Behavioral economist Dan Ariely on Why We Think It’s OK to Cheat and Steal (Sometimes) – Transcript
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Dan Ariely – Behavioral economist
I want to talk to you today a little bit about predictable irrationality. And my interest in irrational behavior started many years ago in a hospital. I was burned very badly. And if you spend a lot of time in hospital, you’ll see a lot of types of irrationalities. And the one that particularly bothered me in the burn department was the process by which the nurses took the bandage off me.
Now, you must have all taken a Band-Aid off at some point, and you must have wondered what’s the right approach. Do you rip it off quickly — short duration but high intensity — or do you take your Band-Aid off slowly — you take a long time, but each second is not as painful — which one of those is the right approach?
The nurses in my department thought that the right approach was the ripping one, so they would grab hold and they would rip, and they would grab hold and they would rip. And because I had 70% of my body burned, it would take about an hour.
And as you can imagine, I hated that moment of ripping with incredible intensity. And I would try to reason with them and say, “Why don’t we try something else? Why don’t we take it a little longer — maybe two hours instead of an hour — and have less of this intensity?”
And the nurses told me two things. They told me that they had the right model of the patient — that they knew what was the right thing to do to minimize my pain — and they also told me that the word patient doesn’t mean to make suggestions or to interfere or — This is not just in Hebrew, by the way. It’s in every language I’ve had experience with so far.
And, you know, there’s not much — there wasn’t much I could do, and they kept on doing what they were doing. And about three years later, when I left the hospital, I started studying at the university. And one of the most interesting lessons I learned was that there is an experimental method that if you have a question you can create a replica of this question in some abstract way, and you can try to examine this question, maybe learn something about the world. So that’s what I did.
I was still interested in this question of how do you take bandages off burn patients. So originally I didn’t have much money, so I went to a hardware store and I bought a carpenter’s vice. And I would bring people to the lab and I would put their finger in it, and I would crunch it a little bit.
And I would crunch it for long periods and short periods, and pain that went up and pain that went down, and with breaks and without breaks — all kinds of versions of pain. And when I finished hurting people a little bit, I would ask them, so, how painful was this? Or, how painful was this? Or, if you had to choose between the last two, which one would you choose?
I kept on doing this for a while. And then, like all good academic projects, I got more funding. I moved to sounds, electrical shocks — I even had a pain suit that I could get people to feel much more pain.
But at the end of this process, what I learned was that the nurses were wrong. Here were wonderful people with good intentions and plenty of experience, and nevertheless they were getting things wrong predictably all the time. It turns out that because we don’t encode duration in the way that we encode intensity, I would have had less pain if the duration would have been longer and the intensity was lower.
It turns out it would have been better to start with my face, which was much more painful, and move toward my legs, giving me a trend of improvement over time — that would have been also less painful.
And it also turns out that it would have been good to give me breaks in the middle to kind of recuperate from the pain. All of these would have been great things to do, and my nurses had no idea.
And from that point on I started thinking, are the nurses the only people in the world who get things wrong in this particular decision, or is it a more general case? And it turns out it’s a more general case — there’s a lot of mistakes we do.
And I want to give you one example of one of these irrationalities, and I want to talk to you about cheating. And the reason I picked cheating is because it’s interesting, but also it tells us something, I think, about the stock market situation we’re in.
So, my interest in cheating started when Enron came on the scene, exploded all of a sudden, and I started thinking about what is happening here. Is it the case that there was kind of a few apples who are capable of doing these things, or are we talking a more endemic situation, that many people are actually capable of behaving this way?
So, like we usually do, I decided to do a simple experiment. And here’s how it went. If you were in the experiment, I would pass you a sheet of paper with 20 simple math problems that everybody could solve, but I wouldn’t give you enough time. When the five minutes were over, I would say, “Pass me the sheets of paper, and I’ll pay you a dollar per question.” People did this. I would pay people four dollars for their task — on average people would solve four problems.
Other people I would tempt to cheat. I would pass their sheet of paper. When the five minutes were over, I would say, “Please shred the piece of paper. Put the little pieces in your pocket or in your backpack, and tell me how many questions you got correctly.” People now solved seven questions on average.
Now, it wasn’t as if there was a few bad apples — a few people cheated a lot. Instead, what we saw is a lot of people who cheat a little bit.
Now, in economic theory, cheating is a very simple cost-benefit analysis. You say, what’s the probability of being caught? How much do I stand to gain from cheating? And how much punishment would I get if I get caught? And you weigh these options out — you do the simple cost-benefit analysis, and you decide whether it’s worthwhile to commit the crime or not. So, we try to test this.
For some people, we varied how much money they could get away with — how much money they could steal. We paid them $0.10 per correct question, $0.50, $1, $5, $10 per correct question.
You would expect that as the amount of money on the table increases, people would cheat more, but in fact it wasn’t the case. We got a lot of people cheating by stealing by a little bit.
What about the probability of being caught? Some people shredded half the sheet of paper, so there was some evidence left. Some people shredded the whole sheet of paper. Some people shredded everything, went out of the room, and paid themselves from the bowl of money that had over $100.
You would expect that as the probability of being caught goes down, people would cheat more, but again, this was not the case. Again, a lot of people cheated by just by a little bit, and they were insensitive to these economic incentives.
So we said, “If people are not sensitive to the economic rational theory explanations, to these forces, what could be going on?” And we thought maybe what is happening is that there are two forces. At one hand, we all want to look at ourselves in the mirror and feel good about ourselves, so we don’t want to cheat. On the other hand, we can cheat a little bit, and still feel good about ourselves. So, maybe what is happening is that there’s a level of cheating we can’t go over, but we can still benefit from cheating at a low degree, as long as it doesn’t change our impressions about ourselves. We call this like a personal fudge factor.