White-collar crime and moral freeloading

Steven Levitt’s book Freakonomics has a section where he tries to gain insights into white-collar crime via the experiences of a bagel-seller called Paul F:

early in the morning, [Paul] would deliver some bagels and a cash basket to a company’s snack room; he would return before lunch to pick up the money and the leftovers. It was an honor-system commerce scheme, and it worked.

There was a lot of fascinating data coming out of his scheme, especially as to when and why people would cheat and not pay for their bagels; however, for those with an eye to bias, the most relevant observation was that:

the same people who routinely steal more than 10 percent of his bagels almost never stoop to stealing his money box.

Similarly, while stealing office supplies is very common for white collar workers, as are various types of fraud, theft and robbery in the usual sense – nicking a CD from HMV, breaking into a house one night – is nearly absent from higher income crime.

I myself always return extra change to a cashier, and would never steal money, but would be perfectly willing to use a fake student ID, for instance. There are many interesting moral, evolutionary and social biases at play here. We also seem to feel that causing someone pain is worst than spreading the pain out over many people (depending on what we think about utility functions, this may or may not be true). A lot of these biases are reflected in the Simpson’s quote:

Myth: Cable piracy is wrong.

Fact: Cable companies are big faceless corporations, which makes it okay.

But there is another way of seeing this. Typical white-collar crime involves a type of "moral free-loading". Stealing something from someone imposes a definite pain on them. But stealing from Microsoft – this won’t pain them in the slightest. My theft will be lost in the noise of the economy; by the time the result filters up to Microsoft, who knows what effect it will have? It is, literally, a victimless crime.

But if many people are doing it, then it imposes a definite cost on Microsoft, on their employees and on the whole economy. So I am committing an act that I can morally defend for myself, if I am the only one doing it, but which is morally wrong for a group to do. Many of our moral codes resemble this, designed to allow us to feel good about our own behaviour while not truly reflecting the costs of our types of behaviour.

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  • TGGP

    I don’t see how a crime is victimless when one person does it but not so when a lot of people do it. It seems to me that it is a little bit of victimizing when one does it and a lot when a lot do it.

    The Guardian article shows paying cash to avoid taxes and not correcting cashiers who give too much change to be the biggest middle-class crimes. Count me as among those awful people who doesn’t see it as a problem (even subjectively). The first is prudently avoiding theft and the latter is limited by the cashiers

  • http://www.pellucid.org Bob Knaus

    For those who feel that it’s OK to take extra change from a cashier, here’s a way to improve your technique which I heard from the owner of a liquor store.

    His point of sale system would tell the cashier how much change to give a customer, but due to a quirk in the system the amount would often disappear from the screen before the cashier had given the customer his money. For most cashiers, this was not a problem because they knew how to count change. But he had one cashier whose cash drawer never balanced. Some days it was a few dollars over, some days a few under. So the owner finally confronted the cashier, who admitted that he didn’t know how to count change. He would just hand some to the customer. If the customer stood there expectantly, waiting for more, he would hand more to the customer until the customer was satisfied.

    So, just look expectant, maybe you’ll get some extra change!

    Oh. One other thing. Almost all businesses dock the cashier’s pay for any shortage in the cash drawer. So it is not the large impersonal business that feels the pain of your minor theft. It is the young person working for minimum wage who does.

  • Joel

    But stealing from Microsoft – this won’t pain them in the slightest. My theft will be lost in the noise of the economy; by the time the result filters up to Microsoft, who knows what effect it will have? It is, literally, a victimless crime.

    But if many people are doing it, then it imposes a definite cost on Microsoft, on their employees and on the whole economy.

    This exact reasoning could just as easily apply to “nicking a CD from HMV”.

  • zzz

    Joel, Microsoft is selling information goods at zero marginal cost. Given that you can’t bargain with them as an individual customer, they don’t lose anything if you “steal” something which you wouldn’t have bought anyway at the current price. Of course, if the practice became widespread, it *would* have an impact on them, since the group becomes large enough to make bargaining an option.

  • Doug S.

    The marginal cost of selling software isn’t quite zero. If you’re buying software in a physical medium, there are manufacturing costs, and bandwidth used for downloads can also cost money. Tech support, if it comes with the software license, can also be expensive to provide. On the other hand, the marginal cost to the company of pirated software actually is zero, as pirates doesn’t directly consume any of the software company’s resources. A piece of software that sells 10,000 licenses creates the same expenses if it is pirated 1000 times or pirated 100,000 times.

  • Stuart Armstrong

    I feel there’s also political movements that show a kind of moral free-loading. Examples are the naive Libetarians as described by Eliezer who feel morally superior in a way of life they advocate for all, without accepting the costs this way of life could have on others. To a more extreme extent, those environmentalists who live very minimally and advocate that for everyone (which stands a big chance of ruining the economy) and anti-immigration advocates who want to turn away refugees on the grounds that they have always lived happily in their own country, and that’s the proper thing to do. Politics has many other examples of this.

    You’re not a moral free-loader if you say “this system is good for me and my friends,” or admit “this system has a cost, but is still good in general”. You are if you say “this system is good for all, and imposes no moral cost when I do it, and hence no has no moral cost in general”, when it does.

  • Stuart Armstrong

    The Guardian article shows paying cash to avoid taxes and not correcting cashiers who give too much change to be the biggest middle-class crimes. Count me as among those awful people who doesn’t see it as a problem

    But would you, in the first case, fill out a fake disability rebate form, and in the second, steal some money from a checkout counter while no-one else is looking? In both cases assume you wouldn’t get caught. Practically they are different, but morally they are the same thing.

    I find them different, though – which just goes to show how much my morality is biased by practicality. And I don’t think I’m the only one.

  • zzz

    Stuart Armstrong, as long as the environmentalists you mention stick to advocacy and do not try to enforce their frugality and thrift by violent means (such as government action) I can’t see how their actions could be economically harmful or immoral. As for the issue raised by Eliezer, it’s a matter of defining a standard for “informed consent”, not an inherent problem with libertariamism.

  • Dagon

    What bias is this pointing out? It could be an offshoot of the entitlement effect: The offender, when empathizing with the victim, values his not-yet-paid amount differently from the already-collected amount from prior sales. And thus would be willing to steal a bagel but not steal the dollar value of that bagel.

    There’s also the not-biased rational judgment that it’s far easier to get away with some offenses than others, and the punishment is less if you do get caught.

  • http://rumorsweretrue.wordpress.com/ topher

    Sissela Bok’s book on lying might be worth a read.

  • http://www.livejournal.com/users/dogofjustice Dog of Justice

    There’s also the not-biased rational judgment that it’s far easier to get away with some offenses than others, and the punishment is less if you do get caught.

    I’m fairly confident that this is what it really comes down to. A white collar criminal doesn’t want their crime to attract attention, since that’s the thing most likely to get them caught. If you eat a single bagel for free, that is practically guaranteed to get lost in the noise. Whereas if you steal the money box, that attracts attention and people will be trying to figure out who did it. They may not succeed, but nevertheless the risk/reward ratio of the latter crime is FAR worse than that for stealing a single bagel.

    Whether a crime is “victimless” or not matters in practice mostly because victims can potentially retaliate.

  • Douglas Knight

    perfectly willing to use a fake student ID

    Why? Because price discrimination offends you? You justify the fraud as part of the price discrimination–they offer breaks to people willing to defraud them.

  • http://www.livejournal.com/users/dogofjustice Dog of Justice

    Hrm, I would like to delete my 7:10 comment after reading the linked Freakonomics piece.

  • Stuart Armstrong

    I can’t see how their actions could be economically harmful or immoral. As for the issue raised by Eliezer, it’s a matter of defining a standard for “informed consent”, not an inherent problem with libertariamism.

    It’s not the actual specifics of how these people behave that’s relevant here – it’s the type of reasoning “when I do it, it’s effects are moral, so if everyone does it, it’s effects will be moral too” (this may be the case, but this reasoning doesn’t show it). If an environmentalist doesn’t impose his will on others, but still thinks that the world would be so much better it everyone followed his example, because it’s better when HE does it then there is a definite bias. Ditto for some libertarians and others with the same reasoning. Whether they act on the bias or not is seperate.

  • zzz

    it’s the type of reasoning “when I do it, it’s effects are moral, so if everyone does it, it’s effects will be moral too”

    That would seem to be a reasonable assumption if the morality of individual action is to be justified. After all, isn’t the Golden Rule based on the opposite inference – that one should not behave as one wouldn’t like everyone else to?