Bryan Caplan  

Arnold's Hypotheticals

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Defining Voluntary Exchange... Avent and Yglesias Reinforced...
I agree with Arnold's analysis of all three of his hypotheticals.  But I doubt Capital One's sales pitch was analogous to:
I tell you that a tree is about to fall on you, but if you give me all the money in your wallet, it will not fall on you. In fact, the tree is not about to fall on you, and I know it. But the relief from the fear of the tree (a fear which I put into your head in the first place) gives you peace of mind.
Instead, it was probably more like:
I tell you that a tree might fall on you, and it would be awful if it did.  But if you give me all the money in your wallet, we'll rescue you if you're ever trapped under a tree.
Since all these statements are true, I see no fraud.  Of course, there may be a few exceptional cases where Capital One's salespeople actually did lie, but Arnold's complaint is about the crumminess of the product and the high-pressure pitches.

Arnold adds:
Many libertarians speak as if it were possible to come up with a clean way to separate voluntary transactions from involuntary transactions.
It's not just libertarians.  The age-old common law also has a bright line, nine-element definition of fraud:
  1. a representation of an existing fact;
  2. its materiality;
  3. its falsity;
  4. the speaker's knowledge of its falsity;
  5. the speaker's intent that it shall be acted upon by the plaintiff;
  6. plaintiff's ignorance of its falsity;
  7. plaintiff's reliance on the truth of the representation;
  8. plaintiff's right to rely upon it; and
  9. consequent damages suffered by plaintiff.

Was Capital One's sales pitch fraudulent in this sense?  No; at minimum, they're missing element #3.  Do major religions commit fraud in this sense?  No; at minimum, they're missing element #4.  Do broader definitions of fraud criminalize a wide range of actions that almost no one considers criminal?  I'm afraid so.

P.S. I'm a long-time Capital One customer.  Nothing I've heard about this case makes me even slightly inclined to find a new bank.  Are any readers even seriously considering taking their business elsewhere?



COMMENTS (4 to date)
Tom West writes:

As a thought experiment, I occasionally wonder that if we had a true Libertarian society with *complete* autonomy over oneself (i.e. the capacity to voluntarily sell oneself into effective slavery) and anything that is not absolutely obvious fraud is allowed, just how long it would take a substantial section of the populace to effectively own another substantial section of the populace and just what the size of those two sections would be.

Note, this is a thought experiment - obviously the preconditions could never occur and the vast majority of Libertarians I know are consequentialists, meaning that if that did start to happen (and most don't believe it would), they would violate their principles to support laws to prevent it.

yet another david writes:

@Tom West:

As a thought experiment, I occasionally wonder that if we had a true Libertarian society with *complete* autonomy over oneself (i.e. the capacity to voluntarily sell oneself into effective slavery) and anything that is not absolutely obvious fraud is allowed, just how long it would take a substantial section of the populace to effectively own another substantial section of the populace and just what the size of those two sections would be.

Interesting. Now, of course, it could be argued that lots of people have, through the democratic process, chosen a form of involuntary servitude.

Note, this is a thought experiment - obviously the preconditions could never occur and the vast majority of Libertarians I know are consequentialists, meaning that if that did start to happen (and most don't believe it would), they would violate their principles to support laws to prevent it.

Interesting comment on consequentialism - sounds a bit like consequentialists believe in bailouts (from voluntary servitude)?

fmb writes:

I propose a bet!

Bryan calls Capital One, and other similar vendors (Cable, email, cell provider, other credit cards come to mind) and gets signed up for at least 3 distinct services that start free but don't stay free (other commenters can perhaps make specific suggestions). He gets at least one bill and then tries to cancel.

He wins if (a) he doesn't pay any money for these services; and (b) in his own judgment he doesn't experience something that he thinks is fraudulent or otherwise worthy of public efforts to prevent such as the CFPB.

MingoV writes:
Are any readers even seriously considering taking their business elsewhere?
I don't use Capital One, but I have informed my credit card companies that if they nag me about such products (or other near-worthless crap) by phone or e-mail, I will drop them. I did so once.

I use the simple game theory "tit for tat" rule for these types of situations. A company that attempts to rip-off its customers loses my business.

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