A Theory of Consumer Fraud in Market Economies

Abstract

Of the many forms of human behavior, perhaps none more than those of force and fraud have caused so much harm in both social and ecological environments. In spite of this, neither shows signs of weakening given their current level of toleration. Nonetheless, what can be said in respect to the use of force in the West is that it has lost most of its competitiveness. While competitive force ruled in the preceding epoch, this category of violence has now been reduced to a relatively negligible degree. On the other hand, the same cannot be said of fraud. In fact, it appears that it has moved in the other direction and become more prevalent. The causes for this movement will be the fundamental question directing the inquiry. In the process, this dissertation will trace historical events and methods of control ranging from the use of direct force, to the use of ceremonies and rituals and to the use of the methods of law. An additional analysis of transformation will also be undertaken with regards to risk-sharing-agrarian-based societies to individual-risk-factory-based ones. The structural conditions of each will be assessed along with their affects on human behavior and in particular the behavior of deception. The latter will be assessed historically through two frames: (1) buying and selling proper and (2) buying and selling within centralized work, i.e., the corporate form. Following Thorstein Veblen, it is hypothesized that as the West evolved from one to the other productive form (from risk-sharing-agrarian-based to individual-risk-factory-based), multiple degrees of separation between individuals emerged. These degrees stretched human relations first when buying and selling broadly entered into communal farming, then when buying and selling broadly entered into factory work and finally when managerial control and absentee ownership became the dominant model for business. And it is postulated that the attitudes and behaviors arising from these degrees facilitate the expression of human deception. Lastly, an analysis of transaction fraud will be undertaken from the disparate behavioral theories developed in the discipline of psychology and economics over the past century. This will include theories from the psychoanalytical approach, the structuralist and behaviorist approaches, the standard economic approach and from the functional and original institutionalist economic approaches. The contemporary dual-process model of the mind along with William Powers control theory of behavior will also be discussed in relation to the approach of the original institutionalist economists.