Nathyn:

Plus, when you're buying something like milk, eggs, bread, and butter, who is going to engage in such intensive research for every product you buy?

Hey I have an idea, maybe we could use branding to solve that problem... People trust Kraft so if given a choice they will buy Kraft milk, eggs and butter so they don't have to do intensive research for every product.

OK, I lied -- it's not really my idea.

Yes, branding. Right. Let's just totally ignore everything I've said in this thread.

Put your fingers in your ears, sing, "Lalalalala!" and think: Branding.

Anonymous Coward:

Nathyn:

If the cheaper butter is, in fact, legitimate, then that is what you'd want, obviously. But since you don't know whether the butter is legitimate, you have to choose the more expensive butter merely out of the fear of being defrauded.

Maybe you could trust that the store values repeat customers more than the limited advantage of defrauding its customers by selling inferior products.

Nope, not my idea either.

Now you're just changing the scale of the problem. Instead of individuals being unable to trust cheap goods and paying an unnecessarily high amount for expensive goods, now you've got firms unable to trust cheap goods, and so they go with expensive ones, or they only purchase from a limited number of trustworty vendors, which drives down the level of competition, which in turn drives up price -- which is again pareto inefficient.

Anonymous Coward:

Nathyn:

And this is more than just "risk," because it isn't caused by random circumstance. It's caused by large amounts of people engaging in petty fraud because the opportunity of suing them is so great.

Do you have any idea what a companies 'name' is worth to them? Once it gets out that they sell inferior products they have to regain the consumer's trust all over again. Who's going to buy an 'exploding tire' when given a choice for example.

Anyway I thought you said that selling cheap products wasn't 'fraud', you were quite adamant about it actually.

The thing is, though, that they wouldn't bear any responsibility, necessarily. Because one firm can only address the problem by making the same kinds of flawed judgments as the consumer could make (going with the more expensive goods), firms just make that same choice and pass the price increase onto the consumer.

Anonymous Coward:

Nathyn:

Yes. You know how giving welfare doesn't necessarily help the poor, because they just end up squandering it and losing it all, in the long-run? Even if you give them money, they don't have any real net gain.

Who's talking about welfare?

I was asking if pareto efficient means that someone loses then does the opposite, pareto inefficient, mean that no one loses.

I used it as an analogy for my following point. Are you capable of tracking logic which runs across more than one or two sentences?

Anonymous Coward:

Nathyn:

Sometimes, at least theoretically, the reverse can be true: If markets are naturally pareto-inefficient, effective regulation which addresses the problem may involve taking wealth away from one person and giving it to another but it doesn't create any net loss for the person who's wealth was lost, because it creates a net gain for the economy and everyone in it.

*cough*Broken Window Fallacy*cough*

A broken window fallacy involves saying a window should be broken, so that it can be fixed.

Pareto inefficiency involves a pre-existing problem that exists independently of the regulation, and would still be a problem without regulation.

Anonymous Coward:

Nathyn:

Imagine, for a moment, if "statist" arguments are true: If anarchy isn't inherently chaos and you need, at a minimum, a government which establishes basic security. In this instance, anarchy could be said to be pareto-inefficient and though government, even minarchism, is coercive, there is no actual net loss by anybody because everybody benefits.

What makes you think I'm an anarchist? Maybe I believe in a constitutional democratic republic and that, even though government is inherently destructive, it's the best that I could ever hope for in my lifetime assuming it can be changed from its current course to more constitutional grounds.

What I don't believe in are BS economic theories that are trivially disproven.

"Pareto inefficiency" isn't a trivially disproven theory. It's pretty widely acknowledged. Surely, if you read Nozick's Anarchy, State, and Utopia, you must have read John Rawls' A Theory of Justice, which it was written in response to -- and which acknowledges the existence of pareto inefficiency.

Anonymous Coward:

Nathyn:

No, it doesn't, because several people here suggested that adulterants are not fraudulent. Why should an adulterant like cow urine be worse than an adulterant like lard?

Have you ever considered that some 'adulterants' may actually *add* value?

Wait, that was already said by someone else too...

Yes, but as I said, an adulterant by definition is something included to secretly diminish the utility of the item while cutting costs. By definition, they add nothing to the item.

It's like saying, "Have you ever considered that some 'poisons' may actually be good for you?"

Anonymous Coward:

Nathyn:

You would ignore it, but is that right? Again, the fraud would profit substantially.

Live and learn... If they need the money that bad let them have it. I can afford to lose $5 here and there, call it my form of guerrilla welfare. You don't think I've never been 'defrauded' fully well knowing they were scamming me but figured they needed the money? I'm not going to just hand over money to a bum but if they 'work' for it then hey, they earned it.

Unless you mean getting defrauded in a consumer transaction then I just don't go there again. Like Blockbuster, I'll never step foot on their property again for the rest of my life.

Is any of that 'right'? Hell, I have no problem with it.

So, there we have it. Petty fraud is OK.

If this is true, would you care if the state coercively taxed you the same amount? If you've seen Team America: World Police, Matt Stone and Trey Parker said that freedom costs $1.05.

 Dear Nathyn, explain why a firm cannot, on behalf of its customers (in reality, on its own behalf), sue a fraudulent company that is mimicking its brand name, and even more, refuse to associate with storeowners who make no endeavour to insure their product's authenticity. 

From their POV, the action is not preferable.

Say that you like butter. You see two butter products which seem to be physically identical, but one is substantially cheaper.

If the cheaper butter is, in fact, legitimate, then that is what you'd want, obviously. But since you don't know whether the butter is legitimate, you have to choose the more expensive butter merely out of the fear of being defrauded.

You've shifted topics now without addressing my original argument. At any rate, you thus prefer avoiding the risk, and going for the more expensive product on account of this. Where is the lack of preference? 

Whether one sues for fraud or not is their matter to consider. If they consider it not to be worth their time, they have made their choice.

Nathyn:

Because I'm not talking about any specific product, just products, in general. Obviously, if they buy a product and they're dissatisfied with it, they won't purchase it again.

Also, when the item is simply described as "butter," if it includes many things which are not butter, that is misleading and in extreme cases, clearly and obviously fraudulent.

An adulterant is not simply something added to improve the product. By definition, it's something secretly added in order to cut costs.

newson:

 tiresome though it is, i've highlighted a couple of points to make your life easier.  first, i'm not talking about butter, just margarine coloured to make it look what market research said people liked!  in fact, in the early days of margarine,  the dairy industry got the government onside to proscribe colouring margarine for the very reason that all the consumer tests revealed people liked yellow.  which are these "nasties' you say are in butter, anyway?

contents, including fillers, are listed on  products.  otherwise there is a risk of litigation should a purchaser suffer  shock via an allergic reaction (eg. msg/peanuts)

i'm saving the best till last...nobody buys products "in general".  every product is the result of a specific, conscious decision.

Nathyn:

My point is that the fact that I can choose to avoid one "good" (I use that term loosely) because you find out it's fraudulent the first time you purchase it doesn't actually stop the fraud itself from ever occuring.

I said "in general" because even if every good is just one sale, people do buy many goods.

You only need to pay once to be defrauded. What you're saying amounts to arguing petty fraud is OK and not a problem for the market, because unless you're an idiot, you'll only be defrauded once per each item.

 

first, nowhere will you find me condoning misrepresentation in any of the posts.  concentrate on what your original question was - ie in the absence of state intervention, would there be a rise in fraud.   many of these posts illustrate that there are self-regulating mechanisms  and behaviours which would limit any rise in fraud. 

second, you raise the point that a defrauded client's lost patronage doesn't stop the next mug getting stung.  fine, but ask your self how many businesses don't depend to a large extent on return customers.  your scenario is illogical because it assumes a totally transient clientelle. in volume businesses, small margins mean you must sell to vast numbers of customers.  a given business can only draw clientelle from a certain  radius, and so you cannot afford to burn too many customers.  where the payoff to the fraud is very large (think financial scam), it is feasible to rip clients off for a while (this is the current case under the sec, notwithstanding mountains of legislation), because this is a high margin proposition.  you don't need a lot of victims to make an awful lot of booty.  however, these customers aren't going to be  happy when they find out about their fraud, and they may well be coming after you either singly or collectively.  that is, prosecution is an economic proposition.

 finally, "adulterants" - in your words, something that adds no value to the product, basically a filler. something that does no harm (that would make absolutely no sense from anyone's perspective), but is less valuable that the product ostensibly being sold.  here's a good example - shops often stock iodized salt with a flowing agent  not because it's necessarily a scam, but because the average punter doesn't want the salt to clog up with humidity . i personally don't like the idea of flowing agents, but the healthy sea-salt packs i tend to buy make a point of advertising their superior quality ie "no filling agents".  see how it works, the lazy or uninformed customer is kindly helped by the competition among brands to be aware of the pitfalls of lesser products. 

Nathyn:

Is it? It's not standard in America. Also, what you just said, says nothing of its justice. If the government does something evil right now, that's no justification for a similar evil in Anarchy, because government can be reformed.

You've never heard of suing for legal fees? It's standard for lawyers to throw that in. What isn't standard is that 'loser pays' in codified into the legal system as in other countries.

Big news a while back, the lady who won against the RIAA sued for legal fees and won but the RIAA lawyers claimed the amount they were seeking was too high so the judge told them to 'open their books' to see if what they spent was comparable to the defense costs.

Oh, and by the way I actually said it's not standard in America.

Nathyn:

Yes, branding. Right. Let's just totally ignore everything I've said in this thread.

Put your fingers in your ears, sing, "Lalalalala!" and think: Branding.

From what I can tell you haven't proposed a solution to this problem. It would appear that you don't wish to hear of any solutions either.

So what's your point then? The most obvious solution is 'flawed' according to you so big deal, nobody claimed the world is perfect.

Nathyn:

Now you're just changing the scale of the problem. Instead of individuals being unable to trust cheap goods and paying an unnecessarily high amount for expensive goods, now you've got firms unable to trust cheap goods, and so they go with expensive ones, or they only purchase from a limited number of trustworty vendors, which drives down the level of competition, which in turn drives up price -- which is again pareto inefficient.

That doesn't make sense at all. Firms will give the customer what they value if they value them as a customer. This equally applies to the store being the 'customer' as it does to the buying public.

You know the stored have these people called 'buyers' who go to these 'shows' and place orders with 'vendors'. My mom used to do it. Well, one of the things they do if give out free samples of the products so the 'buyers' can judge the quality of the product for the store and ultimately the consumer.

I didn't have to buy personal hygiene products for *years*, they loaded her down and when I came to visit she loaded me down. You could say my 'sacrifice' in this matter helped to ensure that the customers at her stores were getting exactly what they paid for.

Nathyn:

The thing is, though, that they wouldn't bear any responsibility, necessarily. Because one firm can only address the problem by making the same kinds of flawed judgments as the consumer could make (going with the more expensive goods), firms just make that same choice and pass the price increase onto the consumer.

See real life example above...

Nathyn:

I used it as an analogy for my following point. Are you capable of tracking logic which runs across more than one or two sentences?

There's your problem... It's standard to use Bad Car Analogies on this here interweb, noob.

Nathyn:

A broken window fallacy involves saying a window should be broken, so that it can be fixed.

Pareto inefficiency involves a pre-existing problem that exists independently of the regulation, and would still be a problem without regulation.

And I quote..."the problem may involve taking wealth away from one person and giving it to another but it doesn't create any net loss for the person who's wealth was lost, because it creates a net gain for the economy and everyone in it."

Ok, I just straight refuse to explain how the Broken Window Fallacy applies to the above...

Nathyn:

"Pareto inefficiency" isn't a trivially disproven theory. It's pretty widely acknowledged. Surely, if you read Nozick's Anarchy, State, and Utopia, you must have read John Rawls' A Theory of Justice, which it was written in response to -- and which acknowledges the existence of pareto inefficiency.

I can think of many 'widely acknowledged' theories that are trivially disproven...

The problem is the people who apply the theories (usually) directly benefit from them so they chose to ignore the opposing viewpoints.

A 'pro-statist' government applying 'pro-statist' economic theories doesn't in any way attest to the validity of said theories.

Nathyn:

Yes, but as I said, an adulterant by definition is something included to secretly diminish the utility of the item while cutting costs. By definition, they add nothing to the item.

It's like saying, "Have you ever considered that some 'poisons' may actually be good for you?"

Perhaps I put quotes around 'adulterant' because I recognized your application of the 'loaded question fallacy' and was trying to work around it to move the discussion to more logically solid ground.

It would appear you have no intention of forming a reasonable argument though.

Nathyn:

So, there we have it. Petty fraud is OK.

Does this mean you 'won' the argument and will now go away?

If you read 'petty fraud is OK' from my personal moral opinion of my actions when encountered by petty fraud then by all means you 'won'...now go away. 

Let me make the logical leap to save some of your brain cycles.

AC said petty fraud is OK. AC posts on a forum where 'Rothbardians' post therefore the Rothbardians say petty fraud is OK. 

Nathyn:

If this is true, would you care if the state coercively taxed you the same amount? If you've seen Team America: World Police, Matt Stone and Trey Parker said that freedom costs $1.05.

You have no idea how happy I would be if the State only taxed me $1.05...

Inquisitor:

 Dear Nathyn, explain why a firm cannot, on behalf of its customers (in reality, on its own behalf), sue a fraudulent company that is mimicking its brand name, and even more, refuse to associate with storeowners who make no endeavour to insure their product's authenticity.

That wasn't what I said.

When firms sell products, they don't always brand them. Think: When you buy butter from the grocery store, it isn't always "Supermarket butter."

There are a lot of options. Just like an individual, a firm has no greater psychic ability to tell the difference between a good that's suspiciously cheap but legitimate and a good that's suspiciously cheap but fraudulent. So, firms can't make any better decisions than individuals can.

Inquisitor:

From their POV, the action is not preferable.

Say that you like butter. You see two butter products which seem to be physically identical, but one is substantially cheaper.

If the cheaper butter is, in fact, legitimate, then that is what you'd want, obviously. But since you don't know whether the butter is legitimate, you have to choose the more expensive butter merely out of the fear of being defrauded.

You've shifted topics now without addressing my original argument. At any rate, you thus prefer avoiding the risk, and going for the more expensive product on account of this. Where is the lack of preference?

Whether one sues for fraud or not is their matter to consider. If they consider it not to be worth their time, they have made their choice.

Because it's not merely risk. It's a choice you have to make in order to avoid rampant fraud. I've addressed this point before.

"Risk of fraud" is not merely the kind of acceptable risk that comes from any decision. You're basically again resorting back to the claim that it's OK for me to try and sell you butter with urine in it because that's just "risk." If you buy the product from me and you don't sue me for fraud, you obviously preferred it.

That's a massive red herring.

And I'm not shifting the debate at all. Everything I've said thus far has been relevant to my main points.

newson:

first, nowhere will you find me condoning misrepresentation in any of the posts.  concentrate on what your original question was - ie in the absence of state intervention, would there be a rise in fraud.   many of these posts illustrate that there are self-regulating mechanisms  and behaviours which would limit any rise in fraud.

second, you raise the point that a defrauded client's lost patronage doesn't stop the next mug getting stung.  fine, but ask your self how many businesses don't depend to a large extent on return customers.  your scenario is illogical because it assumes a totally transient clientelle. in volume businesses, small margins mean you must sell to vast numbers of customers.  a given business can only draw clientelle from a certain  radius, and so you cannot afford to burn too many customers.  where the payoff to the fraud is very large (think financial scam), it is feasible to rip clients off for a while (this is the current case under the sec, notwithstanding mountains of legislation), because this is a high margin proposition.  you don't need a lot of victims to make an awful lot of booty.  however, these customers aren't going to be  happy when they find out about their fraud, and they may well be coming after you either singly or collectively.  that is, prosecution is an economic proposition.

 finally, "adulterants" - in your words, something that adds no value to the product, basically a filler. something that does no harm (that would make absolutely no sense from anyone's perspective), but is less valuable that the product ostensibly being sold.  here's a good example - shops often stock iodized salt with a flowing agent  not because it's necessarily a scam, but because the average punter doesn't want the salt to clog up with humidity . i personally don't like the idea of flowing agents, but the healthy sea-salt packs i tend to buy make a point of advertising their superior quality ie "no filling agents".  see how it works, the lazy or uninformed customer is kindly helped by the competition among brands to be aware of the pitfalls of lesser products.

Yes, to some degree, such mechanisms would limit fraud, but petty fraud would still exist, and probably not on a small level given what we saw in the 19th century and what we see in a lot of poor countries today. Also, such mechanisms aren't in any way hindered by the government, but the government can go further in indicting people on criminal charges of fraud.

As for what I said about adulterants being a filler, yes, that's correct. Your "flowing agents" are not adulterants because they improve the quality of the product, based on public demand.

As said before, saying "adulterants may improve the quality of the good" is like saying "poisons may in fact be good for you."

By definition, they contribute nothing to the good's quality.

Anonymous Coward:

Nathyn:

Is it? It's not standard in America. Also, what you just said, says nothing of its justice. If the government does something evil right now, that's no justification for a similar evil in Anarchy, because government can be reformed.

You've never heard of suing for legal fees? It's standard for lawyers to throw that in. What isn't standard is that 'loser pays' in codified into the legal system as in other countries.

Big news a while back, the lady who won against the RIAA sued for legal fees and won but the RIAA lawyers claimed the amount they were seeking was too high so the judge told them to 'open their books' to see if what they spent was comparable to the defense costs.

Oh, and by the way I actually said it's not standard in America.

Hold on: If I sue someone for legal fees, do they also pay for the legal fees incurred in the process of suing them for said fees?

Also, what do you think the limit should be?

Anonymous Coward:

Nathyn:

Yes, branding. Right. Let's just totally ignore everything I've said in this thread.

Put your fingers in your ears, sing, "Lalalalala!" and think: Branding.

From what I can tell you haven't proposed a solution to this problem. It would appear that you don't wish to hear of any solutions either.

So what's your point then? The most obvious solution is 'flawed' according to you so big deal, nobody claimed the world is perfect.

My solution is acknowledging all the claims you've made above as being good at reducing flawed, but not fully dealing with it: hence, government can help. Establish agencies which investigate, make public, and indict petty fraud.

Anonymous Coward:

Nathyn:

Now you're just changing the scale of the problem. Instead of individuals being unable to trust cheap goods and paying an unnecessarily high amount for expensive goods, now you've got firms unable to trust cheap goods, and so they go with expensive ones, or they only purchase from a limited number of trustworty vendors, which drives down the level of competition, which in turn drives up price -- which is again pareto inefficient.

That doesn't make sense at all. Firms will give the customer what they value if they value them as a customer. This equally applies to the store being the 'customer' as it does to the buying public.

You know the stored have these people called 'buyers' who go to these 'shows' and place orders with 'vendors'. My mom used to do it. Well, one of the things they do if give out free samples of the products so the 'buyers' can judge the quality of the product for the store and ultimately the consumer.

I didn't have to buy personal hygiene products for *years*, they loaded her down and when I came to visit she loaded me down. You could say my 'sacrifice' in this matter helped to ensure that the customers at her stores were getting exactly what they paid for.

Since the problem of imperfect information about petty fraud effects all firms, just as it affects all individuals, there's little one firm can do. As said before, if they go with more expensive goods or limited "trustworthy" vendors, that drives up prices.

Free samples help establish trust, but again, if you only purchase goods from vendors you've gotten free samples from, you are again going to have to drive up price because of the limited availability of vendors who provide free samples.

Anonymous Coward:

Nathyn:

A broken window fallacy involves saying a window should be broken, so that it can be fixed.

Pareto inefficiency involves a pre-existing problem that exists independently of the regulation, and would still be a problem without regulation.

And I quote..."the problem may involve taking wealth away from one person and giving it to another but it doesn't create any net loss for the person who's wealth was lost, because it creates a net gain for the economy and everyone in it."

Ok, I just straight refuse to explain how the Broken Window Fallacy applies to the above...

It isn't a broken window fallacy. To use the similar analogy of the broken window, it goes something like this:

Think of the economy as "one big house," not in the communist sense that we're one big family, but in the sense that in any economy, in order to produce something as simple as a pencil, you depend on a web of cooperative relationships, in trade.

In this house, there is already a broken window which, for one reason or another, nobody wants to fix or is ever going to fix. If I make you or anyone else fix it, even if you have to pay somebody to fix it or do the work yourself in the short-run, in the long-run we all gain, including you, including your initial expenses of labor and wealth.

Anonymous Coward:

Nathyn:

"Pareto inefficiency" isn't a trivially disproven theory. It's pretty widely acknowledged. Surely, if you read Nozick's Anarchy, State, and Utopia, you must have read John Rawls' A Theory of Justice, which it was written in response to -- and which acknowledges the existence of pareto inefficiency.

I can think of many 'widely acknowledged' theories that are trivially disproven...

The problem is the people who apply the theories (usually) directly benefit from them so they chose to ignore the opposing viewpoints.

A 'pro-statist' government applying 'pro-statist' economic theories doesn't in any way attest to the validity of said theories.

This is the same reason why Marxists don't believe in science or mainstream economics.

A "pro-capitalist" government run by the bourgeoisie is not trustworthy, lol.

Anonymous Coward:

You have no idea how happy I would be if the State only taxed me $1.05...

Statist!!!