The evolution of fraud

Much of evolutionary literature focuses on the straightforward relationship between predator and prey, or on competition between members of the same species for limited resources, mates, etc.

But today we’re going to focus on fraud.

Milk Snake
Milk Snake
Coral Snake
Coral Snake

Red touch yellow, kill a fellow. Red touch black, friend to Jack.

The Coral snake is deadly poisonous. (Or venomous, as they say.) The Milk snake is harmless, but by mimicking the coral’s red, black, and yellow bands, it tricks potential predators into believing that it, too, will kill them.

Eastern_Phoebe-nest-Brown-headed-Cowbird-eggThe milk snake is a fraud, benefiting from the coral’s venom without producing any of its own.

Nature has many frauds, from the famously brood-parasitic Cuckoos to the nightmare-fuel snail eyestalk-infecting flatworms, to the fascinating mimic octopus, who can change the colors and patterns on its skin in the blink of an eye.

But just as predator and prey evolve in tandem, the prey developing new strategies to outwit predators, and predators in turn developing new strategies to defeat the prey’s new strategies. So also with fraud; animals who detect frauds out-compete those who are successfully deceived.

Complex human systems depend enormously on trust–and thus are prime breeding grounds for fraud.

Let’s take the job market. Employers want to hire the best employees possible (at the lowest possible prices, of course.) So employers do their best to (efficiently) screen potential candidates for work-related qualities like diligence, honesty, intelligence, and competency.

Employees want to eat. Diligence, honesty, years spent learning how to do a particular job, etc., are not valued because they help the company, but because they result in eating (and, if you’re lucky, reproduction.)

When there are far more employees competing against each other for jobs than there are openings, not only do employers have a chance to ratchet up the qualifications they demand in applicants, they pretty much have to. No employer trying to fill a single position has time to read 10,000 resumes, nor would it be in their interest to do so. So employers come up with requirements–often totally arbitrary–to automatically cut down the number of applications.

“Must have 3-5 years work experience” = people with 6 years of experience automatically rejected.

“Must be currently employed with no gaps in resume” = no one who took time off to have children. (This is one of the reasons birthrates are so low.)

“Must have X degree” = person with 15 years experience in the field but no degree automatically rejected.

The result, of course, is that prospective employees begin lying, cheating, or finding other deceptive ways to trick employers into reading their resumes. Workers with 6 years of experience put down 5. Workers with 2 record 3. People who can’t get into American medical schools attend Caribbean ones. “Brought donuts to the meeting” is inflated to “facilitated cross-discipline network conversation.” Whites who believe employers are practicing AA tickybox “black” on their applications. And as more and more jobs that formerly required nothing more than graduating college start requiring college degrees, more and more colleges start offering bullshit degrees so that everyone can get one.

The higher the competition and more arbitrary the rules, the higher the incentives for cheating.

The problem is particularly bad (or at least blatant) in many developing countries, eg, The Mystery of India’s Deadly Exam Scam:

It began with a test-fixing scandal so massive that it led to 2,000 arrests, including top politicians, academics and doctors. Then suspects started turning up dead. What is the truth behind the Vyapam scam that has gripped India? …

For at least five years, thousands of young men and women had paid bribes worth millions of pounds in total to a network of fixers and political operatives to rig the official examinations run by the Madhya Pradesh Vyavsayik Pariksha Mandal – known as Vyapam – a state body that conducted standardised tests for thousands of highly coveted government jobs and admissions to state-run medical colleges. When the scandal first came to light in 2013, it threatened to paralyse the entire machinery of the state administration: thousands of jobs appeared to have been obtained by fraudulent means, medical schools were tainted by the spectre of corrupt admissions, and dozens of officials were implicated in helping friends and relatives to cheat the exams. …

The list of top state officials placed under arrest reads like the telephone directory of the Madhya Pradesh secretariat. The most senior minister in the state government, Laxmikant Sharma – who had held the health, education and mining portfolios – was jailed, and remains in custody, along with his former aide, Sudhir Sharma, a former schoolteacher who parlayed his political connections into a vast mining fortune.

One of the things I find amusing (and, occasionally, frustrating) about Americans is that many of us are still so trusting. What we call “corruption”–what we imagine as an infection in an otherwise healthy entity–is the completely normal way of doing business throughout most of the world. (I still run into people who are surprised to discover that there are a lot of scams being run out of Nigeria. Nigerian scammers? Really? You don’t say.)

It’s good to get out of your bubble once in a while. Go hang out on international forums with people from the third world, and listen in on some of the conversations between Indians and Pakistanis or Indians and Chinese. Chinese and Indians constantly accuse each other’s countries of engaging in massive educational cheating.

Maybe they know something we don’t.

People want jobs because jobs mean eating; a good job means good eating, ergo every family worth its salt wants their children to get good jobs. But in a nation with 1.2 billion people and only a few good jobs, competition is ferocious:

In 2013, the year the scam was first revealed, two million young people in Madhya Pradesh – a state the size of Poland, with a population greater than the UK – sat for 27 different examinations conducted by Vyapam. Many of these exams are intensely competitive. In 2013, the prestigious Pre-Medical Test (PMT), which determines admission to medical school, had 40,086 applicants competing for just 1,659 seats; the unfortunately named Drug Inspector Recruitment Test (DIRT), had 9,982 candidates striving for 16 vacancies in the state department of public health.

For most applicants, the likelihood of attaining even low-ranking government jobs, with their promise of long-term employment and state pensions, is incredibly remote. In 2013, almost 450,000 young men and women took the exam to become one of the 7,276 police constables recruited that year – a post with a starting salary of 9,300 rupees (£91) per month. Another 270,000 appeared for the recruitment examination to fill slightly more than 2,000 positions at the lowest rank in the state forest service.

Since no one wants to spend their life picking up trash or doing back-breaking manual labor in the hot sun, the obvious solution is to cheat:

The impersonators led the police to Jagdish Sagar, a crooked Indore doctor who had set up a lucrative business that charged up to 200,000 rupees (£2,000) to arrange for intelligent but financially needy medical students to sit examinations on behalf of applicants who could afford to pay.

The families of dumb kids pay for smart kids to take tests for them.

In 2009, police claim, Sagar and Mohindra [Vypam’s systems analyst/data entry guy] had a meeting in Sagar’s car in Bhopal’s New Market bazaar, where the doctor made an unusual proposition: he would give Mohindra the application forms of groups of test-takers, and Mohindra would alter their “roll numbers” to ensure they were seated together so they could cheat from each other. According to Mohindra’s statement to the police, Sagar “offered to pay me 25,000 rupees (£250) for each roll number I changed.”

This came to be known as the “engine-bogie” system. The “engine” would be one of Sagar’s impostors – a bright student from a medical college, taking the exam on behalf of a paying customer – who would also pull along the lower-paying clients sitting next to him by supplying them with answers. … From 2009 to 2013, the police claim, Mohindra tampered with seating assignment for at least 737 of Sagar’s clients taking the state medical exam. …

Mohinda also began just straight-up filling in the bubbles and altering exam scores in the computer for rich kids whose parents had paid him off.

Over the course of only two years, police allege, Mohindra and Trivedi conspired to fix the results of 13 different examinations – for doctors, food inspectors, transport constables, police constables and police sub-inspectors, two different kinds of school teachers, dairy supply officers and forest guards – which had been taken by a total of 3.2 million students.

Remember this if you ever travel to India.

But merely uncovering the scam does not make it go away; witnesses begin dying:

In July 2014, the dean of a medical college in Jabalpur, Madhya Pradesh, Dr SK Sakalle – who was not implicated in the scandal, but had reportedly investigated fraudulent medical admissions and expelled students accused of obtaining their seats by cheating – was found burned to death on the front lawn of his own home. …

In an interview with the Hindustan Times earlier this year, a policeman, whose own son was accused in the scam and died in a road accident, advanced an unlikely yet tantalising theory. He argued that the Vyapam taskforce – under pressure to conduct a credible probe that nevertheless absolved top government officials – had falsely named suspects who were already deceased in order to shield the real culprits.

A competing theory, voiced by journalists covering the scandal in Bhopal, proposes that it will be all but impossible to determine whether the deaths are connected to Vyapam, because the families of many of the dead refuse to admit that their children paid money to cheat on their exams – for fear that the police might arrest the bereaved parents as well.

For India’s poor (and middle class,) scamming is a dammed if you do, dammed if you don’t affair:

“My brother was arrested four months ago for paying someone to ensure he cleared the police constable exam in 2012,” the man told me. “Some people in our village said, ‘This is Madhya Pradesh, nothing happens without money.’ My brother sold his land and paid them 600,000 rupees.”

In August that year, he was one of 403,253 people who appeared for the recruitment test to become a police constable. … Four months after his marriage, his name popped up in the scam, he lost his job and he was hauled off to prison.

“So now my brother has a wife and his first child, but no job, no land, no money, no prospects and a court case to fight,” the man said. “You can write your story, but write that this is a state of 75 million corrupt people, where there is nothing in the villages and if a man comes to the city in search of an honest day’s work, the politicians and their touts demand money and then throw him into jail for paying.”

Pay them their wages each day before sunset, because they are poor and are counting on it. Otherwise they may cry to the Lord against you, and you will be guilty of sin. -- Deuteronomy 24:15
“Pay them their wages each day before sunset, because they are poor and are counting on it. Otherwise they may cry to the Lord against you, and you will be guilty of sin.” — Deuteronomy 24:15

India is not the only place with such scandals:

China Catches 2,440 Students Cheating in High-Tech Scam

Behind Fake Degrees From Pakistan, a Maze of Deceit

2012 Harvard Cheating Scandal

Or, you know, pretty much the entire US economy, especially finance, insurance, and real estate.

I would like to note that in many of these cases, the little guys in the scam, while arguably acting dishonestly and cheating against their neighbors, are basically well-intentioned people who don’t see any other options besides bribing their way into jobs. In the end, these guys often get screwed (or end up dead.)

It’s the people who are taking the bribes and fixing the tests and creating bullshit degrees and profiting off people’s houses burning down who are getting rich off everyone else and ensuring that cheating is the only way to get ahead.

These people are parasites.

Parasitism increases complexity in the host organism, which increases complexity in the parasite in turn:

With selection, evolution can also produce more complex organisms. Complexity often arises in the co-evolution of hosts and pathogens,[7] with each side developing ever more sophisticated adaptations, such as the immune system and the many techniques pathogens have developed to evade it. For example, the parasite Trypanosoma brucei, which causes sleeping sickness, has evolved so many copies of its major surface antigen that about 10% of its genome is devoted to different versions of this one gene. This tremendous complexity allows the parasite to constantly change its surface and thus evade the immune system through antigenic variation.[8]

Animals detect and expel parasites; parasites adapt to avoid detection.

So, too, with human scams.

We tend to increase complexity by adding paperwork.

A few people cheat on their taxes, so the IRS begins randomly auditing people to make sure everyone is complying. A few people refuse to hire African Americans, so companies must keep records on the ethnic/racial identities of everyone they interview for a job. An apartment complex fears it could get sued if a car hits a bicyclist in the parking lot, so it forbids all of the children there from riding their bikes. A college gets sued after a mentally ill student commits suicide on campus, so the college starts expelling all mentally ill students.

Now, while I appreciate certain kinds of complexity (like the sort that results in me having a computer to write on and an internet to post on,) the variety that arises due to a constant war between parasites and prey doesn’t seem to have much in the way of useful side effects. Perhaps I am missing something, but it does not seems like increasing layers of oversight and bureaucracy in an attempt to cut down cheating makes the world any better–rather the opposite, in fact.

Interestingly, fevers are not diseases nor even directly caused by disease, but by your own immune system responding to disease. By increasing your internal temperature, your body aims to kill off the infection or at least make things too inhospitable for it to breed. Fevers (within a moderate range) are your friends.

They are still unpleasant and have a seriously negative effect on your ability to get anything else done.

An ill patient can do little more than lie in bed and hope for recovery; a sick society does nothing but paperwork.

Certainly the correct response to parasitism is to root it out–paperwork, fever, and all. But the long-term response should focus on restructuring institutions so they don’t become infected in the first place.

In human systems, interdependence in close-knit communities is probably the most reliable guard against fraud. You are unlikely to prosper by cheating your brother (genetically, after all, his success is also half your success,) and people who interact with you often will notice if you do not treat them fairly.

Tribal societies have plenty of problems, but at least you know everyone you’re dealing with.

Modern society, by contrast, forces people to interact with and dependent upon thousands of people they don’t know, many they’ve met only once and far more they’ve never met at all. When I sit down to dinner, I must simply trust that the food I bought at the grocery store is clean, healthy, and unadultarated; that no one has contaminated the milk, shoved downer cows into the chute, or failed to properly wash the tomatoes. When I drive I depend on other drivers to not be drunk or impaired, and upon the city to properly maintain the roads and direct traffic. When I apply for jobs I hope employers will actually read my resume and not just hire the boss’s nephew; when I go for a walk in the park, I hope that no one will mug me.

With so many anonymous or near-anonymous interactions, it is very easy for people to defraud others and then slip away, never to be seen again. A mugger melts into a crowd; the neighbor whose dog shat all over your yard moves and disappears. Twitter mobs strike out of the blue and then disperse.

So how do we get, successfully, from tight-knit tribes to million+ people societies with open markets?

How do modern countries exist at all?

I suspect that religion–Christianity in the West, probably others elsewhere–has played a major role in encouraging everyone to cooperate with their neighbors by threatening them with eternal damnation if they don’t.

To return to Deuteronomy 24:

Do not take a pair of millstones—not even the upper one—as security for a debt, because that would be taking a person’s livelihood as security.

If someone is caught kidnapping a fellow Israelite and treating or selling them as a slave, the kidnapper must die. You must purge the evil from among you. …

10 When you make a loan of any kind to your neighbor, do not go into their house to get what is offered to you as a pledge. 11 Stay outside and let the neighbor to whom you are making the loan bring the pledge out to you. 12 If the neighbor is poor, do not go to sleep with their pledge in your possession. 13 Return their cloak by sunset so that your neighbor may sleep in it. Then they will thank you, and it will be regarded as a righteous act in the sight of the Lord your God.

14 Do not take advantage of a hired worker who is poor and needy, whether that worker is a fellow Israelite or a foreigner residing in one of your towns. 15 Pay them their wages each day before sunset, because they are poor and are counting on it. Otherwise they may cry to the Lord against you, and you will be guilty of sin. …

17 Do not deprive the foreigner or the fatherless of justice, or take the cloak of the widow as a pledge. 18 Remember that you were slaves in Egypt and the Lord your God redeemed you from there. That is why I command you to do this.

To be fair, we have to credit Judaism for Deuteronomy.

Here we have organized religion attempting to bridge the gap between tribalism and universal morality. Enslaving one of your own is an offense punishable by death, but there is no command to rescue the enslaved of other nations. You must treat your own employees well, whether they come from your own tribe or other tribes.

In tribal societies, justice is run through the tribe. People with no families or clans–like orphans and foreigners–therefore cannot access the normal routes to justice.

As Peter Frost notes of the German societies of the early Dark Ages:

The new barbarian rulers also disliked the death penalty, but for different reasons. There was a strong feeling that every adult male had a right to use violence and to kill, if need be. This right was of course reciprocal. If you killed a man, his death could be avenged by his brothers and other male kinsmen. The prospect of a vendetta thus created a ‘balance of terror’ that kept violence within limits. So, initially, the barbarians allowed capital punishment only for treason, desertion, and cowardice in combat (Carbasse, 2011, p. 35). [bold mine]

Frost quotes:

[The Salic Law] is a pact (pactus) “concluded between the Franks and their chiefs,” for the specific purpose of ensuring peace among the people by “cutting short the development of brawls.” This term evidently means private acts of vengeance, the traditional vendettas that went on from generation to generation. In place of the vengeance henceforth forbidden, the law obliged the guilty party to pay the victim (or, in the case of murder, his family) compensation. This was an indemnity whose amount was very precisely set by the law, which described with much detail all of the possible damages, this being to avoid any discussion between the parties and make [murder] settlements as rapid, easy, and peaceful as possible. […] This amount was called the wergild, the “price of a man.” The victim’s family could not refuse the wergild, and once it was paid, the family had to be satisfied. They no longer had the right to avenge themselves (Carbasse, 2011, pp. 33-34).

(The Wikipedia notes that, “The same concept outside Germanic culture is known as blood money. Words include ericfine in Ireland, galanas in Wales, veriraha in Finnish, vira (“вира“) in Russia and główszczyzna in Poland. In the Arab world, the very similar institution of diyya is maintained into the present day.”)

Frost continues:

This situation began to change in the 12th century. One reason was that the State had become stronger. But there also had been an ideological change. The State no longer saw itself as an honest broker for violent disputes that did not challenge its existence. Jurists were now arguing that the king must punish the wicked to ensure that the good may live in peace.

In a tribal system, a victim with no family has no one to bring a suit on their behalf, if they are murdered, there is no one to pay weregild to. This leaves orphans and “foreigners” without any access to justice.

Thus Deuteronomy’s command not to mistreat them (or widows.) They aren’t protected under tribal law, but they are under Yahweh’s.

The threat of divine punishment (and promise of rewards for good behavior,) may have encouraged early Christians to cooperate with strangers. People who would cheat others now have both their own consciences and the moral standards of their Christian neighbors to answer to. The ability to do business with people outside of one’s own family or clan without constant fear of getting ripped off is a necessary prerequisite for the development of free markets, modern economies, and million+ nations. (In short, universalism.)

In the absence of universalist societies that effectively discourage cheating, groups that protect their own will out-compete groups that do not. The Amish, for example, have grown from 5,000 to 300,000 people over the past century (despite significant numbers of Amish children choosing to leave the society every generation.)

(By contrast, my own family has largely failed to reproduce itself–my cousins are all childless, and I have no second cousins.)

The Amish avoid outsiders, keeping their wealth within their own communities. This probably also allows them to steer clear of cheaters and scammers (unlike everyone who lost money in the 2008 housing crash or the 2001 stock market crash.) As insular groups go, the Amish don’t seem too bad–I haven’t heard any reports of them stealing people’s chickens or scamming elderly widows out of their life’s savings.

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6 thoughts on “The evolution of fraud

  1. RE Biblical and Germanic tribal societies: when I was reading Heather’s “Empires and Barbarians” I was amazed at how much the Germanic and Slavic state-formation stories paralleled the Biblical narrative. Tribal confederations with (probably) made-up ancestral connections, ad-hoc leadership that gained formality over time, slave/free-foreign/tribal-member/noble status distinctions, heavy interaction with more sophisticated neighboring powers, it even got so specific as premature false-starts that didn’t long survive the charismatic leader.

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