Raising the Cost of Paperwork Errors Will Improve Accuracy
It’s a sad, horrific story. Homeowner returns to find his house demolished. The demolition company was hired legitimately but there was a mistake and it demolished the wrong house. The demolition company relied on GPS co-ordinates, but requiring street addresses isn’t a solution. A typo in the address is just as likely, and it would have demolished the house just as quickly. The problem is less how the demolishers knew which house to knock down, and more how they confirmed that knowledge. They trusted the paperwork, and the paperwork was wrong. Informality works when everybody knows everybody else. When merchants and customers know each other, government officials and citizens know each other, and people know their neighbours, people know what’s going on. In that sort of milieu, if something goes wrong, people notice.
In our modern anonymous world, paperwork is how things get done. Traditionally, signatures, forms, and watermarks all made paperwork official. Forgeries were possible but difficult. Today, there’s still paperwork, but for the most part it only exists until the information makes its way into a computer database. Meanwhile, modern technology – computers, fax machines and desktop publishing software – has made it easy to forge paperwork. Every case of identity theft has, at its core, a paperwork failure. Fake work orders, purchase orders, and other documents are used to steal computers, equipment, and stock. Occasionally, fake faxes result in people being sprung from prison. Fake boarding passes can get you through airport security. This month hackers officially changed the name of a Swedish man.
A reporter even changed the ownership of the Empire State Building. Sure, it was a stunt, but this is a growing form of crime. Someone pretends to be you – preferably when you’re away on holiday – and sells your home to someone else, forging your name on the paperwork. You return to find someone else living in your house, someone who thinks he legitimately bought it. In some senses, this isn’t new. Paperwork mistakes and fraud have happened ever since there was paperwork. And the problem hasn’t been fixed yet for several reasons.
One, our sloppy systems generally work fine, and it’s how we get things done with minimum hassle. Most people’s houses don’t get demolished and most people’s names don’t get maliciously changed. As common as identity theft is, it doesn’t happen to most of us. These stories are news because they are so rare. And in many cases, it’s cheaper to pay for the occasional blunder than ensure it never happens.
Two, sometimes the incentives aren’t in place for paperwork to be properly authenticated. The people who demolished that family home were just trying to get a job done. The same is true for government officials processing title and name changes. Banks get paid when money is transferred from one account to another, not when they find a paperwork problem. We’re all irritated by forms stamped 17 times, and other mysterious bureaucratic processes, but these are actually designed to detect problems.
And three, there’s a psychological mismatch: it is easy to fake paperwork, yet for the most part we act as if it has magical properties of authenticity. What’s changed is scale. Fraud can be perpetrated against hundreds of thousands, automatically. Mistakes can affect that many people, too. What we need are laws that penalise people or companies – criminally or civilly – who make paperwork errors. This raises the cost of mistakes, making authenticating paperwork more attractive, which changes the incentives of those on the receiving end of the paperwork. And that will cause the market to devise technologies to verify the provenance, accuracy, and integrity of information: telephone verification, addresses and GPS co-ordinates, cryptographic authentication, systems that double- and triple-check, and so on.
We can’t reduce society’s reliance on paperwork, and we can’t eliminate errors based on it. But we can put economic incentives in place for people and companies to authenticate paperwork more.
Categories: Economics of Security