Tuesday, July 14, 2009

Mob Rule, Part 2

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Imagine if you will the following:

Situation 1: You're walking home when you see a wallet in the gutter. Inside you find $250 in cash. It turns out that the wallet belongs to your neighbor. Do you keep the cash and claim the wallet was empty when you found it, or do you return it intact?

Situation 2: A major storm just passed through your area. It dropped a few limbs from a neighbor's tree in your yard but did no other damage to your property. While cleaning up you accidentally break a window. Repair will cost $250. Your insurance won't cover the damage because you broke the window yourself. Had the window been broken by a falling tree limb it would have been covered. Do you pay for the repair yourself or do you claim that it was storm damage and get the insurance company to pay for it?

Most people would probably return the money to their neighbor. In fact many would return it to a stranger. However many of those same people will cheat and tell the insurance company that the storm broke the window. Often people who consider themselves honest will not only defraud the insurance company but will take a few “unauthorized benefits” from their employer or help themselves to some items at the store that they didn’t exactly pay for. Some business managers will divert company resources to their personal use. Why that disconnect in honesty? I think the cause is similar to the mob mind-set discussed yesterday; actually what we might call the reverse mob effect. Anonymity and diffusion still play a big part, but in a different way.

First, anonymity and deindividuation: The wallet owner is an individual, but the insurance company is an amorphous entity. In this case it is the victim, not the perpetrator that gets deindividuated. It is the victim who lacks personhood. That makes it easy to think we are harming nobody when we cheat that company.

Second, diffusion: The effects of cheating the company are diffused over a large number of people, doing very little damage to any one of them. In this case it is not the responsibility that is diffused but the damage. Stealing that $250 from the insurance company is still fraud, but is less visible because only a little is stolen from any one individual.

This reverse mob effect affects business and public life. For example, once when I complained about wasteful government spending I got the response, “I regard it as my duty to get as much federal money spent in the county as I can, even if it is spent on wasteful projects.” The speaker was a county commissioner, allegedly a fiscally conservative republican. I had complained to him about the waste but he just wanted to get money into the county. He didn’t think of the fact that he was taking tax money from the widow in Nebraska, the struggling young family in Wyoming, or the parents in California trying to pay for their daughter’s education. The reverse mob effect allowed him to ignore the overall results of his efforts.

Such shortsightedness is common. It is easy to convince ourselves that nobody is hurt when we take maybe a hundredth of a cent from millions of people. We don’t want to think that millions of people may be doing the same, stealing in the aggregate rather large sums of money from each victim. Nor do we remember that a business or government is nothing but a collection of people. Those people need and deserve the fruits of their labor to care for themselves and their families.

Businesses do not manufacture money; instead they exchange goods or services for it. If they lose money to theft they must make it up by raising prices, cutting employee pay or benefits, or reducing payments to stockholders. Worst case, they go out of business and leave customers, employees, stockholders, and even creditors without funds. When we cheat a retailer, insurance company, or any other business we are really cheating the people who depend on that business. Spreading our crime over many people does not change the fact that it is a crime.

Likewise, government has no real way to obtain resources except from the people. Even borrowing or printing money is just a different way to get those resources from you, from your retired first grade teacher, and from other citizens who have to give up the results of their work to provide for government projects. If we demand and get a fancy sports stadium at taxpayer expense, we are really taking the money from those people, many of whom don’t care a fig about sports.

We can improve our economy if we get everybody to realize that there is no such thing as stealing from government or business. Those organizations are only intermediaries between us and other individuals, flesh and blood people with names, homes, families and their own wants and needs. When we defraud a company or the government, we are really defrauding each individual who has an interest in that organization.


Bobkatt said...

Good points. But one thing you didn't cover in your insurance example is that most of us pay a large amount of money every month to insurance companies and not to neighbors or strangers. While I don't remember ever defrauding an insurance company like you suggest, I have personally been cheated by one to the tune of about $3000 dollars. While renting my house my brother accidentally caused a fire in the garage while welding. The insurance inspector claimed it was caused by willful negligence on my brothers part but the fire marshall said it was definitely caused by an accidental spark. The insurance agent offered me about half of the replacement cost to settle and verbally guaranteed me that they wouldn't go after my brother for damages. Needing the money to repair the damage to the dwelling I cashed the check. They immediately filed charges against my brother and I had to hire a lawyer and had to settle for about 1/3 of what I should have got.
Many examples of government waste can be quoted such as the bridge to nowhere, the big dig in Boston, building a rain forest in Ohio, etc. The fact remains that as long as we are forced to send large amounts of money to the Federal government we must beg to get back a portion of it. The answer is smaller Federal government and more local control of our finances and options. We will still have those that insist we fund sports stadiums and art galleries they will be held a little more accountable to the paying public.

Hal Lillywhite said...

Well, the insurance agent who made the offer to you may have been under the influence of a mob-like mind-set, deindivuated and with diffused responsibility. However it is not possible to determine that by limited second-hand information so I'll leave it at that.

I'm sure you learned not to trust anything not written down in such cases.