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I think we might be talking past each other. I've been using "high-trust society" and "high-trust country" kind of interchangeably, but I think more specificity is called for. What I'm really arguing (and what I take Davies to be arguing) is that fraud can only take place within a high-trust community. That is, a country might be low-trust on the whole, but there might be enclaves within that country in which the members enjoy a presumption of trust with one another (social clubs, religious communities, voluntary organisations etc.). It is within these communities in which fraud and scams will occur in countries which are otherwise low-trust. This, I think, is what you're getting at with "putting more effort into appearances of legitimacy": scam artists must consciously infiltrate these high-trust communities, and this may be more difficult in a low-trust country than in a high-trust one (as the members of a high-trust community within an otherwise low-trust country will be doubly suspicious of outsiders).
I think you and @ArjinFerman are both wrong about the point. The optimal amount of fraud is not zero is about how as you eliminate fraud and increase social trust you increase the incentive to fraud and the marginal cost of reducing fraud rises asymptotically such that the last little bit of fraud isn't worth the squeeze. The point isn't that you tolerate fraud as in not police it, it's that you police it but you don't turn panopticon to go from 10 cases of fraud across the whole population to zero. You tolerate it in that you accept cases won't be zero, not that you don't do every reasonably cost effective thing you can do to reduce it.
I don't know if this is quite right. It's not that high-trust societies police fraud just as intensely as low-trust ones, but decide not to got the final mile. They actually police fraud much less than low-trust ones, take people at their word and generally assume their good faith. This is kind of the definition of a high-trust society, and it's also been matched by my experience visiting them.
This is an unstable situation, though, unless fraudsters actually are punished a good bit of the time. If they prosper, your high-trust society days are numbered as the chumps figure out they're chumps and stop trusting and/or turn to fraud themselves.
If we're talking about some less-than-Dunbar's number small community, that's pretty easy, if Aaron Stevenson Stoltzfus invents lying in some small naive Amish community, then even if he doesn't get formally punished (which he likely would be, the Amish not actually being naive), word's going to get around and no one is going to trust him. Anything larger and it's a lot more difficult.
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I don't think we're talking past each other, I just disagree with yours / Davies' core thesis. No, that's not how it works at all. There are scams and frauds in Russia, and there are essentially no high-trust communities there. All that happens is that scammers have to come up with new tricks that other people haven't heard of yet, and so don't know to be on the lookout for.
A community that doesn't lock it's doors is high-trust. If they get burgled, and start locking up it makes them low(er) trust. A burglar learning how to pick locks does not magically make the community high(er)-trust.
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This isn't so; fraud takes place all the time in low-trust communities.
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