We’re all familiar with the Nigerian bank-employee/government-minister/lawyer that has found you on the internet and identified you as the long-lost only surviving relative of some poor deceased cocoa lord with an heirless fortune that you can claim, if you’ll just contact the sender on <prepaid cellphone number>. And pay a little something to secure your claim. And then pay a little more as a deposit on the estate duty. All of which you can just take out of the fortune when it gets paid back to you.

Or not.

So here’s a question: if everyone is so familiar with these mails, why do we still continue to receive them? I mean, it must be time for a change. The scam is tired. It’s been around since the internet began. And the relatives that fell for it are now wiser and poorer.

Which brings me too a follow-up question: doesn’t it seem like the supposed fraudster on the other end of the line is incredibly, well, stupid to think that we’ll keep falling for this tired old ruse?

The cynics amongst my readers might be expecting me to answer this question by saying “Yes, but there is no end to the infinity of human stupidity”.

Okay, not entirely off track. But maybe, not in the way that you expect.

So to answer that question, allow me to introduce a tangent.

The Wisdom Of Solomon

An extract:

1 Kings 3:16-28 (King James Version)

17 And the one woman said, “O my lord, I and this woman dwell in one house; and I was delivered of a child with her in the house.
18 And it came to pass the third day after I was delivered that this woman was delivered also. And we were together; there was no stranger with us in the house, save we two in the house.
19 And this woman’s child died in the night, because she lay upon it.
20 And she arose at midnight, and took my son from beside me while thine handmaid slept, and laid it in her bosom and laid her dead child in my bosom.
21 And when I rose in the morning to give my child suck, behold, it was dead. But when I had considered it in the morning, behold, it was not my son whom I had borne.”
22 And the other woman said, “Nay; but the living is my son, and the dead is thy son!” And this said, “No; but the dead is thy son, and the living is my son!” Thus they spoke before the king.
23 Then said the king, “The one saith, ‘This is my son who liveth, and thy son is the dead’; and the other saith, ‘Nay; but thy son is the dead, and my son is the living.’”
24 And the king said, “Bring me a sword.” And they brought a sword before the king.
25 And the king said, “Divide the living child in two, and give half to the one and half to the other.”
26 Then spoke the woman whose the living child was unto the king, for her heart yearned for her son and she said, “O my lord, give her the living child, and in no wise slay it!” But the other said, “Let it be neither mine nor thine, but divide it.”
27 Then the king answered and said, “Give her the living child, and in no wise slay it. She is the mother thereof.”
28 And all Israel heard of the judgment which the king had judged; and they feared the king, for they saw that the wisdom of God was in him to do judgment.

Or to summarise:

1. Solomon was in a she-said-she-said situation.
2. So he introduced a new variable (“Divide the living child in two“).
3. And watched how the two women reacted.

Why? The game theory:

1. There are two women, one of whom is clearly a psychopath (I mean, whether she’s replacing one child with another, or trying to claim another woman’s child – neither is exactly typical).
2. But how to tell which is which?
3. If he threatens to kill the child, the psychopath would not react in quite the same way as the child’s real mother. If anything, the real mother would rather see the child live with another woman than see it die.The psychopath – not so much.
4. So introduce that into the mix and see what happens.
5. *rolls dice*

In game theory, this new variable is known as a separating equilibrium.

Which brings me to my next fun historical example…

Trial By Ordeal

Earlier this year, I visited the Museum of Torture in Vienna. It was vastly less exciting than it sounds – there was a lot of dust and it was very small. But I did learn that medieval life was very unpleasant, and seemed to revolve around cauldrons of boiling water. Specifically, in trials by ordeal. How those worked:

1. Let’s say that you were accused of theft/murder.
2. You would be ordered to do one of the following:
   1. Insert your hand into a kettle of boiling water in order to retrieve a ring.
   2. Grab onto a red-hot iron bar.
   3. Other painful variations along this theme.
3. The above would be conducted by a priest.
4. If you emerged unharmed, you were innocent.
5. And if you were harmed, then you were clearly guilty, and got punished again.

So obviously, it doesn’t sound like the most…unbiased of outcomes.

And yet, it worked? According to this article by economist Peter Leeson, ordeals exonerated the accused about two thirds of the time (he uses some historical records from Hungary, which record the results of 200 trials by ordeal). So either there was a lot more miracle happening in the Middle Ages, or something else was happening.

Mr Leeson’s argument:

1. The miracle at play here was never really the issue.
2. The trial by ordeal is just another example of a separating equilibrium.
3. Recall that the trial by ordeal was conducted by clerics; and that people had full belief in Iudicum Dei (God’s judgement) in a way that we don’t really have today.
4. This means that, when faced with a trial by ordeal, the innocent would expect some kind of divine exoneration; while the guilty would be faced with a bad outcome from the ordeal, as well as the punishment that followed it.
5. So the priest conducting the ceremony could see the innocence/guilt in the accused’s willingness to undergo the ordeal.
6. He would then rig the ordeal to match the outcome.
7. And this has the awesome side-benefit of keeping the populace generally believing in the power of Iudicum Dei, which would further strengthen the power of the separating equilibrium effect.

Fascinating, right? If you want to hear more, here’s the Freakonomics podcast that inspired almost all of this post: What Do King Solomon and David Lee Roth have in common?

So back to the Nigerian emails…

The Emails From Nigeria are Separating Equilibria

Here’s the scenario that the Nigerian Princeling faces:

1. The world is filled with greedy people.
2. But not all of them are gullible.
3. I don’t want to be dealing with people that think my story sounds plausible, but then insist that I prove myself. That’s too many people.
4. No – what I want is to field calls from the really gullible people, who are going to deposit money into my account without asking too many awkward questions.
5. So what I need to send out is an email that’s filled with bait, but I’ll make it quite obvious that it’s a scam.
6. That’ll weed out all the rational ones. And the vaguely rational ones.
7. And I’ll only get calls from the really gullible ones. Which is exactly what I want.

And that’s why we still get them.

*bows*

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.