Dr. Dan’s Experiment

Dan Ariely was Bob Brinker’s guest on Money Talk last weekend.  Dr. Dan, as Brinker called him, is a professor of Behavioral Economics at MIT’s Sloan School of Management.     Dr Dan was pushing his new book Predictably Irrational. I am going to give a rough summary of one of Dr. Dan’s experiments for the book that I found interesting.   He gave subjects a simple math test where the subjects would be able to able to figure out the correct answers but he made sure that the subjects did not have enough time to complete the tests. He then tested different variables to measure the impact of cheating.   He had testers tell the subjects that they would be paid $1 for each correct answer. The first group:  Once the time was up, they told the testers how many correct answers they got correct.   On average these subjects reported they got 4 correct. The second group:  Once the time was up, they shredded the tests and then told the testers how many they got right.  They knew evidence would not be there to verify how many they got correct and said they got 7 correct. 

The third group:  Once the time was up, they shredded the tests and instead of being told they would be paid in dollars they were told they would be paid in tokens that they could exchange for dollars.   This group reported they correctly answered double the number of problems.  I believe he meant 14. 

He theorized that the farther away from being paid in dollars the more people would cheat.  He said this follows the principal many people at work have no problem taking a pen from their workplace but would not steal ten cents from the cash account at work.   He had a fourth group:  Before given the tests they talked about the Ten Commandments.   These people cheated far less.  He guessed that thinking about mortality made subjects cheat less.   He had a fifth group:  He planted a test taker who announced in front of the other test takers that he completed the test when there was no chance that others could have successfully completed all the test questions.  People who took the test under those conditions cheated more.   

Dr. Dan theorized that subject’s primary decisions about cheating aren’t about the probabilities of being caught, or even the economic rewards to be made.  Instead, it is about our ability to cheat and still feel good about themselves afterward.  The moment something is removed from actual money, it becomes easier for us to cheat.   Most subject would cheat a little.  If the economic incentives changed to cheat where they would be rewarded more for cheating and still be paid in cash few would cheat more than a little.  The amount of cheating remained pretty constant regardless of the extra cash incentives to cheat.

Dr Dan theorized this could have major implications.  He wondered how many people who would be disgusted with someone in the company who would steal $100 would also feel okay with things like back dating stock options since they are far removed from cash.

 He didn’t talk about it but this idea is closely related to Tragedy of the Commons concept popularized by Garritt Hardin.   Each person cheats a little for their own good and they can feel okay with themselves since (1) they believe others are doing it too and (2) they aren’t stealing money.  They are stealing the use of land or air where there is little accountability.

It looks like an interesting book.