Behavioral Economist concludes that most people cheat.

In a very interesting video on the website TED, Dan Ariely, Professor of Behavioral Economics at Duke University, explains his research into why people think it is okay to cheat and steal.

Here is Ariely’s presentation from YouTube:

From his research, he concludes the following:

• A lot of people will cheat.
• When people cheat, however, they cheat by a little, not a lot.
• The probability of being caught is not a prime motivation for avoiding cheating.
• If reminded of morality, people cheat less.
• If distanced from the benefits from cheating, like using “chips” instead of actual money in transactions, people cheat more.
• If your in-group accepts cheating, you cheat more.

I quibble with the interpretation of some of his findings, which may justify a separate post on how people perceive what they do and do not know, but there are always issues of this sort with a given research project.  Where I draw the line is when he expands his conclusions to include all of Wall Street and the stock market, which is totally beyond the scope and nature of his research.

On what basis does he draw this conclusion?  As explained in this short video (as I have not read his book, though I’ve read excerpts and am familiar with the study upon which the book is based), Ariely claims that because stocks and derivatives are not in the form of money, they “distance people from the benefits of cheating,” which leads individuals who engage in the stock market to cheat more.  He alludes to Enron as proof.

This is almost too silly to spend a lot of time on trying to discredit, but I fear that a lot of people who hear his talks or read his book may be lulled into accepting what he says about the stock market as true.  But it is not! Enron is the exception, not the rule.

Companies who issue stocks are raising money to provide a good or service that is valued by society; they are rewarded by profits.  Investors who buy and sell stocks, trade derivatives, and invest in portfolios are trying to make their money go further. They are trying to earn a return on their savings.  Cheaters do not survive in the stock market, unlike the “consequences-free” classroom in Areily’s experiment.

On the other hand, these factors are in glaring abundance in the government:  politicians never “see” the taxes they spend as the hard-earned income of the citizens. And the “benefits” of cheating, including power and privilege, are amorphous and vague, and couched in the so-called morality of “doing the greater good.”  I’m surprised Ariely does not condemn the federal government using the same logic as his does the stock market.

His last take-away from this research project?  That we find it “hard to believe that our own intuition is wrong.”

I think Dr. Ariely ought to apply that caveat to the conclusions he draws about his own research.  Very interesting, very compelling, but his interpretation of the results as they apply to the stock market falls victim to the very same biases that he claims to find in others.

by Sherry Jarrell