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Lecture

PSY100H1 Lecture Notes - White-Collar Crime, Price Fixing, Gas 5


Department
Psychology
Course Code
PSY100H1
Professor
David Nussbaum

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PSYC39 Lecture 6: Economic Crime PY
Date: Oct 22, 2012
1
Which crimes are most severe?
-rape/murder, treason = back in the old days when Canada had capital punishment, treason was a
capital crime (therefore, = severe crime)
-why was/is treason such a serious crime?
-ex) naval officer supplying secret info to Russians info about where Canadian ships were in
the Arctic etc;
-charged under 2 things: Criminal Code and Queen’s Rules
-will probably get life sentence
-the reason why treason is serious when ppl are engaged in acts of treason against one’s
country, it’s not simply a crime with only one or two victims jeopardize many ppl’s lives and
the security of the country; if this info is compromised, that makes ALL of us vulnerable
-this is why treason is seen as a particularly serious crime even though nobody is killed; there’s
potential
-incest (esp if large age diff; goes against societal norms; child can’t say anything; it impacts ability to
trust ppl; PTSD; power differential; laws prohibiting incest if power differential; in the case of brother
and sister = still against the law even if they both consent but the penalty may be less than in the case
of parent and child)
- and financial/economic crimes are also severe
Slide 2: Types of Economic Crime
White-collar crime
o ppl who are in positions of trust/power/authority/responsibility in large org (like
corporations, banks, financial institutions ) have lot of opportunities to steal huge
amounts of money
Theft (diff from robbery)
o Robbery = direct confrontation of the victim (violent even if no assault occurred; the
potential for violence is still there)
Fraud
o More typical of white-collar crimes although not limited to ppl in corporations (ex:
writing a cheque at a store when you know you have no money in your account and you
don’t do anything to pay back the money owed)
Prostitution
Human trafficking
o In the last 10-15 yrs it has become much more of serious crime worldwide much
related to prostitution
o 100’s of thousands are kidnapped and enslaved in prostitution; these women often
cope using drugs
Drug trade
o Virtually no limits
o There are 2 sides to the drug trade; many lives are destroyed by substance abuse &
addictions what can you do about it?

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PSYC39 Lecture 6: Economic Crime PY
Date: Oct 22, 2012
2
Two polar options:
1) wage the war on drugs try as hard as possible to find the ppl who
are distributing drugs more widely incarcerate; hasn’t been successful
o Can’t be successful even if you arrest a few ppl; the profits are
so astronomically high that another 10 ppl will move into their
position; so you’re just changing who is making the money; you
aren’t getting rid of it
2) other approach is to legalize drugs and take the ‘profit’ motive out of
the game
o In 1920s, tried to outlaw alcohol; bootleggers became very
wealthy, there were gangwars; came up with prohibition of
alcohol
o Once prohibition lifted; gvt takes huge tax on alcohol; no wars
over alcohol
o But when you legalize things like cocaine, kids who initially
wouldn’t have done it if it were illegal, would try it and become
addicted; so we can’t exactly legalize it, incidence will skyrocket
Slide 3: White-collar crimes
Occupational crimes (ex: tax evasion)
o Do as an employee
o If no taxes, there’s no wealth to re-distribute
o There really isn’t a lot of opportunity in Canada now because about 25 yrs ago, gvt
started ‘taxing at the source’ = employer removes the taxes before you even get your
paycheque this tax sent to the gvt
o Ppl who have the best opportunity to do tax evasion are ppl that work for themselves
if you work for yourself (run a bsn), ppl come in and pay you money, you can do a few
things:
If ppl pay you cash, don’t have to write it down, so there’s no record of it then
it’s very hard for gvt to say that you’ve earned a certain amount of money; say
to customers that if they pay cash, they don’t have to pay the tax; you’re not
really saving the customers tax money, but you just want to get out of paying
the tax yourself
If there are cheques, then they are traceable
Another way to evade taxes = claim all sorts of expenses that never really
happened = reduces their earning; ex) take a vacation but write it off as a
business meeting
Corporate crimes (ex: price fixing)
o May have more serious consequences compared to tax evasion (but tax evasion is
serious enough crime b/c it deprives the gvt of the funds that are needed to run
services)

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PSYC39 Lecture 6: Economic Crime PY
Date: Oct 22, 2012
3
o Corporate crimes:
Pricing war: back in the day, gas = 5 cents/L; let’s say the gas station is selling for
27 cents and the one across the street is losing customers, so they lower it to 26
cents; then the other gas station lowers theirs to 25 cents pricing wars are
good for the consumer
Even with pricing wars, ppl wouldn’t sell at such a low price that they would lose
money; it’s still reasonable for them to lower the price to that extent
Now: all gas prices are the same, so it appears that all gas stations come
together to decide on the price for a certain day; collusion
If anybody had evidence that this was happening via collusion then this is the
crime of price fixing and they would be charged hundreds of millions of dollars;
because affects a lot of ppl
Although there’s no evidence, although it looks like they are price fixing; one of
their defenses (of the gas companies) is that they all buy gas @ the same price
from producer; and they all have roughly similar profit margins built in so they
all charge the same; but consumers see that when price changes of one
company, they all change the same way
More political than criminal psycholgoy
Slide 4: White-collar Offenders - Profile
Profiles are often misleading b/c they are general and a few hundred ppl who fit the profile
Often male, white, highly educated, in upper management positions (but as more women and
more non-whites enter this position, this would change)
Blickle, Schlegel, Fassbender, Klein (2006): more hedonistic (more focused on enjoying the finer
things in life), narcissistic tendencies, less self-control, more conscientious (=makes them harder
to detect; have to give the appearance that they’re very productive)
Collins and Schmidt (1993): lower integrity, irresponsibility, lack of dependability, disregard of
rules and social norms
The two studies are so discrepant probably the result of ppl studying diff samples (diff
subgroups)
o Ex) if you were to study a group of ppl who were working on Wall Street and found to
have engaged in some white collar crime VS another group of ppl contracted by
renovation companies to go around houses and sell roofs, furnaces to ppl who didn’t
really need it
These are both white-collar crimes but the ppl who work themselves up in large
law firms or security companies, they couldn’t have been slouches; they had to
work very hard to work their way up the ladder of financial organization
Ppl who sell renovations door-to-door don’t work as hard, it’s much more likely,
depending on the sample that you’re studying, can come up with the more
conscientious workers (2006); with the renovator con artists who aren’t terribly
accomplished, diff sample, so can get results of Collins and Schmidt (diff sample)
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