How Dishonesty Works

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Any economist who thinks people are rational, should read the books “Predictably Irrational: The Hidden Forces That Shape Our Decisions” and “The (Honest) Truth About Dishonesty: How We Lie to Everyone – Especially Ourselves” written by Dan Ariely, professor at Duke University. He explores the fertile intersection between psychology and economics to understand why we often make less than rational decisions.

While he has worked on many interesting irrational behaviors–like engaging in risky sex or paying way too much for a good or service–this article is about dishonesty, and what we can do about it.

According to Ariely, we all struggle with two conflicting motivations: On the one hand, we want to reap the easy benefits from cheating and get as much money, glory and satisfaction as possible as quickly as possible; but on the other hand, we want to be able to perceive ourselves as honest, honorable people.

Ariely has made numerous laboratory experiments to understand how that internal conflict plays out in most people. He summarized that work in a Wall Street Journal article, and I will summarize it even further here:

• Almost everybody lies and cheats a little bit: Ariely found that only one percent of the population turns out to be strictly honest and only one percent are “aggressive cheaters.” Thus, about 98 percent of us tend to cheat moderately.
• The probability of cheating is not related to the expected benefits of cheating. Indeed, when test subjects would earn $10 from cheating in the experiment they were less likely to do it than if they would earn only $0.50. This suggests that people are more comfortable with mild cheating.
• People were much more likely to cheat when others had been observed to get away with cheating. This suggests that cheating is highly contagious.
• People were more likely to cheat if it was believed to benefit the team. This suggests that people feel comfortable cheating if “it’s for the greater good.”

What Ariely and his co-authors are suggesting is that people do not only take into account the external costs and benefits of cheating, but that they also have an internal threshold mechanism which cause them to avoid actions that are incompatible with their own self-image. For some people that moral threshold is very high, and they would not even consider throwing a gum paper on the street, while for others it is much lower and they would be comfortable cheating on exams, stealing from their employer, engaging in tax evasion, insurance fraud, adultery, etc.

Given that cheating, lying, stealing, etc. is bad for the overall functioning of society, Ariely has been exploring what we can do to push people towards greater honesty. He found the following factors to be important:

• Nobody cheats right after reading the Ten Commandments – not even atheists. This suggests that moral reminders work very well to strengthen the internal moral thresholds, at least momentarily.
• Swearing honesty at the beginning is better than swearing at the end. Experiments with mock tax-returns indicate that thinking about whether to cheat or not from the beginning will keep you more honest, while revising your dishonest declarations after the fact is considered a nuisance.
• Peer influence is an important factor in unethical behavior (or one bad apple really spoils the barrel). Gino, Ayal & Ariely (2009) demonstrate that relatively minor acts of dishonesty by in-group members can have a large influence on the extent of dishonesty in the group, and suggest that techniques that help to stigmatize the bad apples as out-group members could be useful tools to fight dishonesty.
• It is important to discourage the small and more ubiquitous forms of dishonesty. These are the socially damaging activities that 98% of the population is considering, while only a very small minority will ever engage in murder, rape and other major crimes, that are already well attended by the criminal justice system.

Parents, employers and teachers who hope to keep their kids, employees and students reasonably honest, would do well to take these profound insights of Ariely into account.

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Dr. Lykke E. Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia.

For your reference:

Francesca Gino, Shahar Ayal and Dan Ariely (2009) “Contagion and Differentiation in Unethical Behavior: The Effect of One Bad Apple on the Barrel.” Psychological Science, 20 (3): 393-398.

Dan Ariely (2012) The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves. New York: HarperCollins Publishers.

Dan Ariely (2010) Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions. New York: HarperCollins Publishers.