Scammers

Here is an interesting article about the military-romantic scam that is run out of Africa and that cost gullible American women millions of dollars. The author was able to upload spyware onto their computers and thus trace everything they were doing. My favorite quote from the article:

An interesting anomaly that was later confirmed to be a wide scale trend was the frequent appearance of President Obama’s picture in many of the scammer workspace images (Image 21). Seventeen out of forty workspace images exhibited this trend. It turns out that BHO is considered to be the patron saint of the scammer industry in Nigeria and Ghana and is viewed as the ultimate scamming success story that everyone is trying to emulate.

Payday loans for rich people?

When I saw this ad for J.D. Wentworth a few days ago, my instantaneous reaction was, "Payday loans for rich people." That certainly is not the reaction that the people who made the ad wanted. An important reason for choosing opera as a way of getting their message out is that opera is considered high-class, and they want to be the association of high-class opera to color people's views of their company.

The service they are offering is the same service as payday loans--to restructure payments. People who use payday loans need money now but do not get paid until later. The same is true of the people whom J.D. Wentworth is targeting, though the payments are over a much longer period of time and are much bigger. Their appeal is to people who have structured payments over time, the sort of payments that lotteries, annuities, and some legal settlements give. If you have a certain income stream of $2000 per month and you want to cash it in, firms like J.G. Wentworth are there to help you out.

Are they socially useful? The argument that they are is the same argument that payday loans are socially useful. If people are rational, we should trust that they know what is best for themselves. J.D. Wentworth has testimonials on its website emphasizing how useful it can be to restructure payments. The argument that they are not socially useful is that many people think only short-term and will do things for immediate gratification even though the long-run consequences are disastrous. This position would argue that J.D. Wentworth is preying on those who have self-control problems or are compulsive spenders.

(They have a somewhat different ad that still has the music but a different setting.)

Gullibility and Madoff

In a long but fascinating article about gullibility, Steven Greenspan explains how he invested a large amount of money with Bernie Madoff. He even talks about feedback in several places.

Mr. Shiller employs a social psychological explanation that he terms the "feedback loop theory of investor bubbles." Simply stated, the fact that so many people seem to be making big profits on the investment, and telling others about their good fortune, makes the investment seem safe and too good to pass up.