Predictably Irrational

by Dan Ariely

  You could look at almost any professional group and see signs of similar problems. How about the Association of Petroleum Geologists, for instance? The image I see is Indiana Jones types, with more interest in discussing Jurassic shale and deltaic deposits than in making a buck. But look deeper and you’ll find trouble. “There is unethical behavior going on at a much larger scale than most of us would care to think,” one member of the association wrote to her colleagues.27

  What kind of dishonesty, for goodness’ sake, could be rife in the ranks of petroleum geologists, you ask? Apparently things like using bootlegged seismic and digital data; stealing maps and materials; and exaggerating the promise of certain oil deposits, in cases where a land sale or investment is being made. “The malfeasance is most frequently of shades of gray, rather than black and white,” one petroleum geologist remarked.

  But let’s remember that petroleum geologists are not alone. This decline in professionalism is everywhere. If you need more proof, consider the debate within the field of professional ethicists, who are called more often than ever before to testify at public hearings and trials, where they may be hired by one party or another to consider issues such as treatment rendered to a patient and the rights of the unborn. Are they tempted to bend to the occasion? Apparently so. “Moral Expertise: A Problem in the Professional Ethics of Professional Ethicists” is the title of one article in an ethics journal.28 As I said, the signs of erosion are everywhere.

  WHAT TO DO? Suppose that, rather than invoking the Ten Commandments, we got into the habit of signing our name to some secular statement—similar to a professional oath—that would remind us of our commitment to honesty. Would a simple oath make a difference, in the way that we saw the Ten Commandments make a difference? We needed to find out—hence our next experiment.

  Once again we assembled our participants. In this study, the first group of participants took our matrix math test and handed in their answers to the experimenter in the front of the room (who counted how many questions they answered correctly and paid them accordingly). The second group also took the test, but the members of this group were told to fold their answer sheet, keep it in their possession, and tell the experimenter in the front of the room how many of the problems they got right. The experimenter paid them accordingly, and they were on their way.

  The novel aspect of this experiment had to do with the third group. Before these participants began, each was asked to sign the following statement on the answer sheet: “I understand that this study falls under the MIT honor system.” After signing this statement, they continued with the task. When the time had elapsed they pocketed their answer sheets, walked to the front of the room, told the experimenter how many problems they had correctly solved, and were paid accordingly.

  What were the results? In the control condition, in which cheating was not possible, participants solved on average three problems (out of 20). In the second condition, in which the participants could pocket their answers, they claimed to have solved on average 5.5 problems. What was remarkable was the third situation—in which the participants pocketed their answer sheets, but had also signed the honor code statement. In this case they claimed to have solved, on average, three problems—exactly the same number as the control group. This outcome was similar to the results we achieved with the Ten Commandments—when a moral reminder eliminated cheating altogether. The effect of signing a statement about an honor code is particularly amazing when we take into account that MIT doesn’t even have an honor code.

  So we learned that people cheat when they have a chance to do so, but they don’t cheat as much as they could. Moreover, once they begin thinking about honesty—whether by recalling the Ten Commandments or by signing a simple statement—they stop cheating completely. In other words, when we are removed from any benchmarks of ethical thought, we tend to stray into dishonesty. But if we are reminded of morality at the moment we are tempted, then we are much more likely to be honest.

  At present, several state bars and professional organizations are scrambling to shore up their professional ethics. Some are increasing courses in college and graduate schools, and others are requiring brush-up ethics classes. In the legal profession, Judge Dennis M. Sweeney of the Howard County (Maryland) circuit published his own book, Guidelines for Lawyer Courtroom Conduct, in which he noted, “Most rules, like these, are simply what our mothers would say a polite and well raised man or woman should do. Since, given their other important responsibilities, our mothers (and yours) cannot be in every courtroom in the State, I offer these rules.”

  Will such general measures work? Let’s remember that lawyers do take an oath when they are admitted to the bar, as doctors take an oath when they enter their profession. But occasional swearing of oaths and occasional statements of adherence to rules are not enough. From our experiments, it is clear that oaths and rules must be recalled at, or just before, the moment of temptation. Also, what is more, time is working against us as we try to curb this problem. I said in Chapter 4 that when social norms collide with market norms, the social norms go away and the market norms stay. Even if the analogy is not exact, honesty offers a related lesson: once professional ethics (the social norms) have declined, getting them back won’t be easy.

  THIS DOESN’T MEAN that we shouldn’t try. Why is honesty so important? For one thing, let’s not forget that the United States holds a position of economic power in the world today partly because it is (or at least is perceived to be) one of the world’s most honest nations, in terms of its standards of corporate governance.

  In 2002, the United States ranked twentieth in the world in terms of integrity, according to one survey (Denmark, Finland, and New Zealand were first; Haiti, Iraq, Myanmar, and Somalia were last, at number 163). On this basis, I would suspect that people doing business with the United States generally feel they can get a fair deal. But the fact of the matter is that the United States ranked fourteenth in 2000, before the wave of corporate scandals made the business pages in American newspapers look like a police blotter.29 We are going down the slippery slope, in other words, not up it, and this can have tremendous long-term costs.

  Adam Smith reminded us that honesty really is the best policy, especially in business. To get a glimpse at the other side of that realization—at the downside, in a society without trust—you can take a look at several countries. In China, the word of one person in one region rarely carries to another region. Latin America is full of family-run cartels that hand out loans to relatives (and then fail to cut off credit when the debtor begins to default). Iran is another example of a nation stricken by distrust. An Iranian student at MIT told me that business there lacks a platform of trust. Because of this, no one pays in advance, no one offers credit, and no one is willing to take risks. People must hire within their families, where some level of trust still exists. Would you like to live in such a world? Be careful, because without honesty we might get there faster than you’d imagine.

  What can we do to keep our country honest? We can read the Bible, the Koran, or whatever reflects our values, perhaps. We can revive professional standards. We can sign our names to promises that we will act with integrity. Another path is to first recognize that when we get into situations where our personal financial benefit stands in opposition to our moral standards, we are able to “bend” reality, see the world in terms compatible with our selfish interest, and become dishonest. What is the answer, then? If we recognize this weakness, we can try to avoid such situations from the outset. We can prohibit physicians from ordering tests that would benefit them financially; we can prohibit accountants and auditors from functioning as consultants to the same companies; we can bar members of Congress from setting their own salaries, and so on.

  But this is not the end of the issue of dishonesty. In the next chapter, I will offer some other suggestions about dishonesty, and some other insights into how we struggle with it.

  Reflections on Dishonesty and Toilet Paper


  About a year after Predictably Irrational was first published, I received an interesting e-mail from a woman who used elements from our honor code experiment to design her own test, which effectively solved an important problem involving stolen toilet paper.

  Dear Professor Ariely,

  I found your experiments on cheating particularly interesting (e.g., the nonexistent “MIT honor code” and “The 10 Commandments”) and actually modeled an experiment of my own on yours.

  I live in a house near the UC Berkeley campus. I share the house with many housemates; none of us knew each other before moving in. Moreover, a bunch of new students moved into the house for the summer months last year. This living arrangement led to a number of problems—namely, the stealing of toilet paper.

  Every Sunday, a housekeeper restocks each toilet with three fresh rolls of toilet paper. Last summer, however, I noticed that by Monday evening, all the toilet paper would be gone. This is not unlike a “tragedy of the commons”* situation, and it has become clear that certain housemates were hoarding the toilet paper for their private use. I tried to think of ways to stop the hoarding. I did not want to confront anyone, because my goal was to keep the TP from disappearing, not to alienate people.

  With your experiment in mind, I put a note in the upstairs bathroom asking housemates not to take toilet paper outside the restroom for personal use.

  A couple of hours later, one fresh roll of toilet paper magically reappeared in the bathroom where I had placed the note. This had never happened before. The experiment worked! I checked the downstairs restroom, where I had not left a note—no rolls to be found. Two days later, another fresh roll of toilet paper reappeared in the upstairs bathroom.

  I was quite pleased that my note helped put an end to the hoarding/stealing.

  Thank you for the inspiration! Behavioral economics is certainly applicable to daily life!

  Regards,

  Rhonda

  I must confess that when I thought about the implications of the honor-reminder experiments for day-to-day life, issues around toilet paper didn’t come to mind. But I am happy that Rhonda made the connection and applied it to her own situation. I am also quite pleased that she placed the note in one bathroom but not the other—nice experimental control!

  Appendix: Chapter 13

  The Ten Commandments*

  Catholic - I, the Lord, am your God. You shall not have other gods besides me.

  Jewish - I am the Lord your God who has taken you out of the land of Egypt.

  Protestant - You shall have no other gods but me.

  Catholic - You shall not take the name of the Lord, your God, in vain.

  Jewish - You shall have no other gods but me.

  Protestant - You shall not make unto you any graven images.

  Catholic - Remember to keep holy the Lord’s Day.

  Jewish - You shall not take the name of the Lord your God in vain.

  Protestant - You shall not take the name of the Lord your God in vain.

  Catholic - Honor your father and your mother.

  Jewish - You shall remember the Sabbath and keep it Holy.

  Protestant - You shall remember the Sabbath and keep it Holy.

  Catholic - You shall not kill.

  Jewish - Honor your mother and father.

  Protestant - Honor your mother and father.

  Catholic - You shall not commit adultery.

  Jewish - You shall not murder.

  Protestant - You shall not murder.

  Catholic - You shall not steal.

  Jewish - You shall not commit adultery.

  Protestant - You shall not commit adultery.

  Catholic - You shall not bear false witness.

  Jewish - You shall not steal.

  Protestant - You shall not steal.

  Catholic - You shall not covet your neighbor’s wife.

  Jewish - You shall not bear false witness.

  Protestant - You shall not bear false witness.

  Catholic - You shall not covet your neighbor’s goods.

  Jewish - You shall not covet anything that belongs to your neighbor.

  Protestant - You shall not covet anything that belongs to your neighbor.

  CHAPTER 14

  The Context of Our Character, Part II

  Why Dealing with Cash Makes Us More Honest

  Many of the dormitories at MIT have common areas, where sit a variety of refrigerators that can be used by the students in the nearby rooms. One morning at about eleven, when most of the students were in class, I slipped into the dorms and, floor by floor, went hunting for all the shared refrigerators that I could find.

  When I detected a communal fridge, I inched toward it. Glancing cautiously around, I opened the door, slipped in a six-pack of Coke, and walked briskly away. At a safe distance, I paused and jotted down the time and the location of the fridge where I had left my Cokes.

  Over the next few days I returned to check on my Coke cans. I kept a diary detailing how many of them remained in the fridge. As you might expect, the half-life of Coke in a college dorm isn’t very long. All of them had vanished within 72 hours. But I didn’t always leave Cokes behind. In some of the fridges, I left a plate containing six one-dollar bills. Would the money disappear faster than the Cokes?

  Before I answer that question, let me ask you one. Suppose your spouse calls you at work. Your daughter needs a red pencil for school the next day. “Could you bring one home?” How comfortable would you be taking a red pencil from work for your daughter? Very uncomfortable? Somewhat uncomfortable? Completely comfortable?

  Let me ask you another question. Suppose there are no red pencils at work, but you can buy one downstairs for a dime. And the petty cash box in your office has been left open, and no one is around. Would you take 10 cents from the petty cash box to buy the red pencil? Suppose you didn’t have any change and needed the 10 cents. Would you feel comfortable taking it? Would that be OK?

  I don’t know about you, but while I’d find taking a red pencil from work relatively easy, I’d have a very hard time taking the cash. (Luckily for me, I haven’t had to face this issue, since my daughter is not in school yet.)

  As it turns out, the students at MIT also felt differently about taking cash. As I mentioned, the cans of Coke quickly disappeared; within 72 hours every one of them was gone. But what a different story with the money! The plates of dollar bills remained untouched for 72 hours, until I removed them from the refrigerators.

  So what’s going on here?

  When we look at the world around us, much of the dishonesty we see involves cheating that is one step removed from cash. Companies cheat with their accounting practices; executives cheat by using backdated stock options; lobbyists cheat by underwriting parties for politicians; drug companies cheat by sending doctors and their wives off on posh vacations. To be sure, these people don’t cheat with cold cash (except occasionally). And that’s my point: cheating is a lot easier when it’s a step removed from money.

  Do you think that the architects of Enron’s collapse—Kenneth Lay, Jeffrey Skilling, and Andrew Fastow—would have stolen money from the purses of old women? Certainly, they took millions of dollars in pension monies from a lot of old women. But do you think they would have hit a woman with a blackjack and pulled the cash from her fingers? You may disagree, but my inclination is to say no.

  So what permits us to cheat when cheating involves nonmonetary objects, and what restrains us when we are dealing with money? How does that irrational impulse work?

  BECAUSE WE ARE so adept at rationalizing our petty dishonesty, it’s often hard to get a clear picture of how nonmonetary objects influence our cheating. In taking a pencil, for example, we might reason that office supplies are part of our overall compensation, or that lifting a pencil or two is what everyone does. We might say that taking a can of Coke from a communal refrigerator from time to time is all right, because, after all, we’ve all had cans of Coke taken from us. Maybe Lay, Skilling, and Fast
ow thought that cooking the books at Enron was OK, since it was a temporary measure that could be corrected when business improved. Who knows?

  To get at the true nature of dishonesty, then, we needed to develop a clever experiment, one in which the object in question would allow few excuses. Nina, On, and I thought about it. Suppose we used symbolic currency, such as tokens. They were not cash, but neither were they objects with a history, like a Coke or a pencil. Would it give us insight into the cheating process? We weren’t sure, but it seemed reasonable; and so, a few years ago, we gave it a try.

  This is what happened. As the students at one of the MIT cafeterias finished their lunches, we interrupted them to ask whether they would like to participate in a five-minute experiment. All they had to do, we explained, was solve 20 simple math problems (finding two numbers that added up to 10). And for this they would get 50 cents per correct answer.

  The experiment began similarly in each case, but ended in one of three different ways. When the participants in the first group finished their tests, they took their worksheets up to the experimenter, who tallied their correct answers and paid them 50 cents for each. The participants in the second group were told to tear up their worksheets, stuff the scraps into their pockets or backpacks, and simply tell the experimenter their score in exchange for payment. So far this experiment was similar to the tests of honesty described in the previous chapter.

  But the participants in the last group had something significantly different in their instructions. We told them, as we had told the previous group, to tear up the worksheets and simply tell the experimenter how many questions they had answered correctly. But this time, the experimenter wouldn’t be giving them cash. Rather, she would give them a token for each question they claimed to have solved. The students would then walk 12 feet across the room to another experimenter, who would exchange each token for 50 cents.