By Bryan Caplan
I agree with Arnold’s analysis of all three of his hypotheticals. But I doubt Capital One’s sales pitch was analogous to:
I tell you that a tree is about to fall on you, but if you give me all
the money in your wallet, it will not fall on you. In fact, the tree is
not about to fall on you, and I know it. But the relief from the fear
of the tree (a fear which I put into your head in the first place) gives
you peace of mind.
Instead, it was probably more like:
I tell you that a tree might fall on you, and it would be awful if it did. But if you give me all
the money in your wallet, we’ll rescue you if you’re ever trapped under a tree.
Since all these statements are true, I see no fraud. Of course, there may be a few exceptional cases where Capital One’s salespeople actually did lie, but Arnold’s complaint is about the crumminess of the product and the high-pressure pitches.
Many libertarians speak as if it were possible to come up with a clean
way to separate voluntary transactions from involuntary transactions.
It’s not just libertarians. The age-old common law also has a bright line, nine-element definition of fraud:
- a representation of an existing fact;
- its materiality;
- its falsity;
- the speaker’s knowledge of its falsity;
- the speaker’s intent that it shall be acted upon by the plaintiff;
- plaintiff’s ignorance of its falsity;
- plaintiff’s reliance on the truth of the representation;
- plaintiff’s right to rely upon it; and
- consequent damages suffered by plaintiff.
Was Capital One’s sales pitch fraudulent in this sense? No; at minimum, they’re missing element #3. Do major religions commit fraud in this sense? No; at minimum, they’re missing element #4. Do broader definitions of fraud criminalize a wide range of actions that almost no one considers criminal? I’m afraid so.
P.S. I’m a long-time Capital One customer. Nothing I’ve heard about this case makes me even slightly inclined to find a new bank. Are any readers even seriously considering taking their business elsewhere?