On the shady side of economics

Abstract

This paper explains fraud from an economic point of view, using traditional economic tools and reasoning. It is shown how a supply-of-fraud function can be defined and estimated for individuals, and subsequently aggregated to derive crime rates for societies. Another approach is to explain the behaviour of fraudsters as rent-seekers, a la mode Gary Becker, and the problem of fraud may be seen as a case of market failure too. The paper also discusses some effects of fraud on society, and gives an empirical comparison between countries.