Here is a letter I got last week:

Dear Professor Ariely,

I have something of a story that intrigued me along the lines of your ‘dishonesty’ experiments. My wife’s cousin (I’ll call her Mary) is generally a nice, honest person. She and her fiancé found an iPhone on vacation. They decided to keep the phone, a nice item of value. Soon after, the owner started calling repeatedly (his name comes up on the screen). Mary chose to not answer the phone. After many calls were unanswered, the calls stopped. Mary kept the phone.

Mary’s situation is special because it is an instance where the lost object can ‘communicate’ with the finder and ‘ask’ to be returned. To what extent and to how long would the average person wait before answering? Would they directly refuse to return the item, or demand compensation?

What if you could rig a phone to deliver a series of text messages that become increasingly personal? Would the finder then feel more connected to the owner, feel empathy, and be more likely to return the phone?

As a side note, the owner of the iPhone was able to remotely shut down the phone so nobody could benefit. The unfortunate outcome is a lost phone. The upside is the empowerment given to the owner, who as a last resort just stops the functionality.

What do you think?

Jack

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Dear Jack,

I think that there are two very interesting points here:

The first is that Mary probably realized that if she answered the phone she would feel obligated to return the iPhone to its owner. And since she did not want to give it up, she simply did not answer the phone. This act is in essence a very sad type of self-control.  Generally we try to exert self-control when we want to assure that we will behave well (save money, take medications, not procrastinate), but here Mary was trying to avoid the temptation that would have made her behave in a kind way.

The second interesting idea is that people are more likely to return items that are more personal. Text messages are one extreme example of this principle, but maybe it would also work for wallets with pictures, books with names, cloths with initials, etc.

Not sure if this helps, but maybe we could learn something from Mary’s behavior.  And for sure don’t leave any valuables unattended during thanksgiving.

Irrationally yours

Dan

Every profession is bound by written and unwritten rules and policies; some of them are set by organizations while others are an integral part of the occupation you choose. For example, doctors have to swear by the Hippocratic Oath, lawyers cannot divulge any privileged attorney-client conversations, and priests cannot reveal what was said to them in the confessional. The same kind of ethical code exists in the profession of accountancy because it is a means of public service. As Robert H. Montgomery put it, “Accountants and the accountancy profession exist as a means of public service; the distinction which separates a profession from a mere means of livelihood is that the profession is accountable to standards of the public interest, and beyond the compensation paid by clients.”

However, accountants are plagued by deep ethical dilemmas – there may be times when their employers ask them to twist and tweak the financial position of the company because they’ve had a bad year. The usual spiel given is that they’re definitely going to rake in the profits in the months that follow and that the deficits that have been covered up this year will more than be taken care of in the years to come. So the accountant is left wondering if he/she should be loyal to their professional ethics or show loyalty to the company that has hired them.

To overcome this type of problems, ethics is taught as a subject when you choose to study accountancy, because you are responsible not just to your employer, but also to the general public who believe in your reports and statements and take important decisions based on your word. An important question here if course is how effective are ethics classes, and even if they are successful how long would their influence last (a week? a month? a year? 2 years?).  It is hard to believe that taking one or two classes on ethnics while studying accountancy is going to have a long term effect, and most likely higher standards and more strict definitions of continuing are needed (and maybe also higher frequency of education).

In other cases accountants are torn between reporting misbehaviors that are going on and between minding their own business – should they open up a can of worms and be at the center of a controversy or just take heart in the fact that they were true to the ethics of their profession? This type of cases present the “action inaction bias” where in general people view their own actions as much more important than inactions – which means that accountants are more likely to care about their own actions than about reporting the actions of others.  Yet, accountants must remember that they are accountable for not just their actions, but also their non-actions, if either tend to affect the public adversely.

Overall the study of accountancy, and understanding its challenges is not only important in its own right, but it also provide an important case from which to view problems of conflicts of interest

By-line:

This guest post is contributed by Omar Adams, he writes on the topic of online accounting degrees . He welcomes your comments at his email id: omaradams47@gmail.com.

Recently, a flaming trashcan ignited a house in Tennessee. Local authorities were notified and a crew of firefighters rushed to the scene to put out the fire just in time.

Wait a minute. That’s not at all what happened. In Obion County, firefighters are not on-call to the community at large. Instead, the right to a fireman is only guaranteed to those who pay an annual $75 fire protection fee before their property lights up. When this house (belonging to homeowners who had not paid the fee) caught fire, firefighters refused to come to the rescue. They ignored the family’s begging, only arriving at the scene when the fire jumped to a neighbor’s house (who had, in fact, paid for protection). Still, not a drop of water was wasted on the first house. Firefighters merely stood and watched as the house dissolved into ash.

This problem is related to the question of bailing out people with bad mortgages.  Should we help those who took o mortgages that they could not afford?  Would it encourage them in the future to keep on being reckless?

Or we can ask a more general question — should we actually let people decide whether they’d like to pay the advance protection fee, or is there something ultimately flawed about letting people decide for themselves? Very few of us think that we will be the ones in need of fire protection, and because we don’t foresee the consequences of not paying, we might not be sufficiently prepared for a potential disaster. And maybe we shouldn’t have to make that difficult decision ourselves.

There are a few topics that Mother Teresa and Joseph Stalin agreed on, other than the cause for human apathy. So I suspect that both would be surprised – as I am — about the reaction to the BP oil spill.

If six months ago someone were to describe to me a tremendous oil spill and ask me to predict our collective reaction to it, I would have said that we would be highly interested in this disaster for a week or two and, after that short time, our interest would dwindle to “mildly interested.” After all, we (the public) appear only vaguely interested in a whole slew of environmental issues. The destruction of the Amazon rainforest, for example, has been going on for decades. Since 1970 we’ve managed to destroy about 600,000 square miles (www.mongabay.com/brazil.html), but we’re so used to these kinds of statistics that no one seems to care much.

So, why is it that we care so much about the BP oil spill than what happens on a daily basis in the Amazon? Here’s what we know about human caring and compassion.  First and foremost, it is based on our emotions rather than our reasoning. Joseph Stalin said, “One death is a tragedy, a million is a statistic.”  Mother Teresa said, “If I look at the masses I will never act, but if I look at the one I will.”  In oil spill terms: We see pelicans and turtles mired and dying in oil, and we want to cry. We hear about families who have had their homes ruined and their livelihoods horribly affected or even destroyed, and we sympathize with their helplessness and want to do something to help them recover.  Our compassion isn’t necessarily proportional to the magnitude of the catastrophe. It depends on how much of our emotion is invoked.

Perhaps I’m mistaken about human apathy, but it is also possible that there are particular features of the BP oil spill that influence how much we care, and that if these features were different, we would care substantially less, even if the magnitude of the disaster were the same.

Here are a few characteristics that might differentiate the BP oil spill from the destruction of the Amazon. First, it is a singular event with a precise beginning. Second, while the tragedy was ongoing (and we are not yet sure if it has ended or not) it seemed to become more desperate by the day. Third, we have a single organization that we can villainize. In contrast, in the Amazon, there are many organizations and individuals at fault, both in the countries where deforestation is occurring and abroad. And fourth, the Gulf is so much closer to home (at least for Americans).

The BP oil spill is, of course, a hugely devastating tragedy. At this stage, we don’t fully understand the magnitude of its consequences, which will likely last for decades. At the same time, it might be worthwhile to take this moment in history as an opportunity – when are caring about this tragedy is still high – to reflect on our larger relationship with the oceans, and the apathy with which we generally greet the less dramatic, but perhaps equally devastating, environmental consequences of overfishing and “everyday pollution.”

I suspect that, because our abuse of the oceans is commonly the result of many small steps by many people, we fail to become enraged with either the process or the outcomes. But we should be. And we should do our best to take better care of our oceans, and not only when the pollution is caused by a single large, easily villainized organization.

Maybe this is another case in which we want to make sure that we don’t waste a really good crisis (for a related missed opportunity see financial crisis). Maybe it is time to look more broadly at our interactions with the oceans and make it a better long-term relationship, and maybe we need to do this while we still care, and before our interest in the oceans dissipates.

…

There is a certain perverse pleasure in contemplating the perfect crime.

You can apply your ingenuity to the hypothetical issues of choosing a target, evading surveillance and law enforcement, dealing with contingencies and covering your tracks afterward. You can prove to yourself what an accomplished criminal mastermind you would be, if you so chose.

The perfect crime usually takes the form of a bank robbery in which the criminals cleverly bypass all security systems using neat gadgets, rappelling wires and knowledge they’ve acquired over several weeks of casing the joint. This seems to be an ideal crime because we can applaud the criminals’ cunning, intelligence and resourcefulness.

But it’s not quite perfect. After all, contingencies by definition depend on chance, and therefore can’t ever be perfectly thought out (and in all good bank-robber movies, the thieves either almost get caught or do).  Even if the chances of being caught are close to zero, do we really want to call this a perfect crime? The authorities are likely to take it very seriously, and respond accordingly with harsh punishment. In this light, the 0.001 percent chance of getting caught might not seem like a lot, but if you take into account the severity of punishment, such crimes suddenly seem much less perfect.

In my mind, the perfect crime is one that not only yields more money, but is one where, if by some small chance you did get caught, no one would care, and the punishment would be negligible.

So, with this new knowledge how would you go about it?

First, the crime would need to be obscure and confusing, making it difficult to detect. Breaking a window and stealing jewelry is too straightforward. Second, the crime should involve many people engaging in the same type of crime so that no one can point a finger at you. This is why looting, though easy to detect, is much more difficult to get a handle on than a single robbery. Third, your crime will need to fall under the shady umbrella of plausible deniability so that if you do get caught, you can always say you didn’t know it was wrong in the first place. With this kind of defense, even if the public cares, the legal system may let you off easy. Moreover, plausible deniability allows you to apologize in the aftermath and ask forgiveness for your “mistake.”

If you really want to go all out, do something you can spin in a positive light, and maybe even create an ideology around it. This way you can then explain how you’re actually on the side of progress. Say, for instance, you’re “providing liquidity” and “lubricating the market” and thereby helping the economy – even if it happens to be by taking people’s money. You can also resort to opaque and promising-sounding language to make your case; you’re “restoring equilibrium,” “eliminating arbitrage” and creating “opportunity” and “efficiency” across the board.

Basically, just bottle snake oil and tell them it will cure, rather than cause, blindness.

Something to avoid, on the other hand, is anything involving an identifiable victim with whom people can sympathize and feel sorry for. Don’t rob one little old lady blind, or any one individual for that matter. It’s part of human nature that we care so much about blue-collar crime, even though the average burglary only costs about $1,300 (according to 2004 FBI crime reports), of which the criminal only nets a few hundred. Crimes like burglaries are the least ideal crime: they’re simple, detectable, perpetrated by a single or just a few people. They create an obvious victim and can’t be cloaked in rhetoric. Instead, what you should aim for is to steal a little bit of money from as many people as possible—little, old or otherwise — it doesn’t matter, as long as you don’t reverse the fortune of any one individual. After all, when lots of individuals suffer just a bit, people won’t mind as much.

So, what is the ideal crime?  Which activity is difficult to detect, involves many people, has plausible deniability, can be supported by an ideology and affects many people just a bit?  Yes, I think you know the answer, and it does involve banks…

Seriously, what we have here is a problem with our priorities. We have tremendous regulations for what is legal and illegal in the domain of possessions and blue-collar crime. But, what about regulations in banking?  It is not that I really think that bankers plan and plot crimes for a living (I don’t), but I do think they are continuously faced with tremendous conflicts of interests, and as a consequence they see reality in a way that fits their own wallets and not their clients.  The recent turmoil in the market is just a symptom of this conflict of interest problem, and unless we remove conflicts of interests from the banking system, we are going to be part of a long stream of perfect crimes.

This blog post first appeared on a website for a new PBS show called Need To Know

Question: what are God’s views on affirmative action, the death penalty and same-sex marriage? Answer: whatever you want them to be.

That’s according to a recent study by Nicholas Epley, Benjamin Converse, Alexa Delbosc, George Monteleone and John Cacioppo, found that we tend to ascribe our own views to God.

Past studies have shown that when we reason about other people, we form an opinion of their views based on two sources: egocentric info (i.e., what we ourselves believe) and outside clues (what the other person has said and done, and what others have said about them).

Here, the researchers wanted to find out how much we rely on egocentric info to construe other people’s views, including God’s. To that end, they had devout American participants provide their personal views on various issues (abortion, death penalty, Iraq war, etc.), as well as what they thought were the views of others (Katie Couric, George Bush, the average American, God, etc.).

When the researchers compared participants’ personal views with the participants’ estimates of others’ views, they found one significant pattern: there was a correlation between participants’ personal views and their estimates of God’s view. For example, participants who said they were for same-sex marriage tended to also say that God was for same-sex marriage. And participants who said they were against same-sex marriage tended to also say that God was against same-sex marriage.

But this wasn’t the case for the other figures – Couric, Bush, average American, and so forth. Participants who said they were for same-sex marriage were statistically neither more nor less likely to say that Couric was for same-sex marriage than those who held the opposite view. In other words, what I say Couric thinks has nothing to do with what I myself think. But what I say God thinks has lots to do with what I myself think.

But correlation doesn’t imply causation, so to shed light on the direction of causality, the researchers ran two follow-up experiments. This time, instead of just surveying participants for current views, they induced participants to change their personal views by randomly assigning them to give speeches for or against the issue (death penalty) in front of a camera. Because it was random assignment, some people ended up arguing for their personal view, while others argued against it (many past studies have shown that in this context, people tend to shift their own opinions in a direction consistent with the speech they delivered). So, what about the other views (God’s, Couric’s etc.) – would the participant revise those as well?

Yes and no. The only other view that changed was God’s. As participants’ own views changed, so did their estimates of God’s view. The participant who started out very much for the death penalty but took on a more moderate view after arguing against the death penalty on camera also ascribed a more moderate view to God. But his estimates of the others’ views remained unchanged.

Overall these results suggest that God is a blank slate onto which we project whatever we choose to. We join religious communities that argue for our viewpoint and we interpret religious readings to support our personal positions.

Irrationally Yours,

Dan

p.s and happy birthday to my little sister Tali

The New York Times Magazine publishes once a year the “years in ideas.”

This is the third year in a row that they are picking one of my papers, which is very nice of them.

It is also particularity nice of them that this year they picked two papers I am a part of.

One of the papers they picked this year is: The Counterfeit Self

Her is their report:
Wearing imitation designer clothing or accessories can fool others — but no matter how convincing the knockoff, you never, of course, fool yourself. It’s a small but undeniable act of duplicity. Which led a trio of researchers to suspect that wearing counterfeits might quietly take a psychological toll on the wearer.

To test their hunch, the psychologists Francesca Gino, Michael Norton and Dan Ariely asked two groups of young women to wear sunglasses taken from a box labeled either “authentic” or “counterfeit.” (In truth, all the eyewear was authentic, donated by a brand-name designer interested in curtailing counterfeiting.) Then the researchers put the participants in situations in which it was both easy and tempting to cheat.

In one situation, which was ostensibly part of a product evaluation, the women wore the shades while answering a set of very simple math problems — under heavy time pressure.

Afterward, given ample time to check their work, they reported how many problems they were able to answer correctly. They had been told they’d be paid for each answer they reported getting right, thus creating an incentive to inflate their scores. Unbeknown to the participants, the researchers knew each person’s actual score. Math performance was the same for the two groups — but whereas 30 percent of those in the “authentic” condition inflated their scores, a whopping 71 percent of the counterfeit-wearing participants did so.
Why did this happen? As Gino puts it, “When one feels like a fake, he or she is likely to behave like a fake.” It was notable that the participants were oblivious to this and other similar effects the researchers discovered: the psychological costs of cheap knockoffs are hidden. The study is currently in press at the journal Psychological Science.

Could other types of fakery also lead to ethical lapses? “It’s a fascinating research question,” says Gino, who studies organizational behavior at the University of North Carolina. “There are lots of situations on the job where we’re not true to ourselves, and we might not realize there might be unintended consequences.”

The second paper they picked this year is: The Drunken Ultimatum

Her is their report:

The so-called ultimatum game contains a world of psychological and economic mysteries. In a laboratory setting, one person is given an allotment of money (say, $100) and instructed to offer a second person a portion. If the second player says yes to the offer, both keep the cash. If the second player says no, both walk away with nothing.

The rational move in any single game is for the second person to take whatever is offered. (It’s more than he came in with.) But in fact, most people reject offers of less than 30 percent of the total, punishing offers they perceive as unfair. Why?

The academic debate boils down to two competing explanations. On one hand, players might be strategically suppressing their self-interest, turning down cash now in the hope that if there are future games, the “proposer” will make better offers. On the other hand, players might simply be lashing out in anger.

The researchers Carey Morewedge and Tamar Krishnamurti, of Carnegie Mellon University, and Dan Ariely, of Duke, recently tested the competing explanations — by exploring how drunken people played the game.

As described in a working paper now under peer review, Morewedge and Krishnamurti took a “data truck” to a strip of bars on the South Side of Pittsburgh (where participants were “often at a level of intoxication that is greater than is ethical to induce”) and also did controlled testing, in labs, of people randomly selected to get drunk.
The scholars were interested in drunkenness because intoxication, as other social-science experiments have shown, doesn’t fuzz up judgment so much as cause the drinker to overly focus on the most prominent cue in his environment. If the long-term-strategy hypothesis were true, drunken players would be more inclined to accept any amount of cash. (Money on the table generates more-visceral responses than long-term goals do.) If the anger/revenge theory were true, however, drunken players would become less likely to accept low offers: raw anger would trump money-lust.

In both setups, drunken players were less likely than their sober peers to accept offers of less than 50 percent of the total. The finding suggests, the authors said, that the principal impulse driving subjects was a wish for revenge.

Lets see if this trend continues….

I found this quote in a wonderful book called 3 men in a boat.  The book was written in 1889 by Jerome K. Jerome, and interestingly it does not seem that much has changed since then.

I knew a young man once, he was a most conscientious fellow and, when he took to fly-fishing, he determined never to exaggerate his hauls by more than twenty-five percent.
“When I have caught forty fish,” said he, “then I will tell people that I have caught fifty, and so on. But I will not lie any more than that, because it is sinful to lie.”

What if on your next coffee run, you discover that Starbucks has started running on the honor system? All the baristas are gone, and in their place, you find Tupperware filled with coins and bills. Would you pay for your daily soy Latte? Or would you “forget” to shell out the five bucks? Be honest.

This, of course, is only a thought experiment, as I doubt Starbucks will be adopting the honor policy anytime soon. But in another part of the world, it’s a real question that residents are facing on a daily basis. As the New York Times recently reported, the attorney general’s office in Indonesia has been opening thousands of “honesty cafes” as part of its anticorruption campaign.

The idea is that these cashier-free cafes will teach people to be honest and curb the country’s corruption problem (which pervades business, politics, and education) by inducing residents – especially the young – to get into the habit of practicing honesty. As the Times reports, “…the cafes are meant to force people to think constantly about whether they are being honest and, presumably, make them feel guilty if they are not.”

It’s a laudable plan, and a lovely feel-good idea, but will it work? I have my doubts.

First I think that people will also cheat to a certain extent in these honesty cafes (as they do in our experiments). In fact, according to one Indonesian student, they already do: “Some of my friends don’t pay the right amount.”

But that’s not the worst of it. I worry that these cafes won’t just fail to discourage cheating – they will actually lead to more of it. In some of our research, we found that cheating on one occasion makes it easier for people to cheat again on a later task, because it alters their self-concept. (Think of dieting as an analogy: once you break your diet once, it’s that much easier to say, “Oh what the hey, cut me a slice of that chocolate cake; I’ll count calories again tomorrow.”)

With honesty cafés widespread, residents will have more temptations to cheat, more occasion to cheat, and maybe this will make it such that they will find it easier to cheat again in other contexts.

Maybe these cafes are a good idea, maybe it will not have any effect, but I worry that it might make things worse.

Will Rogers once said that “The income tax has made liars out of more Americans than golf” and I worry that he was correct.

When I came to the US I was very excited with the tax system. I thought that as a matter of civic engagement this was wonderful ritual, where once a year citizens reflected on their contribution to the common pool of taxes — both for good and for bad.  Thinking about the benefits of taxes but also worrying about the waste and protesting against it.  Only later did I realize that the tax code is so complex and annoying that instead of thinking about social issues, taxation, and waste –it is mostly a day of annoyance (in fact more than one day) and rather than promoting civic mindedness it is mostly about tying to find loopholes in the tax code that will decrease our individual payments.  

One reason for this is that the tax code is so confusing and ambiguous (is taking your sister for dinner and talking to her about work a legitimate business expense?  What if she gives you a good idea that you later use?) that we are drawn to the details of how to fit our particular pattern of expenditures within this messy tax code — and while playing this game we also try to minimize our payment.  

So, what do we do to fix this problem?  First I think that we need to simplify the tax code to make the process less time consuming, less annoying, and maybe even making it more equitable.  Second, I think that we can ask citizens how they want the government to use their tax money.  This does not have to be 100% of the tax, and instead the tax forms can ask us how we want to allocate 10% of our taxes between education, clean energy, health, etc.  By doing so I think that we can increase the care and scrutiny that should come with tax season and more generally increase civic engagement.

Finally – I cannot post something about taxes without making some comment about how to decrease cheating.  My suggestion is to have the first question on the tax form asking us if we want to contribute $25 to a task force to fight cheating and corruption.  The people who would say “yes” to this question would have committed themselves, and some money, toward honesty — and it is likely that they would continue behaving more ethically while filling in the rest of the tax form.  And for the people who answer “no”?  Maybe they should audited.

Happy tax day

Dan