Debating the Nature of Fraud
by Roger DonwayIn the November Navigator, I undertook to set forth an account of fraud as a violation of rights from which government should protect people. This was in response to William Vandersteel's suggestion that fraud ought not be considered a crime or punishable by the government. In answering my argument, Vandersteel makes clear that our disagreement goes deeper still. He writes:
The issue comes down to the difference between physical force directed against a person (i.e. bodily attack) and all other forms of force. It is the difference between being held up at gun point and a thief lifting your wallet without your being aware of it. This difference is crucial to [the] issue of maintaining separation of state and economics.
The distinction is stated with admirable clarity, but I believe it cannot be sustained. If a person snatches away each morsel of food just as it is about to enter my mouth (so long as he does not touch my hand), I will die just as surely as if he shoots me, even though the food is mere property.
Vernon L. Chappell wrote to make a clarifying point. I had written that Ayn Rand's belief that "only force can violate rights" rules out such "economic crimes" as "the restraint of trade" and "the attempt to monopolize." Chappell pointed out that these actions could indeed be criminal if carried out by criminal means, for example, extortion or blackmail. That is true, but I am not sure the state would need to define any crimes above and beyond extortion and blackmail.
Lastly, Frank Bryan sent in an interesting challenge to my definition of "fraud," which was, "the act of obtaining goods and services from another through an inducement of gain that involves a conscious and harmful deception of the person who conveys the goods or performs the services." Bryan wrote:
Your definition of fraud is too narrow. . . . I would broaden [the genus] to say 'the act of obtaining value from another.' Fraud exists in a wider context than material values. The word material in Rand's definition ('obtaining material values without their owner's consent') also unnecessarily limits the scope. Other intangible values, such as respect, can be obtained by fraud.
Consequently, Bryan offers this definition: "a deliberate misrepresentation of reality in order to obtain value from another."
Bryan's definition has several interesting features, including its reversal of my genus and differentia. I defined fraud as the counterfeit of a legitimate market process. Bryan defines it as a species of immorality. In a letter, I suggested that we seemed to be looking at fraud in different contexts. Bryan's definition of "fraud," I said, might be a good one in a moral context.
I was trying to isolate the legal concept of 'fraud.' . . . You mention obtaining respect by fraud. [But] you would not say, would you, that such a fraud is something about which one can call the police?
Bryan answered: "No, but in an ideal society it might be, although damages would be as difficult to measure as 'pain and suffering.'" That seems to me a dubious notion, close to the conservative dictum that "there is no right to do wrong," at least when the wrong affects another.
In response to Bryan's criticisms, however, I would broaden my definition of fraud slightly. The case I would include is one where a person is defrauded not of goods or services per se but of a right to goods or services. Thus a person might own, not a stretch of land, but a right-of-way over that land. To obtain his right-of- way by conscious deception should also count as fraud. U