Continuing my little series of posts on the analogies between scientific fraud and financial fraud, inspired by Dan Davies’ book Lying For Money. As with past posts in the series, the hope is that the looking at scientific fraud through the lens of financial fraud provides some novel and useful insights. Just thinking out loud here, trying ideas on for size.
Today: is there a scientific equivalent of a “control fraud”? For British readers, a more clickbait-y title for this post would be “Is there a scientific equivalent of the PPI mis-selling scandal?”
A “control fraud” is a financial fraud that’s only possible for someone who controls one or more economic entities, such as a bank trading desk (think Nick Leeson) or a savings & loan (think Charles Keating). Because you control the entity, you can extract money from the entity “legitimately”. Well, legitimately in the sense that it’s normal for whoever controls some economic entity to extract money from it, usually in the form of salary and benefits. The trouble is that the profits that would support and justify the salary and benefits are fake.
For instance, in a “cash for trash” scam, Keating’s S&L would loan borrowers much more money than their real estate collateral was worth on the open market. In exchange, said borrowers would use some of the money to buy similar real estate at an inflated price from a firm that Keating also controlled. That’s a great deal for both Keating’s real estate firm, and Keating’s S&L. The real estate firm makes an enormous profit on the sale. And because the sale inflates the apparent “market value” of that particular sort of real estate, the borrower’s collateral can now be revalued to a value greater than that of the loan it secures.
The distinctive feature of “cash for trash”, and other control frauds, is that there’s nothing illegal about the individual transactions comprising the fraud, at least not necessarily. For instance, there’s nothing illegal about someone paying substantially more for a piece of real estate than anyone else is willing to pay. The fraud is at the level of the whole interlocking network of component transactions.
Most of the biggest financial frauds are control frauds. If you want to steal a lot of money, control fraud is the way to go.
So, are there scientific equivalents of control frauds? I’m not sure; I’m having trouble thinking of any really clear-cut examples. Someone like Diederik Stapel doesn’t quite fit. Yes, he controlled his lab. But he used control of his lab to conceal the fact that he was providing his grad students with fake data he’d purportedly collected on their behalf. You don’t have to be a lab PI to fake data. And faking data–the most common sort of scientific fraud–is analogous to a fraudulent financial transaction. It’s not analogous to a network of interlocking financial transactions that’s only illegitimate at the level of the whole network.
Maybe a journal editor who systematically forces submitting authors to cite other papers from the journal, in order to boost the journal’s impact factor, could be considered a control fraud? Or a journal editor who arranges for the journal to publish many of their own papers?
It’s interesting to reflect that the very rare scientific frauds that did significant damage to science as a whole mostly weren’t control frauds. That seems like a contrast between scientific fraud and financial fraud.
But there’s another, more abstract sort of control fraud that might have a scientific analogue, or at least so some would argue: a distributed control fraud. Quoting Davies’ book:
Now consider this – what would happen if, rather than organizing the fraudulent inflation of the corporation yourself [as in a “cash for trash” scam], you simply set up a system of (non-) checks and balances, such that other people were likely to inflate it for you? In other words, rather than committing crimes yourself to inflate the value, you just created a massively criminogenic environment in the firm, and let nature take its course?…That’s pretty abstract. But there’s a level of abstraction even higher than that. What if…there really was no intention to create a criminogenic scheme at all? If you were lucky enough to set up a company with bad incentives and internal controls by accident…[then] it would be possible for a massive control fraud to take place purely by accident, without any criminal responsibility at all. This would present a really unattractive [legal] case; there would be huge amounts of criminality and misrepresentation, but all of it would be carried out by relatively low-level employees, most of whom would hardly have profited from doing so, and many of whom could credibly claim that they were not sophisticated enough to realize that what they were doing was illegal. Meanwhile, you would have a top tier of fantastically rich senior managers, who should have known what was going on, and about whom everyone has a strong suspicion that they ‘must have known’, but no possibility whatsoever of being able to meet criminal standards of evidence of them having done so, because they in fact didn’t know.
Davies suggests the Payment Protection Insurance (PPI) mis-selling scandal as an example of a distributed control fraud. Briefly, large numbers of British people who took out mortgages, loans, or credit cards were sold insurance that would cover their repayments under certain conditions, such as job loss. But the insurance was expensive, structured to make payout on claims unlikely, pushed on people who didn’t understand what they were buying, and sometimes sold under false pretences. Davies discusses the broader “criminogenic” circumstances that led to this, summarizing them as “the natural result of what happens when a dysfunctional industry meets a weak management structure, under [competitive] pressure”, adding “To the frustration of all, it is not a crime to set stupid targets for your sales force, and it is not a crime to fail to check up on them.”
It’s easy to see an analogy to science here; the question is just how seriously to take the analogy. There are surely some who would take it very seriously indeed. Who would argue that academic scientific research as a whole–all of it–is analogous to a distributed control fraud! Just for the sake of argument, let’s take that possibility seriously for a moment. Put as starkly as possible, the argument goes something like this: competitive pressures to get grants and publish papers lead lab PIs to set unreasonably high expectations for their grad students and postdocs without exercising much oversight of them. The result is that grad students and postdocs crank out tons of low-quality science, using questionable research practices and in the worst cases outright fakery.
Without wanting to suggest that the incentives and control measures in academic science are perfect, I don’t buy this analogy. I don’t buy it because I think academic science as a whole is too high in aggregate quality for the analogy to work. Scientific misconduct is just too rare for science as a whole to be analogized to a distributed control fraud, even if one defines “misconduct” broadly enough to include questionable research practices and thinks that most misconduct goes undetected. I do think there are rare cases of scientific fields becoming sufficiently dysfunctional that the analogy to distributed control fraud miiiiiight fit (*cough* social psychology *cough*). But even in those cases I don’t think the analogy really fits. I think the replication crisis in social psychology has revealed some collective, self-reinforcing blind spots in that field, but not collective behavior that looks unethical and fraudulent when you step back from it, in contrast to the case of PPI mis-selling. And like I said, I definitely don’t think the analogy to distributed control fraud fits science as a whole. But this is an argument about gradations and degrees, not about something black and white. There’s no clear bright line between “distributed control fraud” and “a basically well-run competitive industry”.
Looking forward to your comments as always.*
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