People tend to cheat more in a cashless society: Dan Ariely

Dan Ariely is the James B Duke Professor of Psychology and Behavioural Economics at Duke University at Durham in North Carolina, US. His sometimes unusual experiments are consistently interesting, amusing and informative, demonstrating profound ideas that fly in the face of common wisdom. In addition to appointments at the Fuqua School of Business, the Centre for Cognitive Neuroscience, the Department of Economics and the School of Medicine at the Duke University, Ariely is also the author of bestsellers like Predictably Irrational and The Upside of Irrationality. His new book The Honest Truth About Dishonesty has just come out. In this interview with Vivek Kaul, Ariely shares interesting insights that he has gathered on why people are honest and dishonest, through experiments that he has carried out over the years. Excerpts:

Q: You say that most of us are 98-percenters when it comes to being honest. Could you explain what do you mean by that?
A: In our experiments, we tempt people to steal money. The paradigm is that we give people a sheet of paper with 20 simple math problems and we say solve as many as you can in five minutes. Now, five minutes is not enough time to solve everything.

And at the end we ask people to destroy the piece of paper they have solved the questions on and just tell us how many questions they have solved correctly. We have a way to find out how many questions they solved correctly. And what we find is that lots of people cheat a little. We find very few crooks and we find very few people who don’t cheat at all. But we find lots of people who cheat a little bit. And that’s basically what I mean.

Q: Why are people dishonest?
A: We are dishonest because we have other good incentives besides honesty. In the social domain, we are dishonest when somebody asks us, “Honey, how do I look in this dress?” We have conflicting interests. We want to be honest but we also don’t want to hurt the other person. We also don’t want to have a miserable evening ahead of us. In the financial domain, it is the same thing.

We want to benefit from having more money and we want to be honest. There is a tension between the two things. What is interesting is that you would think we can solve these tensions by being perfectly honest, but then we won’t get the money. So we solve this tension by being slightly dishonest.

Q: In one of your interviews after the release of your new book, you said: ‘Most people are able to cheat a little because they can maintain the sense of themselves as basically honest people.’  What do you mean by that?
A: Think about two cases. One in which you go to a restaurant, eat and then leave the restaurant without paying. I have gone to many restaurants and asked waiters if this is possible and how would they recommend that I go about doing that and escape without paying, if I wanted to. They always give me great suggestions about how I could do this without getting caught. And when I ask them how many people actually do it, they say it almost never happens. This basically tells us that people are not doing cost-benefit analysis all the time and thinking what can they get away with.  Now if you compare it to illegal downloading business, you find most people have no problems doing that.

Q: What is the difference between the two?
A: The difference is that in the case of illegal downloading of music, you can be dishonest and download illegal music, but you don’t have any difficulty thinking of yourself as a bad person because everybody is doing it. You don’t see the person you are offending. You don’t see the investment in the music and so on. In the restaurant case, it would be incredibly hard for you to eat, leave without paying and not think of yourself as a crook. And it turns out, that’s basically what we do. We gravitate to these cases where we could cheat a little bit and still think of ourselves as good people.

Q: You have suggested in your new book that ‘small-time cheaters still perceive themselves as good people’. But what about big-time cheaters like the Wall Street operators? How does it work in their case?
A: I have talked to all kinds of cheaters recently, which include cheaters who have indulged in white collar crime related to financial industry. These guys don’t start off with intentions of big crimes instead what they find is that they do one step and they tell themselves that they are going to do it for just a little while and then they are going to do something different. The crime is going to fix itself. But of course it doesn’t. And then it just gets worse and worse and worse. So when you and I look at big cheaters we say to ourselves oh we could have never done the stream of things that they did. But they also did not think about this stream of things. Instead they thought about it at one step at a time and that made it much easier to think about it and do it. Also, cheating at work is a bit more complex. Sometimes people cheat for work. Sometimes people have a sense of loyalty to other people.

Actually I did some interviews with cheaters who had been indicted for cheating fraud. In many cases they worked for the company and they were not going to make much out of it personally. It was out of a social obligation to the company why they cheated.

Q: You carried out an experiment where you left Coca-Cola bottles with cash in a college dorm refrigerator. You found that the Coke bottles disappeared but the cash was still there. What was happening in this case?
A: Again this is a question of distance from money and the ability to rationalise. We have done lot of experiments like this. This is not the only one. The basic finding is that as things get closer to money we have a hard time of thinking of ourselves as honest if we take it. So for example you can imagine a situation where you take ten cents from a petty cash box. It would be hard to take that money and not think of yourself as a thief. But what if it is not ten cents from a petty cash box but a pencil from work. All of sudden the distance has made it a little easier for you to be dishonest.

Q: One of the interesting things that comes out of your book is that you believe that people tend to cheat more and be more dishonest in a cashless society. Could you explain with an experiment you carried out to come to the conclusion?
A: In one of the experiments people solved math problems that I told you about. After the time for the experiment was over, they shred the piece of paper on which they had solved the math problems. When they finished the problem they came to the experimenter and said Mr Experimenter I have solved ‘x’ problems, give me ‘x’ dollars. And we paid them the money. In the other condition they finished answering the questions, shredded the piece of paper and came to the experimenter and said, I have finished answering the questions, give me ‘x’ number of tokens. In the first case, they looked somebody in the eye and cheated directly for money. In the second case they asked for something that was one step removed from money. What happened now? Now people were twice as dishonest. Again the idea is that once we get distanced from money it is easier for us to feel that we are honest but nevertheless be dishonest.

Q: How does religion impact honesty? Hindus and Jews fast. Catholics confess. Does all this really matter?
A: I don’t know if fasting by itself matters because I haven’t tested for it. But there is good evidence that asking for forgiveness is important because it allows people to set a new standard. Also, some people believe that religious people are more honest. By the way I don’t know if they are more honest or not. But some people believe that because religions have heaven and hell. At least some religions have heaven and hell. Hinduism has karma and reincarnation and that it is this long-term thinking that is causing people to behave in an honest way. I don’t think that is likely to be true. People are not really thinking about the long-term consequences of their actions. There are many other aspects of life so why would we think all of a sudden about religion and the long-term consequences that come with it. Instead I think that the goal of religion or the role of it in how it works is by creating small rules for behaviour. You have this in Hinduism. Judaism has a lot of them. The moment you have small rules that regulate behaviour all of a sudden people know at each point in time, where are they? Are they on the right side or the wrong side of the rule and that’s what I think is important.

Q: You say dishonesty is not all bad all the time and give your own example of when you were burned badly during your teenage years. The nurses who were treating you told you a white lie about the pain a particular procedure would inflict. What are you trying to suggest in this case?
A: The idea is that honesty is an important human value. But there are other human values and other human motivations. For example, you should have a motivation of not hurting other people and getting other people to be happy and so on. Sometimes the human values contradict each other. They are not compatible.

There is a question of what do you want to do in those cases. And I am not suggesting that in all cases honesty should always win and nothing else should be considered. We should think about it more carefully.

One of the interesting experiments in your book was when you gave designer sunglasses to two groups of people. One group was told they were wearing authentic designer sunglasses.

Q: Another one was told they are wearing fakes. Then you gave a test to both the groups and tempted them to cheat. Could you tell our readers what followed and what did you conclude from that?
A: What was interesting is that people who wore fake glasses cheated to a higher degree, to a more dishonest level. What it means is that once we take one step into a bad direction, for example wearing counterfeit products, the next step is a little easier. And this should worry us in general because it means that there is a slippery slope that can get us to behave in ways ideally we wouldn’t want to behave.  The second thing is to think differently about fashion products. Fashion products are interesting because we wear them. And they become a signal to ourselves. And they kind of influence us. We have a potential problem when we wear fake products there is a risk that this would create a negative halo effect on the rest of our activities.

Q: You say honesty is a state of mind. What do you mean by that?
A: We can think about this honesty being a function of personality. But what we find in general is that it is function of the situation we are in. The way it works is that the situation changes our ability to rationalise. When rationalisation increases -- for example, when we say things like everybody does it, nobody else will suffer or when we say we are doing it for a good cause -- we cheat to a higher degree. But when we have just signed an honour code, when we have just recited the ten-commandments or just come out of a confession, all of a sudden the fudge factor decreases. Our ability to rationalise decreases. We cheat less. So it is actually less of a function of our own internal stable morality. It is more a function of the situation you are put in.

Q: Can you give an example to substantiate that?
A: Imagine you are a banker. These days we are all against bankers. Imagine that I made you a banker in 2007 and I promised you $10 million if you can only say that a mortgage-backed security is a good product. Ask yourself whether under those conditions you would be able to say that mortgage-backed security is a good product? But what if the distance from money was larger? You did not see the consequences of your actions.

What if many people around you did the same thing? Now you can see that how it would be quite easy to be in a situation that created tremendous conflicts of interest and tremendous dishonesty, even if you are internally an honest person. And that’s why I feel that we need to think carefully about what causes dishonesty and try to fix things.

Interviewer Kaul is a writer and can be reached at vivek.kaul@gmail.com