What is it about?
For most crimes, victims recognize it as a crime when they encounter it (e.g. robbery, assault). However, scams only work when people do not recognize that the perpetrator is trying to victimize them. Nonetheless, after their first exposure to a scam, people are likely to recognize it when exposed to subsequent attempts. Low-ability scammers are less likely to successfully victimize people but may inadvertently make people aware of the scam. Thus, they may actually fulfill a socially useful function. If enforcement primarily discourages low-ability scammers, it may actually lead to increased victimization when people are exposed to high-ability scammers.
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Why is it important?
By some estimates, scams cost up to $100 billion in the United States alone. Even if this article contributed to only a 0.1% reduction in scams, the authors will have more than repaid society for their lifetime salaries.
Perspectives
The idea for the paper occurred to me when I visited Beijing, China. The first morning, three ‘art professors’ approached me about buying their work. In my opinion, the first was a low-ability scammer as he actually told me that I ‘obviously knew a lot about art‘ (it would take very little time talking to me for someone to realize that I know little about art). In the afternoon, I encountered several young women wanting to have tea with me. They were much more convincing. However, although I was not yet aware of the ‘Beijing tea scam’, I was on my guard after meeting the ‘art professors’. Hence, the inspiration for this paper.
Derek Pyne
Thompson Rivers University
Read the Original
This page is a summary of: The Economics of Scams, Review of Law & Economics, January 2017, De Gruyter,
DOI: 10.1515/rle-2015-0035.
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