Consider the truth in this joke: A father scolds his kid for stealing a pencil from another student at school. “That was wrong,” he tells the child. “Besides, I could easily have gotten you a bunch of pencils from work.”
We want to think of ourselves as good and moral people, but our susceptibility to being dishonest varies depending on circumstances. Robbing our neighbor is something we resist more than robbing our employer, and we find it harder to steal cash than the equivalent amount of office supplies, notes behavioral economist Dan Ariely in “The (Honest) Truth About Dishonesty: How We Lie to Everyone — Especially Ourselves” (Harper).
In a psychological experiment, students asked to solve a series of puzzles were told they’d collect a small amount of money for each correct answer. Some students were asked to turn in their tests and be scored by a grader; others were told to shred their tests and then report how many correct answers they’d given.
It isn’t very surprising that the students asked to shred their tests, who were practically invited to cheat, did so. But they only cheated a little. What made them double their cheating? A system in which they were not paid in cash but in tokens, redeemable for cash.
This matters, notes Ariely, because cash is disappearing from our society. Modern finance makes stealing an increasingly abstract activity, one in which moving a decimal point can yield far more than any armed robbery.
“From all the research I have done over the years,” writes Ariely, “the idea that worries me the most is that the more cashless our society becomes, the more our moral compass slips. What will happen to our morality as a society as financial products become more obscure and less recognizably related to money (think, for example, about stock options, derivatives and credit default swaps)?”
Did the Barclays bankers who fixed the Libor interest rate for their own gain — in effect ripping off countless other people and institutions they’d never even laid eyes on, much less pulled a gun on — even think of themselves as thieves? Probably not. But it’s clear today’s Bonnies and Clydes work at the banks, not against them.
Modern life brings other ways of making it easier to be dishonest. Global competition means high pressure to perform, which means weakened moral muscle — what Ariely calls the “dead grannies” syndrome. As a professor, he has noticed that there is always a rash of deaths among students’ relatives (usually grandmothers) just before final exams.
“To all grandmothers out there: Take care of yourselves at finals time,” he says, noting that failing students are 50 times more likely to lose a grandmother than their peers. We can probably assume that Wall Street bankers are under pressure comparable to, if not greater than, students studying for an exam.
Secularization means less exposure to moral precepts such as the Ten Commandments. Ariely found that simply asking a group of students to think about the commandments before a test reduced cheating to zero. Another group’s cheating disappeared when they were asked to sign an agreement stating that they would abide by their college’s “honor code,” even if their college didn’t have one. And when atheists were asked to swear on a Bible before a test, even this act reduced cheating to zero. Evidence suggests that religious dogma and symbols have their uses, even among nonbelievers, and yet overt displays and discussion of these things are, like cash currency, vanishing.
Even knockoff designer goods can bump up your cheating side. Handing out expensive Chloé sunglasses to students, some of whom were told they were wearing counterfeits, Ariely found that 75% of those who believed they were wearing pirated merchandise cheated on a test (as opposed to 30% of those who were told, correctly, that they had been wearing genuine designer goods). “Once we knowingly put on a counterfeit product,” Ariely concludes, “moral constraints loosen to some degree, making it easier to take further steps down the road of dishonesty.”
Moreover, there is an infectious quality to cheating: Students who observed that one of their colleagues on the puzzle test had obviously benefitted from cheating were much more likely to follow suit. Ariely asks us to imagine the following scenario: “Bob at Giantbank engages in shady dealings — overpricing some financial products, delaying reporting losses until the next year, and so on — and in the process he makes boatloads of money. In a relatively short period of time, it is clear to many other bankers that Bob isn’t the only one to fudge some numbers. To them, fudging the numbers now becomes accepted behavior.”
Or as The Wall Street Journal gently put it on Thursday, the Libor scandal unveils, “what some industry executives said was a widespread practice of submitting faulty Libor data.”
“Submitting faulty data” sounds ever so much nicer than “robbing unknown numbers of victims.”