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> Of course the optimal amount of fraud for a business is zero. Only if the business doesn’t have to pay to avert fraud. > A world with zero fraud would be op
by theptip 3y ago
> Of course the optimal amount of fraud for a business is zero.
Only if the business doesn’t have to pay to avert fraud.
> A world with zero fraud would be optimal for them.
You are misunderstanding the statement. We are not imagining which hypothetical world we wish to live in. We are making a claim about fraud levels in this world and how they feed into profits.
In this world, every reduction in fraud costs money or time or opportunity. Therefore, optimizing your profit means choosing a non-zero (often higher than you’d think) level of fraud.
- akerl_ 3y agoYea; I think this is one of the times where terms of art matter. "Optimal" here doesn't mean like "It would be optimal for me if I had infinite money", it's a term of art in fields like economics that describes the best case of the available variables. This is how we end up going back and forth between "the optimal amount of fraud is non-zero" and "it would be optimal to have no fraud". Economics has to live with the world that exists, and there is no plausible combo of variables where people who are about to attempt fraud are instantly evaporated into dust.
- yreg 3y ago>You are misunderstanding the statement. We are not imagining which hypothetical world we wish to live in. We are making a claim about fraud levels in this world and how they feed into profits. Then the question should be stated clearly: "How much effort and resources should be spent to combat fraud?" The answer is very obviously not "all of the effort and all of the money". Therefore the matter is trivial.