I’d much rather see a few people who didn’t need benefits manage to claim them than see people who do need them be left without. The first option costs tax payers a bit more money. The second results in people’s lives being made significantly worse, and in some cases in deaths.

I grew up in an area where many parents could afford (maybe if they budget carefully, maybe just anyway) to privately educate a child. But they mostly didn't, because the government funded schools were pretty good. In fact, as children it was actually a minor stigma to be privately educated, because if your parents are spending a lot of money on the fancy school, either they don't know how to spend their cash (so they're stupid) or you're really stupid and they sent you to that school in the hope of making up for it. It was seen as like easy mode. Smart kids don't go to private school, why would they waste the money?

The first option costs taxpayers significantly more than a ‘bit’.

Just look at how much it cost when they basically turned off all the checks in order to get covid relief into the hands of people who really needed it. In Arizona, after a while, they made it so you had to sit on (virtual) hold for 8-10 hours to verify your identity with a human or they would cut you off. Which worked well enough to ensure only the people who really needed it went through all the hassle. It really sucked for those people but they stopped sending billions of dollars overseas to people who just googled someone’s address.

That's not quite what I got from the article. I read it as the more friction you put in place to prevent fraud, the harder it is for legitimate transactions to happen. Therefore, it's not so much about the cost of the fraud, but the opportunity cost of legitimate transactions which don't happen in the zero-fraud environment.

Actually, now I'm thinking about it emotionally as well. Best way to prevent myself from getting hurt is to close off as much as I can. Also the best way to prevent myself from feeling joy and all the other things I want to feel.

So thank you for this reminder.

However, I'm not nearly as breezy about $20 billion annually in fraud. Maybe that's fine from the perspective of the merchants and credit card networks. But from the societal perspective, that's subsidizing bad actors. People and groups who will not stop at one kind of crime as they try to grow. People who will divert other people into being parasitic. That's not healthy for society or for the individuals who end up living lives of crime.

So I think the society-optimal level of fraud is way below the merchant-acceptable amount of fraud.

Incidentally, this shows that the 'perfect' ethical stance is not necessarily the one that delivers the most benefits at the least cost, aka when ideals meet the real world...

“It is better that ten guilty persons escape than that one innocent suffer”

At some point in pursuit of “0 crime” you will be imprisoning 10 innocent men to capture 1 criminal.

To put it another way you're forgetting the victims. The 10 fraudsters made 10 people suffer. their suffering needs to added to the equation

The current system from that perspective works great. You have to get pretty unlucky to get convicted as an innocent, especially in this day and age where a cop’s testimony isn’t worth nowhere near as much as it used to be.

And morally alone it’s far worse to wrongfully convict an innocent person than to let a guilty one go free.

1. Pass the cost towards self regulation of people, using client facing measures e.g. prove their innocence if they are an outlier

2. Catch a couple of cases and over market your policing ability to disadvantage the most gullible.

3. Catch a couple of cases, even minor infractions and destroy them with disproportionate fines or jail sentences, economy of randomness or economy of those who have the best lawyers.

Fraud against government, as above but add:

4. Add arbitrary constraints, you don't really want the system to work, you just fake it for political reasons

This isn't hypothetical; it's the issue underling the "program design" controversies about means-testing in public policy.

(And of course, if you did want to maximize tax revenue, you'd focus enforcement on the big fish.)

With the intent to incentivize and train criminals to stay small and low impact.

If you're a retail platform, and you have a few scammers making a few grand of 20-100 dollar scams. You can play wack a mole with them and then that keeps people doing that small fraud rather than leveling up and potentially doing crimes that could endanger the whole business with the exposure.

It’s like saying that the optimal dirtiness after cleaning your house is non-zero (greater than zero) because cleaning it perfectly takes much more effort than it is worth!

That’s not counter-intuitive at all. It’s just an obvious fact stated in a silly way (for clicks or whatever else).

It's not just stated in a silly way, it's stated in a way that's incorrect because they didn't mean what they said. "The optimal amount of fraud is nonzero" does not actually mean the exact same thing as "in an optimally-beneficial fraud prevention effort, the amount of fraud is non-zero".

But the very point of the article is to not take zero-fraud in isolation and instead, explain how non-zero-fraud is an unavoidable tradeoff when balancing 2 simultaneous goals:

- (1) prevent fraud transactions as much as practically possible

- (2) make legitimate transactions as easy as possible

If one accepts the premise of pursuing those 2 goals at the same time, then by definition, we're no longer talking about "in isolation". You've now unavoidably entered non-zero fraud territory.

Perhaps it's the author's particular wordsmithing of what he's trying to convey that just rubs many readers the wrong way.

The post makes it clear that the discussion is not about theory or taking anything in isolation - it's about fraud in the real world. In that context, the way it's stated is correct - if you have zero fraud in the real world, that means that you designed the tradeoffs wrong and that the cost of your fraud prevention (in terms of actual dollars as well as inconvenience to customers, etc.) is greater than the overall cost would be if you allowed a small amount of fraud to occur (looking at the total cost of that fraud as well as the cost of preventing additional fraud).

I suppose the problem is that whether or not the title of the post is true or not depends on the context in which it's taken, and the title itself doesn't have any context. Since the post does offer context, though, I think it's reasonable to take the title in that context.

Yeah, but that phrase won't get any clicks.

I gave up about half way through the article and just skimmed through the rest.

And the argument that more stringent anti-fraud protections increase the burdon on legitimate claimants is absolutely spot on, and has parallels in all sorts of other legal, financial, and market situations c:

If your incentive is to have zero fraud, the organization will find ways to not detect fraud or add so many controls and audits that the cost of doing whatever will go up.

There’s a balance. In the tax world, the de-clawing of the IRS for certain things have dramatically impacted compliance. You want enough enforcement that you’re discouraging median cheater, but not so much the cure is more expensive.

We can start with payment. What would someone pay with? Credit/debit numbers can be stolen. Checks can be stolen or forged. Cash can be counterfeit. What form of transaction has zero chance of fraud?

To make transactions available to people you need to introduce systems that can have fraud in them. There is a balance between availability/ease and fraud.

If we view those repeated tricks as business as usual - we should probably make them accessible to everyone. Otherwise the small fraud becomes rampant.

And benefits are for helping people who are in poverty.