The (Honest) Truth About Dishonesty

When Dan was promoted to manager, he took on the task of catching the thief. He began to suspect another young employee whose job it was to take the cash to the bank. He contacted the U.S. National Park Service’s detective agency, and a detective helped him set up a sting operation. One February night, they set the trap. Dan put marked bills into the cash-box and left. Then he and the detective hid in the nearby bushes, waiting for the suspect. When the suspected staff member eventually left for the night, they pounced on him and found some marked bills in his pocket. Case closed, right?

Not so, as it turned out. The young employee stole only $60 that night, and even after he was fired, money and merchandise still went missing. Dan’s next step was to set up an inventory system with price lists and sales records. He told the retirees to write down what was sold and what they received, and—you guessed it—the thievery stopped. The problem was not a single thief but the multitude of elderly, well-meaning, art-loving volunteers who would help themselves to the goods and loose cash lying around.

The moral of this story is anything but uplifting. As Dan put it, “We are going to take things from each other if we have a chance … many people need controls around them for them to do the right thing.”

THE PRIMARY PURPOSE of this book is to examine the rational cost-benefit forces that are presumed to drive dishonest behavior but (as you will see) often do not, and the irrational forces that we think don’t matter but often do. To wit, when a large amount of money goes missing, we usually think it’s the work of one coldhearted criminal. But as we saw in the art lovers’ story, cheating is not necessarily due to one guy doing a cost-benefit analysis and stealing a lot of money. Instead, it is more often an outcome of many people who quietly justify taking a little bit of cash or a little bit of merchandise over and over. In what follows we will explore the forces that spur us to cheat, and we’ll take a closer look at what keeps us honest. We will discuss what makes dishonesty rear its ugly head and how we cheat for our own benefit while maintaining a positive view of ourselves—a facet of our behavior that enables much of our dishonesty.

Once we explore the basic tendencies that underlie dishonesty, we will turn to some experiments that will help us discover the psychological and environmental forces that increase and decrease honesty in our daily lives, including conflicts of interest, counterfeits, pledges, creativity, and simply being tired. We’ll explore the social aspects of dishonesty too, including how others influence our understanding of what’s right and wrong, and our capacity for cheating when others can benefit from our dishonesty. Ultimately, we will attempt to understand how dishonesty works, how it depends on the structure of our daily environment, and under what conditions we are likely to be more and less dishonest.

In addition to exploring the forces that shape dishonesty, one of the main practical benefits of the behavioral economics approach is that it shows us the internal and environmental influences on our behavior. Once we more clearly understand the forces that really drive us, we discover that we are not helpless in the face of our human follies (dishonesty included), that we can restructure our environment, and that by doing so we can achieve better behaviors and outcomes.

It’s my hope that the research I describe in the following chapters will help us understand what causes our own dishonest behavior and point to some interesting ways to curb and limit it.

And now for the journey …

CHAPTER 1

Testing the Simple Model of Rational Crime (SMORC)

Let me come right out and say it. They cheat. You cheat. And yes, I also cheat from time to time.

As a college professor, I try to mix things up a bit in order to keep my students interested in the material. To this end, I occasionally invite interesting guest speakers to class, which is also a nice way to reduce the time I spend on preparation. Basically, it’s a win-win-win situation for the guest speaker, the class, and, of course, me.

For one of these “get out of teaching free” lectures, I invited a special guest to my behavioral economics class. This clever, well-established man has a fine pedigree: before becoming a legendary business consultant to prominent banks and CEOs, he had earned his juris doctor and, before that, a bachelor’s at Princeton. “Over the past few years,” I told the class, “our distinguished guest has been helping business elites achieve their dreams!”

With that introduction, the guest took the stage. He was forthright from the get-go. “Today I am going to help you reach your dreams. Your dreams of MONEY!” he shouted with a thumping, Zumba-trainer voice. “Do you guys want to make some MONEY?”