By Ben Schiller

Dan Ariely, a behavioral economist, is known for his bestseller Predictably Irrational where he shows that humans--and markets--are a lot less rational than we tend to think. For his latest book, he takes on the question of why people behave dishonestly, and concludes--again--that it's not why we think.

People don't make a cost-benefit analysis before cheating, or lying, as is commonly thought. They try to have it both ways: they use "flexible cognitive psychology" to think of themselves as an honest person, while making sure they get as much as possible. The key is rationalization, and maintaining a psychological distance from the consequences.

The animated video is from a talk Ariely gave about The (Honest) Truth About Dishonesty, and typically it is fun, with lots of examples. In an interview, Ariely talked about cases where people rationalize--for example, why golfers are more likely, according to his experiment, to kick their ball than move it by hand.

"People have a hard time moving it four inches. There is a psychological barrier. But if they kick the ball, they can think they are not actually doing it. Somehow it's not as deliberate, so it's easier to do," he says.

Distance explains some business-related dishonesty. For example, bankers might rationalize manipulating interest rates, because they are nowhere near the person paying a higher price for a mortgage. It's also easier if other people are doing it, and if there is a greater cause--for example, if some of the gains will go to charity.

Having tried to understand what motivates people to act dishonestly, Ariely did several experiments to find out what might curtail it. Some solutions that appear to work: Having people sign important forms at the beginning rather than at the end. Giving people the ability to confess regularly, as if they were Catholic ("The ability to say I've done wrong, and to get a fresh start, is very powerful," he says). Regular reminders of moral standards, like honor codes.

"The building blocks for dishonesty in the corporate world are strong conflicts of interest, fuzzy rules, and an ability to rationalize. We want to attack all three as much as we can, and we want to do that especially with activities that are easier to rationalize."

Like finance. Dishonesty was especially easy to rationalize leading up to the crisis. It wasn't so much that the bankers were intrinsically dishonest, but that conditions favored dishonesty.

"We all have the capacity to be quite bad. In banking, we've created the circumstances for everyone to misbehave," Ariely says. Fixing the system will therefore require "changing the incentive structures," as much as punishing certain people.

Comments