I believe buried in there is one other factor that is somewhat related:
- reducing friction helps drive more legitimate business. Accordingly, over-aggressive anti-fraud practices can result in reduced sales.
A toy example: a business could eliminate exposure to credit card fraud by not accepting credit cards. That would however reduce overall sales.
I guess this can all fit within a “marginal cost” explanation though.
A very real example in retail. I can minimize the possibility that I'll be hit with fraudulent returns. Require a receipt, short window, store credit only, must be in like new condition with all packaging, etc. (Or just sell everything on an all sales are final basis.) Different stores do many of these things to a greater or lesser degree on at least some merchandise. But you'd probably better be offering really good prices if you do.
Yes, but it undermines the first point, a bit. There's costs-- direct and social costs-- to making transactions hard; so perhaps optimal for a society is still not 0.
Also, there's nothing to say that the amount of fraud is stable and that we can't find a world where we have better mechanisms to reduce it for the same cost. (Improved technology, legal structures, norms, etc).
A business could eliminate all fraud, abuse and theft of every type by shutting down completely.