SOCIAL WANTS AND THE UNINTENDED CONSEQUENCES

“As every individual, therefore, endeavour as much as he can both to employ his capital in the support of domestic industry, and so to direct that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of other society as great as he can. He generally, indeed, neither intends to promote the public interest, nor know how much he is promoting it. By preferring the support of domestic to that of foreign industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it” (see footnote 1).

On the 10^th of November 2006, mid-term elections in America confirmed a majority victory for the Democratic Party, a result that gave them power again after twelve years, and left a limp Republican President. If for anything that caused this shift, most important on the minds of Americans was the military presence of the U.S. in Iraq.  Donald Rumsfield, the Defense Secretary lost his job, and President Bush was left in office without a voice as unexpected effects of the Republican Party’s policies began to unfold.

In a bid to satisfy “public interest”, the Republicans I guess never did make anything of Alexis de Tocqueville when in 1831 he said, “no sooner do you set foot upon American ground than you are stunned by a kind of tumult; a confused clamor is heard on every side and a thousand simultaneous voices demand the satisfaction of their social wants”. Certainly, politicians and policy makers propose new legislations designed to make society a better place and make us better people. But, all policies have consequences, which they are hoped to achieve. However, in many cases, legislation brings other consequences that were neither intended nor desired by those who supported the law. And sometimes, laws don’t even achieve the goals they were meant to bring about.

For example, everyday, global consumers receive offers that just sound too good to be true. In the past, these offers came through the mail, or by telephone. Now, the con artists and swindler have found a new avenue to pitch their frauds – the internet. The on-line scams know no national borders or boundaries; they respect no investigative jurisdictions. But, as with all scammers, they have one objective – to separate you from your money! In several cases, even your life. Legislators are crying “there oughta be a law!” Laws to protect public interest from these thieves and fraudsters. But, how do these enacted laws affect our behaviour in both predictable and unexpected ways in a society where order is existent in human affairs.

In what many are calling America’s (or rather the world’s) fastest growing type of robbery, crooks are working without the usual tools of the trade. Forget sawn-off shot guns and ski masks: your name and Pension Number (see footnote 2) will do the trick, or that blank, pre-approved credit application you tossed out with the coffee grounds. Even talking on your phone or surfing the internet can allow someone you may never meet to rob you of the one thing you may have though safe from attack: your identity.

Identity theft is a criminal offense. It occurs when a person knowingly transfers or uses, without lawful authority, a means of identification of another person with the intent to commit or to aid or abet any unlawful activity that constitutes violation of federal law or that constitutes a felony under any applicable state or law. Identify fraud is digging into a consumer's pockets – around $221 billion by the end of 200, tripling to an incredible $2 trillion by the end of 2005 (see footnote 3). The British economy alone, suffers a loss of £1.3 billion per year. The knock-on effects are not limited to financial loss – it can take victims up to 300 hours of effort to regain their credibility with banks and credit reference agencies. Terrorist attacks could also be on the offing.

The number of identity theft victims and their total losses are probably much higher than reported. It’s hard to pin down, because law enforcement agencies may classify identity theft differently – it can involve credit card fraud, internet fraud or mail fraud, among other crimes. The perpetrator may use a variety of tactics to obtain your personal information and drain your finances: posing as a loan officer and ordering you credit report (which lists lines of credit); “shoulder surfing” at the ATM or phone booth to get your PIN code, “dumpster diving” in trash bins behind businesses or apartments for unshredded credit applications, cancelled checks, bank records or any documents containing personal information; or, stealing mail right out of your own mailbox.

An interesting point about theft is that it is a crime in which you decide whether to participate. Hanging up the phone or not responding to shady mailings or e-mails makes it difficult for the scammer to commit theft. But con artists are very persuasive using all types of excuses, explanations, and offers to lead you – and your money – away from common sense.

If producing, smuggling and peddling drugs were the crime of the 20^th century, identity theft is the crime of the 21^st century. While fighting the trade is now high on the agenda of most governments, identity theft is still to get the importance it deserves. In many countries around the world, it is yet to become even a cognizable offense. In some, the laws that exist to fight identity theft are hardly adequate. Even in the U.S., identity theft remains low on the agenda of lawmakers although the FBI has identified it as number 3 among its top 10 priorities. But, what is really galling is that while the internet is today teeming with criminals of various sizes, shapes and colors only a mere 5% of these co artists are caught and prosecuted. While the U.S. remains the country with the highest incidence of identity theft, - quite likely given that internet usage is highest in this country – Europe is not left behind. Despite such low legislative action, the laws in place and those in the process of gaining ground are continuing to push for prevention, by enhancing the penalties for any individual who steal an identity and uses that false identity to commit any one of a number of serious crimes. Furthermore, laws such as the Data Accountability and Trust Act (DATA) move for stricter security measures to protect consumer information; and the Fair and Accurate Credit Transactions Act of 2003 (FACT) make room for consumes to order free credit report (consumer pull). However, the Identity Theft Prevention Act of 2001 and Identity Theft Prevention Act of 2002, does not only help victims of identity theft correct their records but increase penalties by as much as five years for identity theft for the purpose of committing a terrorist act.

This became clearer when Nigerian born Jide Komolafe, 31, became one of the first people in the U.S. to be convicted under the Identity Theft Prevention Enhancement Act of 2004, which created the new offense of aggravated identity theft and added to years to the normal sentence. Justice caught up with him when he was sentenced February 2, 2006 to five and half years of prison (see footnote 4).

On the contrary, the “imperious immediacy of interest” (see footnote 5) attached to thee laws result to profiling, unexpected protests against these legislations, strain to hi-tech security and further injury to, and complication of victims’ and would-be victims’ plight. While terrorists like Ahmed Ressam are caught because like him, they would be ‘hinky’ (see footnote 6), others like the alleged “American Taliban” John Walker Lindh and British “shoe bomber” Richard Reid would have committed their intended crime before being caught. This is because profiling fails. To profile, is to generalize. It is taking the characteristics of a population and applying them to an individual. Profiling works better if the characteristics profiled are accurate. But ethics aside, profiling fails because most real fraudsters are overlooked. Active failures will be much more common than passive failures. Timothy McVeigh eluded arrest while law enforcement searched for Arab suspects, and DC snipers John Muhammad and Lee Boyd Malvo continued on a killing spree while officials looked for “a white man in a white van.” The greater majority of people who fit the profiles will be innocent. Brazilian electrician Jean Charles de Menezes, killed by the British police on July 22, 2005 was no more armed than the police officers themselves (see footnote 7). At the same time, some real fraudsters are going to deliberately try to sneak past the profile.

Although “consumer pull” from credit bureaux has no effect on credit, and consumers entitled to “freezing” their credits and fraud “alerts”, these measures deal with identify theft only after it has happened and not before – a case of bolting the stable door after the horse has been stolen. Freezers can interfere with the credit-issuing process, can be technically difficult to implement and can carry a cost that may be passed on to consumers. And although these credit monitoring options are available at no-out-of-pocket expenses (some customers could still see it. As another way for the bureaux to enrich themselves more), it can’t prevent identify theft but can reduce only the impact.

Strains in hi-tech used for the latest encryption, consumers screening and data security technologies, is more likely certain than expected. This is because however the hi-tech security measure, humans will still beat computers at ‘hinkiness-detection’ for many decades to come. Even institutionalized profiling is bound to fail – these fraudsters would have done their homework in identity faking.

Taxpayers also face a risk of identity theft, in legislations that allow tax preparers sell personal information of taxpayers with permission (see footnote 8) making room for tax preparers to produce a separate piece of paper of webpage requesting permission to describe personal information, is only going to make room for identity theft under the nose of identify owners and credit bureaux. Protesters are also going to stand on the fact that some legislations would fail to correct possible privacy and technical loop holes in attempts to save would-be victims from theft.

But however the consequences of legislations, the law is still one key institution that makes the co-ordination of a (free) society possible. It is a code that has evolved not at the hands of politicians but in the decision of judges. According to Tocqueville, “the spirit of the law which is produced in the schools and courts of justice gradually penetrates beyond their walls into the bosom of society, where it descends to the lowest classes, so that at least the whole people contract the habits and tastes of the judicial magistrate”. The law is respected because it is based on rules that have been tested in real life, and because the values and the spirit of the law are closely connected to the moral values of civilization.

The moral framework for human society is not set in stone neither is it in the self-interest of legislators, which have become a “basic value” for the enactment of these laws, but rather is constantly changing as new rules are discovered that allow the social order to function better. Life can be hard because it forces individuals to adjust to the needs of others. The society works because it coordinates conflicting desires by creating incentives for people to satisfy their own wants by satisfying those of others. And the hum of commerce eases the path of social cooperation, in part because it offers man opportunities that are simply not available when acting alone. Incentives allow us to cooperate with others even though our views on political issues or our religions beliefs may differ.

“It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from regard to their own self-interest”.

FOOTNOTES

1.                   A quote from notable economist Adam Smith in his book, The Wealth of Nations. In an article entitled “Unintended Consequences”, Rob Norton makes reference, to Smith’s understanding of unintended consequences in economic reality — that people do act in their own self-interest and not public interest; while he did not argue that self-interest is always good, he has beneficial effects on the community.

2.                   Known as Social Security Number in the U.S. , Sweden and some countries; National Insurance in the U.K. or just Pension Number in some other countries, a pension is a steady income given to a person, made in the form of a guaranteed annuity to a retired or disabled employee. The program name could differ and vary but, it still focuses on the same aim.

3.                   According to the Analyst house, Aberdeen Group, this is only an estimate of loss, in global terms. This shows that possible financial loss greater than reported, is being suffered by victims to identity thieves.

4.                   Komolafe opened accounts at both Citizens and Charter One banks in the name of other people, made fake deposits and then withdrew money with a debit card. He was also convicted of bank fraud and identity theft. When he was arrested on 2^nd August, 2004, Komolafe had his possession, identifying information including social security numbers of 68 people.

5.                   According to Rob Norton in his “Unintended Consequences”, Robert K. Merton referred to instances in which an individual wants the intended consequence of an action so much that he purposefully chooses of ignore any unintended effects. That type of willful ignorance is very different from true ignorance.

6.                   On 14^th December, 1999, Ahmed Ressam tried to enter the U.S. by ferryboat from Victoria Island, British Columbia. In the trunk of his car, he had a suitcase bombs. His plans were to drive, to Los Angeles International Airport, put his suitcase on a luggage cart in the terminal, set the timer, and then leave. The plan would have worked had someone not been vigilant. Ressam had to clear customs before boarding the ferry. He had take ID, in the name of Benni Antoine Norris, and the computer cleared him based on this ID. He was wanted by the Canadian Police, on the other side of the Strait of Juan de Fuca, at Port Angeles, Washington. Ressam was approached by U.S. Customs agent Diana Dean, who asked some, routine questions and then decided that he looked suspicious. He was fidgeting, sweaty and jittery. He avoided eye contact. In Dean’s own words, he was acting ‘hinky’. More questioning ensued then there was no one else crossing the border, so two other agents got involved and more hinky behavior. Ressam’s car was eventually searched, and he was finally discovered and arrested.

7.                   Jean Charles de Menezes, 27, was a Brazilian electrician living in Tulse Hill, in South London. Menezes was shot and killed a Stockwell Tube Station on the London Underground by unnamed Metropolitan Police officers. Police later issued an apology, saying that they had mistaken him for a suspect in the previous day’s failed bombings and explosions, and was unconnected with the attempted bombings.

8.                   In December 2005, proposed changes on tax laws were announced in the U.S. The plan proposes to allow tax preparers to sell personal information of taxpayers with permission. While lawyers, consumer advocacy groups, and a few members of congress are raising a live and cry about the proposal, arguing that it will amount to identify theft. Proponents of the plan including the Internal Revenue Service (IRS) are defending it saying that it is part of larger process aimed at updating tax rules for the internet and electronic files.