The topic of this section is dishonesty, the ways we lie and cheat but still think
of our self as good people. A guy goes into a church and goes into
confession, and he says to the priest, forgive me Father for I have sinned.
And the father said, what have you done my son?
And the guy said, I'm 72 years old and I just had sex with two 25 year old twins.
And the priest said, this is terrible. Please say 700 times Hail Mary and walk
around the church seven times, and give a $1,000 to charity.
And how long has it been since your last confession?
I said, I've never been to confession. And the priest said, you're 72 years old
and you've never been to confession? How can that be?
The guy says, I'm Jewish. So then, the priest said, so what are you
doing here and why you telling me? And the guy said, I'm telling everybody.
What is it about dishonesty? When we think about dishonesty, we have a
very simple model of dishonesty. We have a model that people do the cost
benefit analysis. What do we tend to gain?
What do we tend to lose? Is this worth it?
But it turns out that throughout the studies you will see in this section, this
is not actually a good model. Instead, lots of other things are driving
us to both, be honest and be dishonest. And as you will see, in more nuance and
complete understanding of this problem is both going to help us figure out what's
going on. And also help us figure out how to fight
dishonesty. So, first of all, try to be honest and ask
yourself whether you have cheated in the last year.
If you have, raise your hand. What about the last month?
What about the last week? What about today?
The reality's, as you probably realized, that we lie and cheat lots of the time.
And at the same time, while we do those actions, we don't think of our self as
being immoral. And that's kind of the dilemma I want to
talk about. We often think about, crime, as a few
individuals who steal a lot of money and cheat a lot, but I want us to think about
the cheating that we can all do, that we can all be part of, and how does it really
work. Okay, so I actually started thinking about
dishonesty when Enron kind of collapsed all of a sudden.
And my question, the question that puzzled me at the time was, what was the cause for
the collapse of Enron? Were there three bad apples that planned
and plotted and executed this incredible accounting scheme?
Is this the best explanation for what's going on?
Or, is the explanation to a lots of people at Enron and around Enron that were not
active vicious people, but were turning a blind eye to something really bad that was
going on and benefiting them at the same time, kind of wishful blindness?
And I happened to meet John Perry Barlow, who used to write lyrics and manage a
group called the, Grateful Dead. And at some point John Perry Barlow, who's
a wonderful person, became a consultant for Enron.
And this, of course, could be thought of as a commentary of the times.
But beyond that, when I met John Perry Barlow, he told me that when he was a
consultant for Enron, not only was he oblivious to what was going on, he created
an ideology for, from himself that protected him from seeing all the bad
things that were happening around. So, this was not just wish for blindness,
this was active blindness. When he was trying to create an ideology
to make himself not see all the bad things that he didn't want to see, because he was
getting paid. So, this question of how do we want to
think about dishonesty. Do we want to think about it as the
property of a few bad apples, or do we want to think about it, about something
that we can all do, is actually very important?
Because, for example, what should we do about dishonesty as a company?
If we think it's only bad apples, then we should improve our HR processes, we should
just not hire bad apples. Or, if people become bad apples, we should
fire them later on. But if everybody's capable of that, that's
not very easy. The same thing we can ask about
governemnt. What should the government do with bad
apples? If it's just a few of them, we can think
about how to kick them off. But there's something about the fabric of
how the government governs and how people are influenced by each other.
Then, we need to think very differently about these structures.
And, of course, the same thing happens with individuals cheating.
So, let's take a step back and let's say, what do we know about cheating and how do
we measure it? So, let's start with the measurement
issue. I do experiments, I try to create
something that I can measure a bit more precisely than asking people for their
opinions about something or what they would do.
And here is the method I came up with. We gave people a sheet of paper with 20
simple math problems. These were math problems that everybody
could solve given enough time. You would just have to look for the
different cells in the matrix and look for the two numbers that add to ten.
There's lots of those combinations. And when you find the one that, the two
numbers that add to ten, you know that you've found it.
But, it takes a while to find this. So, we give people a sheet of these
problems, we give them 20 problems in one sheet.
And we say, why don't you go ahead and solve as many of those as you can in the
next five minutes and we will pay you, let's say, a dollar per question for each
one you get correct. We say to people, please flip the page and
get go, start, and people start. They work as fast as they can.
And the end of the five minutes we say, stop, put your pencil down and count how
many questions you got correctly. Again, these are questions that are quite
self-evident whether you got the right or not.
People count how many ones they got correctly and then we say, now please take
the sheet of paper and go to the back of the room, and please shred the sheet of
paper. And then, come back to the front of the
room and tell me how many questions you got correctly, and I will pay you
accordingly. People do this, they count, they shred,
the come back to the front of the room, and they announce how many questions they
got correctly. People on average announced that they
solved six problems and they get paid accordingly.
What the people in this experiment do not know is that we fixed the shredder so the
shredder only shreds the sides of the page.
So, when you put the page in, it gives you the satisfaction of the noise of the
shredder and the slowness of the progression but the main part of the page
remains intact. And we can jump in later on and find out
how many problems people really solve correctly.
And what do we find when we do it? We find that people solve 4 problems, but
they report to be solving 6. Now you can ask the question of, how is
this distribution of cheating looks like? Is it most people are honest, reporting
four and solving really four? And a few people are cheating a lot, and
they are shifting the average? No, it turns out that lots and lots of
people cheat. In fact, we find very few people that
cheat in a egregious way, and instead we find lots and lots of people who cheat
just a little. Now, you can say, okay.
So, let's find out why are people and why are people cheating a little bit.
So, to examine this, let's first think about what is the economic rational theory
of cheating. An economic rational theory of cheating
goes back to the famous Chicago economist, Gary Becker.
And the story goes that Gary Becker is one day driving to the University of Chicago
looking for a place to park his car. He can't find a legal parking spot and
he's about to be late for a meeting. And Gary Becker does a quick calculation.
He said, what is the benefit of getting to the meeting on time?
What is the cost of parking illegally? And he makes, he compares those things.
Decide to park illegally and gets to the meeting on time.
And as he walks around the University of Chicago to the meeting, he thinks that
what he has done is basically a cost/benefit analysis about a crime, a
minor crime, but a crime. He was thinking about the benefit of
getting to the meeting on time, he was thinking about the risk of being caught
and getting a ticket and the cost of such parking ticket, and he was comparing the
two of them. And in comparing the benefit and the cost,
he decided, well, it's worthwhile for him to park illegally, or not.
And from that point on, Gary Becker said that all decisions about moral issues and
dishonesty are like that. They're about the cost and benefits.
So, for example, every time you pass by a grocery store or a gas station, you should
ask yourself, how much money is in the till?
What's the chance of catch me if I rob this grocery store and gas station?
How much time will I get in prison minus the time for good behavior?
And you should do a cost benefit analysis and decide whether to hit the gas station
or not. Realize that in this conception of this
problem, there's no morality. It's just about cost and benefit.
So, that's with this understanding about constant benefit and the rational approach
for dishonesty. Let's take a step back and let's go back
to the method, the little experiment with the matrices, and see, can we test the
Becker theory? So, the Becker theory has three
components. How much money you intend to gain?
What's the probability you will get caught, and how much time will you get in
prison? What's the side of the punishment?
We started with the first one, how much money do you stand to gain?
We gave this sheet to some people and we said, if you solve these problems
correctly, for each on you solve, you will get 10 cents.
To another group you said, for each problem you will solve, you will get 25
cents. Another group we offered 50 cents, another
$1, $2, $5. The highest group was promised $10 per
correct question. We gave them, we gave them five minutes,
they did the task, they shredded the piece of paper, they reported.
How much cheating did we see? And what happened to cheating as a
function of how much money they were promised per correct question?
Before I go to the answer for this, we created another experiment in which we
just describe to people in the same way I'm describing to you.
We describe to people the experiment. And we say, hey, if this was the
experiment, how much do you think people would cheat at 25 cents, 50 cents, $1, $2,
$5, $10? And what people predicted, what they
thought would happen was that cheating would increase as the amount of the reward
goes up. In essence, people had the same theory as
Becker, that cheating is influenced by the amount of money we stand to gain.
And therefore, as the amount of money goes up, so will the level of cheating.
But when we did the experiment for real, what did we find?
We find lots of people cheating just by a little bit.
And this amount of cheating was independent on the amount of money that
they got. In fact, for $10 per correct question,
cheating was slightly lower than for all other amounts.
So, first of all, it doesn't go up. And if anything, it goes down.
That was the first part of the Becker element.
What about the next one? What about the probability of being
caught? We played with that as well.
Some people, we asked them to tear half the sheet and only shred half the sheet
and submit to us the other half so we would have some evidence of what they did
and some evidence were eliminated. Other people we asked to eliminate and
shred the whole sheet of paper. Another group we asked to shred the piece
of paper, leave the room, and pay themselves from a bowl of money that had
over $100 in it. Now, if you think about it, shredding half
the page has some probability of being caught.
Shredding the whole page has less probability of being caught.
Shredding the whole page and leaving and paying yourself with a bowl of money had
even lower probability of being caught. What happened?
Again, before I tell you the real result, we ask people to predict.
What do you think would happen? And people predicted, as the probability
of being caught will go down, the amount of cheating will go up.
Again, suggesting that peoples' naive theories about driving, what's driving
this dishonesty, is very much in line with the Becker theory.
But what did we find when we did the experiments for real?
We found that lots of people cheated just by a little bit independent of the
probability of being caught. Now, you might say something else.
You might say, you know, maybe what's going on here is the people think they can
cheat a little bit and not being caught. If you say, oh, you know, if I really saw
four and I only report six, nobody will be suspicious.
But if I report seven, all of a sudden people would become suspicious of that.
So, we tried that as well. We told some people, we say, hey, the
average person in this experiment solves four problems.
We told another group that the average person in the experiment solves eight
problems. Now, if people just don't want to be
detected when they're told other people have solved four, maybe they would claim
six. And when they were told other people would
solve eight, they could report ten. But what happened?
No difference between those two conditions.
In both of them, people really solved four and reported six.
So again, it doesn't look like it's about the probability of being caught or about
wanting to go above some threshold, and not even about the reward.
So, what is going on here? You could say, well, people don't care
about the rewards and punishment. How much they stand to gain, probability
of being caught. People are just moral, wonderful,
creatures. Maybe in Freudian terms, it would be the
super ego. We have this notion of society about what
is appropriate and inappropriate and we've internalized that.
And that's basically what's ruling our behavior.
What kind of angels? But, you know, we can't say that as well
because we see lots of people are cheating.
Just a little bit but lots of people are cheating.
So, we have this tension that people are dishonest but at the same time people
don't react to their economic incentives. So, what we need is a new model of what
causes people to be dishonest that is not relying solely on economic incentive of
the amount of money to be gained, probability of being caught, and time in
prison.