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The feel-good story of the summer comes from Russia, where, we are told by the state-funded broadcaster RT, an enterprising fellow has turned the tables on his credit card company.
Dmitry Agarkov reportedly received an unsolicited offer of a credit card. Dissatisfied with the terms of the deal, he wrote his own amendments, signed the contract and mailed it back to the bank, which countersigned it and sent him his credit card – apparently not noticing that Mr Agarkov had proposed an interest rate of zero, an unlimited credit balance and a cancellation fee of nearly $200,000. So far the courts have sided with Mr Agarkov.
Well, as Tom Waits once sang, the large print giveth and the small print taketh away. But needless to say, we consumers are usually the ones who fail to read the small print. That can hardly be a surprise: the small print is usually unintelligible.
Take the example of reading the privacy policies of websites. Aleecia McDonald and Lorrie Cranor, two academics specialising in computer privacy, published a research paper back in 2008 estimating how long it would take to read all this stuff. With the typical policy weighing in at 2,500 words (that is four times the length of this column, and possibly even more full of jargon), and four new privacy policies to read per day, McDonald and Cranor reckon that the time it would take to read all these policies would be 244 hours a year. Put another way, if your job were to read privacy policies, you’d spend six weeks on the task.
Does any of this matter, and if so, can we improve the situation?
One famous economic idea throws a harsh light on the subject: George Akerlof’s “lemons” model, for which he won the Nobel Memorial Prize in Economics. (The lemons model is about cars, not citrus fruit.) If sellers can evaluate the quality of a used car but buyers cannot, the likely outcome is that both buyers and sellers know that only the most awful cars will be traded in the market.
The same could apply to small print: customers naturally assume that all contracts contain weaselly clauses, and companies who might prefer to deal honestly know that they’ll never get credit for doing so.
A more hopeful economic model suggests that a few diligent shoppers will keep the worst corporate excesses in check. Many of us don’t check prices in supermarkets any more than we check the small print; we just assume that others are paying attention and so the prices will be fair. Maybe that is also true of contracts? Unlikely, alas.
A study in 2009 by Yannis Bakos and others called “Does Anyone Read the Fine Print?” tracked people as they shopped for software online. Out of 125,000 browsing sessions, only 55 involved looking at the “end user licence agreement” (EULA) for more than a second; even then, the median time looking at it was 29 seconds. It is barely an exaggeration to say that nobody reads the EULA.
We have some defences: courts refuse to enforce abusive terms, and companies restrain themselves to keep their reputations intact. But that’s a long way from a healthy market built on informed consumer choice.
One solution, which has been advanced both by computer scientists such as Lorrie Cranor, and by economists such as Richard Thaler, is to use our computers to help us. Contracts are confusing in part because they are not natural-language documents at all – they are a kind of algorithm designed to be interpreted by law courts instead of by computers. Why not, then, produce machine-readable privacy contracts, or pricing schemes? Our computers can advise us if we are about to make a bad choice, and suggest superior alternatives. The idea might seem like science fiction – but these days, what doesn’t?
Tim Harford’s new book, ‘The Undercover Economist Strikes Back’ is published this week by Little, Brown
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