I’ve read Murray N. Rothbard’s Ethics of Liberty and Walter Block’s Defending the Undefendable. I’d like to say I understood most of the propositions in the above books, but I’m a little hazy on at least one issue (there might be more, but I don’t remember them right now). Namely, I don’t know how far the implications of Professor Block’s defense of advertising go.
Professor Block claimed that “fraudulent advertising is equivalent to theft” (quoting off the top of my head right now), which is clear enough, but I’m not sure where fraudulent advertising starts, so to speak. Other than accepting payment for a functional cell phone and delivering a broken cell phone, or even a brick, what else constitutes fraud?
Would the faith healer, for example, be defrauding their customers by selling them water supposedly imbued with healing energies? Would the fortune teller be defrauding their customers by selling them a glimpse of their future, but instead delivering card tricks? Or to provide a more mundane example, be the mechanic defrauding their customers by charging exorbitant rates for spare parts, even though they explicitly stated they only charge enough to cover their own costs. I see how my last example can be seen as a bit vague, but I figure it’s more relevant than those stated earlier, since patronizing faith healers or fortune tellers is just asking to be duped anyway.
Can you provide some insight on that matter? Or perhaps recommend relevant reading material?
Fraud is theft through subtlety. So, if you manufacture, say, a pain drug, labeled and marketed at 5% concentration but, to save money, you reduce the actual concentration to 4%, you are committing fraud because you are transferring title to a 5% solution pain drug to your customers when the actual property delivered is 4% solution pain drug. Marketing your drug as “the most powerful pain reliever in the world”, no matter how demonstrably false is not fraud because no property transfer is involved or even implied. What matters is what real property actually changes hands and whether that exchange was fraudulent by virtue of a property title that entitled the receiver to more property than was, in fact, delivered.
The technicalities are up to the court system (a private one) to sort out.
All we really need to be concerned about are general principles. Which is that deliberately misleading someone for your own benefit and there loss is fraud.
It should work fine for a court to work from for the examples you have given. A case I think is more interesting is trademark counter-fitting.
If the product really is identical it is hard to prove the customer lost something compared to if he had bought what he though he was buying which is the same product but produced by the a factory actually run by the label indicated on it.
So the difference is between clearly labeling something and merely marketing it a certain way? Which would make quack medicines and all that rubbish not fraudulent?
So, selling someone a lemon car is fraud? I don’t think so and I don’t think we should desire the law to enter into the realm of trying to determine at what point up-selling stops and at what point fraud begins. To qualify as fraud, the property title which is transferred to the injured party must be materially false. Subjective intent (deliberation), and the gray area of what constitutes “misleading someone” is far, far too fuzzy for defining the crime of fraud.
No, the difference is whether a property title incorrectly describes the property to which it refers. I am using the term “title” in its broadest sense to include even verbal descriptions. Let’s say I sell you 100 barrels of oil but, to make more money, I underfill each barrel by 10%. I will have really sold you only 90 barrels of oil spread over 100 barrels. Notice that the essence of what I have done is theft. Lying was only the means to the end. The theft is the crime (aggression). Fraud is just a particular way of going about theft.
Marketing is not a transaction. If I put an advertisement up, there is no actual transfer of goods occurring. It is not a sale. All that matters is what’s printed on the product description which the buyer received in the course of transacting. So, a label, or a catalog description but not a magazine ad or billboard can be fraudulent.
What determines a “just” lie is a subjective criteria. You may be able to justify a lie, but be prepared to defend your argument with other people because they will use their own criterias to judge your lie.
You make a lot of sense, but could you perhaps go over the examples I have originally posted? Because in my (admittedly somewhat economically naive) understanding, those aren’t clearly non-fraudulent according to what you said.
Your example of 4% concentration sold as 5% being fraud, and merely marketing as “the best” not being fraud, is easily understood, though.
I should have said “merely” lying where I used “just” lying, because I didn’t mean to say anything about justifying a lie. Sorry for being unclear on that.
I think it depends on exactly how it is labeled/described. If the faith healer claims that this water is divine and God will work through it to heal you of diseases, etc. then I don’t think it’s fraudulent because, at the end of the day, it is just water and is labeled exactly as such. The symbolic significance attached to the water by the faith healer is not a material claim, he’s not incorrectly specifying a quantity, weight or other measurable. Even claims regarding medical studies cannot constitute fraud since they do not describe what the property is, only what the seller claims its effects will or might be.
No. The service paid for is a reading. When you enter, you receive a reading. If you do not (i.e. the fortune teller just pockets the money and runs), that would be fraud/theft.
Of course not.
Pricing is voluntary. There is no “just” price. Once you understand that every individual has an unlimited right to price their property at any level they see fit, you will understand that the mechanic cannot defraud his customers even if he charged $1,000,000 markup on a $50 alternator. For fraud to have occurred, theft must have occurred. The real art is finding the theft… what property was stolen… to what property does the defrauded have title? In the case of the oil barrels, the theft was the 10 missing barrels of oil and the restitution would consist of forcing the fraud to deliver the 10 barrels to which the defrauded individual has title along with whatever other damages are just.
That much I understood even before your explanation, I was just unclear about the detail of the seller specifically claiming something else. One has a right to ask for an exorbitant markup on any sale, right?
But what about a situation where the customer explicitly says they will patronize a mechanic on the condition of there being no markup on parts sold, only a separate charge for work-hours put into the car. When the mechanic agrees and still charges a markup, is this not theft? If I understood you correctly, it might as well be, because the title for spare parts at no markup is sold, but the price of parts with a markup is sold.
I feel like I’m delving into the arcane or unrealistic here, but I’m nonetheless interested in your take on this issue, since you appear to know much more on this topic than I do.
EDIT:
I just remembered a semi-related case from real life. Back when I was making my license, my driving instructor charged me extra for (repeatedly) stalling his car’s engine, claiming that it was the equivalent of putting several hundred kilometers on the drivetrain. I later realized that was one hell of a ripoff, even thinking it was outright fraudulent. I now think that it wasn’t fraud after all, but being as economically naive as I am, I’d like your input on this, if you don’t mind.
Yeah, misleading may be a bit vague cause it can refer to simply omitting information. Which is ok in some cases but not all.
There is a bunch of implicit information in every purchase we make and if we can’t rely on that it would be very difficult and complicated to do any business. I think the current laws about fraud, at least in Sweden are very good. If you buy a car you can assume it is working for instance otherwise you should have been told that it doesn’t work. It is implicit in the concept of a car that it operates. If it doesn’t you can get your money back.
When you buy a house however the law is ancient and most almost all of the responsibility rests on the buyer. That makes buying a house rather costly as you need to hire inspectors and whatnot. But it is an expensive transaction so you should probably do that anyway, unlike the small stuff we buy everyday where placing all the responsibility on the buyer isn’t feasible.
Stores could guarantee there sales with contracts that are better then the law. But we have the whole second-hand market between private individuals that would be choked if the buyer had to take all the responsibility to obtain explicit information about the product. At least I would be very reluctant to buy anything second-hand if the default fraud protection was any worse then the Swedish law is today.
The only problem with it is that the way it is designed it couldn’t be applied to trademark counter-fitting. That is covered by IP law instead which shouldn’t exist. But I think selling something made by A and saying it is made by B is fraud. Copying the label is not, but you have to give correct information about the producer along with it in that case.
My knowledge about market anarchy is so far pretty sketchy, because after reading two books I’ve mentioned in my first post, I thought that intellectual property rights were compatible with with the doctrine.
While I’m at it, may I redirect your attention to the (perhaps naive) questions posted in my penultimate post? While I think I grasp that the examples I’ve stated aren’t legally (from a natural law perspective) fraudulent, I still can’t completely wrap my head around the reasoning why this is so.
There could be private IP law, but it is not compatible with the principles of liberty.
Information is not scarce by nature and thus can not be property without creating artificial conflict, which goes against fundamental principles of sound ethics. Also contractual protection doesn’t work ,since contracts don’t bind third parties it only takes one person showing the information to someone that isn’t bound by contract and the flood gates are open…
The only way to protect trademarks in a free society is if selling counterfeit brands can be classified as fraud.
k, i just skimmed the first post so I’m gonna be honest and say I just wanted to make a quick point.
I don’t think it’s necessary to use force to punish fraud. Doing so would be costly. I think what would happen in the marketplace would be totally smearing the reputations of anyone who committed fraud. The knowledge that they were fraudulent would make other people lower the price they’d be willing to pay and some might not even conduct business with fraudulent people at all.
However, if some people believe that the person isn’t being fraudulent, then that person will continue to commit fraud (like the example someone gave of the fortune teller selling a “glimpse into the future” but just doing a card trick and some questioning to give a vage “prediction” of things to come)
A free society wouldn’t necessarily protect trademarks. It would be up to the consumers to decide whether or not they wanted to do business with the fraudulent person at all or at a reduced price. Plus, let’s say they find out that the person is committing fraud…but as consumers they STILL value paying for the product because it meets their expectations and desires, well then they would be free to continue doing business with the fraudulent businessperson.
Example: Let’s say I buy “Tropicana” orange juice, and it turns out not to be Tropicana…well if I actually like the product and I find that it is still the product I want in all aspects other than being owned by the same folks, then I might actually continue buying that orange juice. Why shouldn’t I be allowed to continue buying it? Well anyways, yeah in a free society it would be possible to still commit fraud sometimes if it didn’t bother consumers all that much.
Also, the entrepreneurs would have an incentive to further differentiate their product. Maybe they make a label with a special design that is very hard to copy whether in shape or because of special ink or whatever. Or maybe it would happen that the labels would be very similar but have some defining differnece so that consumers actually knew which one was which. Maybe some consumers would prefer the original “real Tropicana” and others might prefer the counterfeit Tropicana. Or maybe instead of orange juice, the same thing would happen with candy and the tastes of the two candies would be different and demand for both products would exist because some consumers would prefer one and some consuemrs would prefer the other.
It is not about copying the label itself, if the customer knows it is copied it can’t be fraud.
The problem is if someone deliberately provide disinformation about who the manufacturer is for there own gain. It is the other persons loss criteria of the fraud definition I think might be causing some trouble in this case.
At least if you calculate these gains and losses in some kind of measurable objective market value. The person that bought the product under the wrong information and actually wanted a specific manufacturer will be at a loss, but it could be very difficult to prove in a court of law if other people don’t value one manufacturer higher then another also so it is reflected in the market price.
For it to be usable in law one would have to make it so any lies about material facts related to the product can be used as viable grounds to reverse the purchase and just assume the value loss is there otherwise the party wouldn’t seek to have the purchase reversed. The problem is ofcourse if they really just changed there mind for some other reason … it would be possible to exploit fraud protection law.
yes it would still be fraud. It would be fraud if the businessperson says the product is something it is not. However, that does not necessarily mean that consumers won’t value it. Some of them might. Maybe because it has most of the things they were looking for, or maybe because it has OTHER things they weren’t expecting but turned out to be helpful.
If the customer knows it’s copied, then it can still be fraud. Again, fraud is when the person sellign it says that the product is something that it actually is not. However, just because the product is not what the seller says it is, doesn’t necessarily mean that customers wouldn’t want it.
edit - so yeah, my basic point is that you don’t need laws to protect against fraud, but also that the market would probably protect against fraud more efficiently than laws could.
fraud 1 a: any act, expression, omission, or concealment calculated to deceive another to his or her disadvantage;
This is basically the broadest definition of fraud there is. Normally it is defined as one party obtaining gains at the expense of another by means of deception.
So in other words there are three elements to fraud. Deception, gain and loss. Your scenario doesn’t fill the third part of the definition, since you are saying the customers are satisified.
No it can’t still be fraud. Because he is saying that it is copied we have removed the element of deception.
Also wearing counter-fit clothing wouldn’t be fraud cause there is transaction of value between the persons that believe you have Armani and yourself.
Except when you wear it on your job interview to deceive the employer you are more qualified for the job and not some random slob. And this is where fraud legislature becomes really messy…
You are seriously blurring the concepts of fraud and lying in your expression.
There are reasons we have two different words for it and one is regulated in law whereas the other one is not.
What you are saying basically is that we shouldn’t regulate lying …
“Under our proposed theory would fraud be actionable at law? Yes, because fraud is failure to fulfill a voluntarily agreed upon transfer of property, and is therefore implicit theft. If, for example, A sells to B a package which A says contains a radio, and it contains only a pile of scrap metal, then A has taken B’s money and not fulfilled the agreed upon conditions for such a transfer-the delivery of a radio. A has therefore stolen B’s property. The same applies to a failure to fulfill any product warranty. If, for example, the seller asserts that the contents of a certain package include 5 ounces of product X, and they do not do so, then the seller has taken money without fulfilling the terms of the contract; he has in effect stolen the buyer’s money. Once again, warranties of products would be legally enforceable, not because they are “promises,” but because they describe one of the entities of the agreed-upon contract. If the entity is not as the seller describes, then fraud and hence implicit theft have taken place. 13”
13 In older law, the action of deceit against the vendor of a chattel upon false warranty was, indeed, a pure action of tort (theft in our sense). James Barr Ames, “The History of Assumpsit,” Harvard Law Review 2, no. 1 (): 8. For a contrasting promise view, see Roscoe Pound, Jurisprudence (St. Paul, Minn.: West, 1959), pp. 111,200; and Oliver Wendell Holmes, Jr., The Common Law, Howe ed., (: Belknap Press of Harvard University Press, 1963), p. 216.
Wouldn’t it be pertinent to get a quote first? Anyone who gives someone a blank cheque is asking for trouble. Caveat emptor. Why should it matter to that individual consumer if the producer is covering their costs or not with that specific transaction? The buyer should realise there are sharks out there, and call around before committing to repairs. It’s not rocket science. But maybe they don’t care enough to bother? Potential business.. a mechanics association, blonde ladies who know nothing about cars could call for advice? Get the industry standard to compare? eh.
That much was clear, I was merely asking if a contract like that would be actionable. Now that I think of it, that example I’ve given is unrealistic anyway.
Current sentiment (and, as far as I know, the law in at least some cases) seems to favor the notion that merely just false advertising - as opposed to false labeling - is tantamount to fraud, and thus theft. Bearing that in mind, you really can’t blame us for wanting to elucidate this issue.