Wednesday, December 24, 2008

Markets and fraud

You can't read the news these days without thinking about fraud, and how market designers should think about it. I don't just mean headline grabbing Ponzi schemes of unprecedented proportions either, but run of the mill misbehavior. Part of the answer involves regulation, legislation, law enforcement, and the profession of accountancy. There's even an Association of Certified Fraud Examiners.

Scott Kominers (an aspiring market designer who is applying to grad schools this year, and looks like a hot prospect) draws my attention to a case that might fall under the heading of environmental activism: Bidder said it was easy to rig government auction.

Scott writes:
"Apparently, "Tim DeChristopher, 27, a University of Utah economics student and environmental activist," infiltrated the government oil and gas parcel auction. 'He snapped up 22,500 acres of parcels between Arches and Canyonlands national parks that he doesn't plan to develop or even pay for. He also drove up prices on other bids by hundreds of thousands of dollars.' Proof that those who do not practice safe market design are doomed to be beaten by economics students."

5 comments:

michael webster said...

It would be helpful if we had an economic theory of fraud constructed out of compliance techniques and rational choice.

So far, economists treat fraud primarily as an error and not a rational response to opportunity.

Anonymous said...

One man's "environmental activism" is another man's fraud. Throw the book at the little creep.

Anonymous said...

So it is the market designer's fault that it was not a fraud-proof system? Is there such a thing as a process or situation that leaves no room to be exploited? The student's accomplishment will drive up everyone's energy costs. I agree, now we the public, should pursue our market right and ability to charge the student with fraud.

befalas said...

This made CNN!

http://money.cnn.com/video/#/video/news/2008/12/24/new.utahactivist.122408.cnnmoney

Videokonferenzen zur Miete said...

Why isn't fraud treated more seriously?! I mean isn't the loss of money and the companies that are brought down to its knees by fraud not enough example? Harder criminal laws should be implemented if they really wanna strike fear into the hearts of would-be fraud wannabes.