By William K. Black
(Cross Posted at Benzinga.com)
If you have studied economics at the university level in the last 35 years it is likely you were introduced to the concept of “asymmetrical information” and George Akerlof’s famous 1970 article on markets for “lemons” (American slang for an automobile of terrible quality). The Nobel committee that awards the prize in economics singled out that article for special praise in deciding to make him a Nobel Laureate in 2001. The article discusses the implications of asymmetrical information in a number of contexts, but at least two of the contexts involved what criminologists call “control fraud” and a third involves the risk of fraud by borrowers. Most of the examples Akerlof discussed involved fraud. The frauds he analyzes concern deceit about the quality of goods being sold or the borrowers’ ability or willingness to repay a loan. Continue reading
