Kilkenomics :: Dan Ariely

never been such an event that's so much fun with so much dry material it's a blast you have to take economics out of the conference room and out of academia because economics is about the business of ordinary people's lives could give a huge kill Kannamma --xx welcome to mr. dan Ariely ladies and gentlemen hello hello so thanks for this lovely introduction although I I do have to tell you that I have learned over the years that a a key to a good talk is to have low expectations it's also true for marriage so so I want to talk to you a little bit today about dishonesty and to start thinking about dishonesty how many people here have lied at least once in 2013 okay how about the last week I'm not going to ask about the last hour but there was this really interesting study in which they took two people who didn't know each other they put him in the same room and said please introduce yourself to the other person talk for 10 minutes and the end of the 10 minutes they put them in different room and said did you lie in the last 10 minutes and almost everybody said no way and then they said well luckily we taped everything you said let's play it back to you sentence by sentence and see whether after each sentence you lied or not and on average people are committed to lie between two and three times in 10 minutes and when you think about it we realize we lie a lot right will I not at the same time how many people here think of yourself in general terms as honest wonderful people not the same group and this is the conundrum I want to talk about how can it beat it on one hand we realize were dishonest on the other hand we think of ourselves as good people so before we go ahead and talk about this honesty I want to say some good things about this honesty there's a story in the Bible that God comes to Sarah and says Sarah you're going to have a son and Sarah laughs and the religious scholars have interpreted her laughter saying how can I have a son when my husband is so old and God said don't worry he'll have a son then it goes to Abraham he said Abraham you're going to have a son in Abraham says did you tell Sarah and God says yes and Abraham said in what did Sarah said and God lies God said Sarah said how could you have a son when she is sold and the religious scholars have wondered how could God lie and their conclusion was that it's okay to lie for peace at home and I've talked to many religious scholars about this and they're basically saying look there are many human values honesty is one of them but not all human values are compatible all the time and what do you do with human values collide does honesty win all the time no peace at home sometimes should win this is why we don't teach our kids for example that's the correct answer to the question honey how do I look in that dress is always the truth right we realize that we want some kind of social lubricant in terms of people not telling us the perfect honest all the time I mean how many of you would want to be married to somebody who always told the truth not that appealing so so we recognize this we recognize that some dishonesty is important social mechanism we teach our kids you know to be polite not to say some things and so on and then of course people become professionals any professional life things are different you might want your significant other to care about your emotion you don't want your accountant to care about your emotions right in the professional life we do want people to behave differently but we learn our lessons about how to behave in life in the social realm and then we are somehow expected to do it differently in that other realm so I mostly want today to tell you about experiments we've done on how people cheat and when they cheat more and when they cheat less but before I do that I want to tell you a couple of stories about big cheaters that I have met there so in addition to doing lab experiments on cheating I also try to interview and have discussions with people who committed big crimes accounting fraud insider trading doping in sports all kind of thing I just won't tell you about a couple of those so one of the first guys I talked to his name is Sam antar and Sam was brought up in a family that had these retail chain of electronics they were selling VCRs and radios and TV stuff like that and when he was 12 he was brought to work for his cousin Eddie his cousin Eddie was running this chain of stores the chain was called crazy Eddie's this was in New York and New Jersey some of you might know about them anyway at age 12 he starts to work for the family business and he learns about the three rules of commerce the first rule of Commerce is that every time they put an ad in the paper they put it for something really cheap but when people come into the store they try to divert them to buy something else something that has higher margins for them and they have a very systematic procedure for that they approach by three different salespeople everybody telling them what a crappy deal that particular thing was and they get them to switch to something else the second rule of Commerce is that it's their money and it's not the government's money no need to pay taxes and they try to keep everything in cash no receipts nothing in the bank and the third rule is that every winter they take all the merchandise they couldn't get rid of they put in this corner of the warehouse they pretend the pipes above it broke they take a hose they wet the merchandise and they submit an insurance claim the insurance pays them sometimes they let them keep the merchandise for a very small fee in which case this switch insurance company in which the same merchandise again the next year anyway he grows up in this environment and he when he gets to be 18 he goes to college and what do you think he goes to study and he guesses come on interesting accounting accounting okay he goes to study accounting and after the second year of accounting school he comes back to the family and he says we have been doing things the wrong way he says we have been skimming we've been taking them out of money not paying taxes that's called skimming we have been skimming this is that is not right he said if you really want to get wealthy we need to have an IPO now you can dump stock and get some real money you know what what is this skimming thing so he said ok now to have a successful IPO we want to show an increase in revenues now how do companies show increasing revenues for most companies you work harder you work harder you sell more you show an increase in revenue the aunt our family has another approach which is they cheat less every year so they have a four year plan in which every year they cheat by 25% less until on the fourth year they don't cheat at all they show an increased amount in revenue they have a very successful IPO over the next year they dump a hundred million dollars worth of stocks okay up to this point in the discussion with Sam the guy seems like the poster child for the Chicago School of Economics the guy has no morals he doesn't care it's all about money he doesn't care about customers government nothing it's just about maximizing money and then I asked him and how did the family fall I mean most of the people ended up in jail and here is where the picture turns around now he doesn't look so rational all of a sudden so Eddie Eddie his cousin had the wife called Debbie and behind her back everybody called her Debbie one you see what this is going he also had the mistress also called Debbie and everybody called her Debbie - anyway the aunt her family was a hierarchical family and Eddie's father was at the head of that family and as Eddie sold a hundred million dollar worth of stocks people stopped going to his father for advice his father used to hold court people would come to listen to him and pay respect all of a sudden everybody goes toward the hundred million dollar went and his father lost control he tries to get control back but he can't fight this amount of money anyway one New Year Eve he called Debbie 1 and gives her the address for Debbie to his apartment and she goes to her apartment and Sam said that this is called in a family the New Year Massacre nobody died anyway this is the first point in our three-hour discussion by now that Sam's looks morally disgusted he looks at me and he says there are some things you don't do there are some lines you don't cross you don't tell a wife about her husband's mistress everything else was fine customers insurance company taxes this was a moral violation and in fact it was not such just a moral violation for him it was a moral violation of the whole family because the family really got split over this half was with Eddie's father half was offended together with Eddie and each of the sides gave the FBI information about the other half which eventually got to their demise and and Sam said that without that he don't think they would have ever been caught but that aspect of violation was so offensive to them that they basically gave the other half of the family up just for that now there's lots of question that we can ask about something like Sam we can say what can we expect for somebody who at age 12 gets into a family like this and do we can we expect him to develop a a moral fiber but we can also ask yourself whether we're all a little bit like Sam and here's the thing in the first part of the discussion with Sam it seemed he has no morals but that was not true the guy was deeply moral but only about a very small subset of areas in life within the family his word or his word his handshake was his handshake his promise was his promise and you don't tell the wife about her husband's mistress the rest of the world he didn't care about right and we can think about whether we have the same kind of things where we take some aspects of life maybe not as many as Sam and we just don't care about them so for example how many of you have illegally download material on your computers come on honesty I guess some of you have not are you noted you haven't figured out how to do it yet and and from all the people who have illegal dollar material no computer how many of you would you feel guilty if the local newspaper tomorrow's had an announcement that said that they found out that you had some illegal download music on your computer would you be embarrassed about this almost nobody does now this is kind of like Sam's world right you've basically taken one behavior which is illegal download and said this is not a moral question right now Sam has done it more but I think we all do it to some to some degree another story I want to tell you is a story about actually a policeman this was a policeman who was in charge of a murder investigation in Washington DC around Washington DC and it was about two years after this a murder happened that he got a lead to a suspect and he caught her and he brought her in for interrogation and after about two days she admitted that she did it but even with her admittance the district attorney decided did not have enough evidence for that and decided to let her go and this guy was really oh obsessed by that because he was a woman who had a minute and they let her go anyway four years later he is already working in a different County but he has a weekend off he drives back to the old County he takes all the tapes and material he decide he's going to look at everything very carefully to prove the QI they have a case and to put her in jail for life and he looks at the evidence and he realizes that when they murder happened she was eight months pregnant and there was no way that she was the one who did it and he looks back because the evidence of the egg the witness expert said there was a very small skinny woman so there was no chance it was her it was clear it was not her he looks back at the evidence and he realizes that he got her to confess something she didn't do and he realizes how the whole procedures for policemen for interrogation in the US are about getting people to say to have false confession so he basically say you're guilty I know that now if you don't cooperate you get the chair but if you cooperate you might just get thirty years in jail I said and you like Chinese food right instead yes he said you actually check in Lauren strips I don't know maybe also you like shrimp and we do some shrimp in the evidence I mean so the whole thing was about leading her leading her alone along to admit something she didn't do and he basically said that at the moment he believed she was doing it and he was not evil but he basically got her to admit something she didn't do out of a desire to get out the truth he kind of helped the truth come out not the right truth but he's a version of the truth and he also said that he had tremendous pressure to basically find somebody guilty and he said he didn't care if they were guilty at the end he just had to get her off that murder investigation of his books so they basically have a counting of how many cases they have that are unsolved and they basically weigh on them and people it's the statistic and if they can take a case and basically clear it up or for some things a bit anyway I've talked to many crooks and all kinds of people but now I want to go back and I want to talk about little cheaters and all of us and so the standard view of dishonesty is the cost-benefit analysis you walk by a grocery store and you say how much money is in the till what's the chance they'll catch me how much time will I get in prison and then you say is this worth it or not that's the standard approach that people do the cost-benefit calculation that's what's driving policy and all kinds of other decisions but is that theory correct do people actually think about crime in cost-benefit analysis so first of all we can ask the introspection question when was the last time you yourself thought about the cost-benefit analysis you know you must have gone to some friend's home for house for dinner that maybe didn't value his guests and you went to the bathroom and they had these really new nice hand towels and your towels are little old and you know you had you had your bag and you could have taken and nobody would have caught you and nobody would have done anything have you thought about this how many time have you been to a restaurant it had nicer cutlery than you have at home but the reality is that we have lots of opportunities to take stuff and nobody would ever find out and we would not get punished but we don't think about it by the way next time you go to a restaurant now you'll think about it so so the introspection is that we don't actually think a lot in terms of cost-benefit analysis also in the u.s. we have the death penalty there are some states that have the death penalty and some states that don't and when you look at the a crime rate for rates that for crimes it could get the death penalty you don't see any difference between the states that have the death penalty and States adult and if people did the cost-benefit analysis it would decrease crime rate to some degree people say oh yeah but death penalty not worth it turns out it has no effect on death and the crime rate um and then we can think about the experiments so first of all how do we measure this honesty we measure this honesty in a very simple way we take a sheet of paper with twenty simple math problems and we tell people I'll give you $1 per question you solve correctly you have five minutes I would pass if you are in the experiment I would pass the sheets of paper around I would say Ready Set turn the sheet over you would turn the sheet over and you would start to work as fast as you can at the end of the five minutes I would say please stop put your pencil down and count how many questions you got correctly now that you know how many questions you got correctly and also how much money you deserve take the sheet of paper go to the back of the room and shred it and once you did that come back and tell me how many questions you got correctly I'll pay you accordingly people do this they come in the basic experiment they say they solve six problems I pay them six dollars they go home what the people in the experiment don't know is that we played with the shredder talking talking about cheating and the shredder only shred the size of the page so when you put it in it vibrates it shakes it makes the right noise but the main body of the page remains intact and we can find out how many questions people really solve correctly and what do we find on average people solve for and report to be solving six and by the way where is this difference coming from is it coming from some big cheaters who cheat a lot and shift the mean no it comes from a ton of little cheaters we've run this experiment so far on a little bit more than 40,000 people I'll tell you about some of those experiments many many people and we've had about 20 people who cheated a lot and together they stole about 300 dollars from us we also had almost 30,000 people which is it a little bit each but together they stole about sixty thousand dollars from us and I actually think this is not a bad analogy for the economy you know sometimes you have crooks that's true but lots of time you have people who just cheat a little bit but because there are many of them and they do it every day it accumulates to be a very very high amount okay so now we have a measure to how how to measure the amount that people cheat so we played with economic model what happens when we pay people more money per question you would think people would cheat more they don't lots of people cheat just a little bit but as the amount of money per question increases people don't cheat more what about the probability of being caught again doesn't matter so what's happening on one hand people cheat we can tell people are angels on the other hand people don't respond to the economic incentive so what we thought is happening is that many people are trying to balance psychology and economics maybe on one hand we want to look in the mirror and feel good about herself we want to feel that we're good honest wonderful people have some my ego utility from that right kind of some personal happiness from our view of our own self on the other hand maybe we want to benefit from cheating we want to now you could say you can't have both you're either honest or you're a cheater well maybe you can maybe as long as we cheat just a little bit we can benefit from cheating and still think of ourselves as good people right and so somebody told me that in Ireland it's kind of okay to underreport your income by 5% that's kind of acceptable you know seven seems too much five is perfectly acceptable not sure it's true but you know that's what you said em I think the same thing goes with the speed limit right you can drive a little bit over this edge a lot is terrible but a little bit it's okay just there's a range in which you think it's still okay it's not but we think it's okay so this idea is that it's all about rationalization it's about how we can both cheat a little bit and think of ourselves as dishonest having the cake and keeping the cake and eating it too but we can only do a little bit of that so let's think together if it's all about rationalization if it's all about weaving a tail telling a story trying to justify what this level of dishonesty is actually okay what kind of things would help us rationalize higher level of dishonesty what kind of things would increase the level of dishonesty that we're capable of doing because they would help us rationalize why this is actually okay give me some suggestions everybody else is doing it right that's a wonderful rationalization so let me tell you an experiment we did on that so in one experiment we had the room full of people and we did the same task I told you about before with two changes the first change was we prepaid people we gave people an envelope with all the money as if they solved all the problems and we asked them at the end to give us back the money they did not make that was the first change the second change was that we hired an acting student and we asked the acting student to sit in the front row and 30 seconds into the experiment to raise their hand and say excuse me I solved everything what do I do now imagine you're in the experiment you're still working on problem number one there is no question that this guy is cheating but the experiment said you solved everything you're free to go and you see this person standing taking the envelope with all the money leaving nothing behind and walking out of the room what would you do lots more people cheat but there are two interpretations here one is about the cost-benefit analysis one interpretation is they look you just prove to me that in this experiment I can't even get away with it nobody's chasing me there's no downside consequences the other possibility is that it's not about being chased or being have a punishment it's about being socially acceptable so how do we separate those we gave the student a different sweatshirt and here's the story we ran this experiment at university called Carnegie Mellon in Pittsburgh everybody was a Carnegie Mellon student and that acting student was wearing a Carnegie Mellon outfit in the second version of the experiment he was wearing University of Pittsburgh sweatshirt and I'm not sure how it is is the rivalry between universities here right so so I mean think about something like football clubs soccer clubs right I mean you could say that somebody if you prefer a particular team I don't know what what they are but you know a and B we'll call them and if somebody is wearing now what happens if you're a Carnegie Mellon student you have a rivalry with University of Pittsburgh students and all of a sudden you see University of Pittsburgh student cheating an egregious way I know I'll give you a local example you're sitting here everybody's Irish and there's a British guy who's cheating in a big way you still learn that in this world you can cheat and get away with it but it's the British or doing it would that change your moral considerations well now people treat much less people say oh cheating is possible but it's other people we don't like so much those are the people cheating let me do less I'll give it another experiment we did on this I own the vending machine people put coins and get candy and at some point I rigged the vending machine on the outside it says 75 cents but on the inside it was set to have prices zero so people would put the coins they would press the button the candy will come and the money would come back what do you think and we sat on the side and watched first of all first of all there was a big phone number to call in case something is wrong how many people do you think called zero very right okay now what do you think what would you think how people behave what what was the most common behavior sorry people very happy how many candies did people take lot the majority took either three or four nobody took five nobody took five and I think it's because people kind of remember the case in which the vending machine took their money and they kind of just evening out the vending Karma that machine must have been a relative of this one who Christopher and the other thing that people did was to call friends to do the same thing and again you can see why right because officers IFIF they're doing it as well it's kind of more okay to do so everybody else is doing it is very powerful very powerful thing what else what else would change rationalization you think the government is also doing it so so it doesn't have to be the government but there's an evil entity who is who is doing that right so you're recovering back so we did this study we went in Boston to some coffee shops and we said to people hey would you be willing to do a study for five minutes for five dollars they said yes and then we explained to them what the task was that it was a very boring task they had to circle letters on a piece of paper for five minutes and at the end of the five minutes we came back and we said thank you very much here's your five dollars please count int and sign a receipt for five dollars but we actually gave them nine and we left and we said leave the receipt here how many Bostonians do you think told us we overpaid them come on these a of your relatives slightly more than 50% gave us the money back I'm sure in Ireland will be much higher in another version of the experiment when the research assistant explained to them what the task is here is what you do you circle he stopped in the middle he pretended somebody called him on his cell phone he picked up his cellphone and he pretended to be talking to John for 12 seconds about meeting tonight for pizza hey John what's up pizza my place 12 seconds putting the phone back going right back explain to them what to do now when he gave the nine dollars how many people returned the money now only 14% what happened was that people were pissed not very pissed just a little pissed right you only 12 seconds but that was enough to allow them to justify he did something bad to me I'm going to to revenge back now here's the sad thing sometimes he told people it was his money in his experiment which meant that he was the offender and if you revenged against him the offender would suffer sometimes he said I'm looking for some professors it's his money at his research so now if you would take revenge it wouldn't be just because it's you would take revenge against me the professor when Daniel the the student who did it was the one who offended him people don't care they get offended it allows them to justify it and they take it on whoever that they see next so but the feeling of life has been bad to me my turn is very right and we also showed in in a recent paper when we look at the broad range of social economic status people who are relatively poor - people who are relatively wealthy we don't find big differences in this honesty but when we find people who believed that their position in society is unjust right and think about like saying something like you should have all been wealthier if your government was more responsible you really deserve that you didn't deserve this government you actually didn't choose for them I mean I basically can explain to you all kind of thing that you should have been better that condition actually allow people to justify a higher level of cheating where I so amount of money doesn't explain it but the justification of where you are compared you think you should have been that one does matter what else do you think metaphor justification practice what do you mean by practice as you do it much we'll come back to this very good religion also let's come back to it in a second it doesn't hurt anybody yeah it doesn't hurt anybody is very very powerful so in the last you use every time I've gone to a restaurant actually I haven't done it here but every time I go to restaurant I asked the waiter I said look is there a way to eat here in escape without paying and I usually have you try this now and I usually tell them look I'm not really going to try not interested sometimes they ask me for my credit card upfront usually usually they give me really good advice there's a back alley wait for a big party to come in they have suggestions of how to do it and then I said how often does it happen and they say almost never say sometimes people who pay on credit card forget if they paid or not paid by sometimes even if they left they call back and said I forgot to pay here's my credit card almost never happened and then you look at something like illegal downloads what's the difference now the truth is in the u.s. illegal download is more dangerous than not paying in a restaurant if you don't pay in a restaurant they catch you you can always say I forgot if you download stuff on an illegal on your computer legally and they catch you you can't say I forgot right and and you know that the industry is going to try and make an example of you so here are two activities one is dangerous one is not one is people but the people are engaging in a dangerous one and not another one because when somebody serves us in a restaurant we see the marginal cost we see somebody's time we see their salad whatever it is we know that we consume something and we would feel like crooks if we did it on the internet we can basically say nobody is hurting right there's all kinds of stories about this so this idea is that as things become more removed we don't see who is paying the cost and because of that we allow ourselves to rationalize to a higher degree and B be less honest now I'll tell you a little joke about this a little Johnny comes home from school with the note from the teacher that said that little Johnny stole a pencil from the kid who's sitting next to him and Johnny's father is just furious and said Johnny I'm embarrassed and humiliated you never never never steal a pencil from the kid who's sitting next to you just unheard of you're grounded for two weeks and just wait until your mother comes and besides Johnny says you know very well that if you need a pencil all you need to do is to mention it you could just say something you can ask and I can bring you dozens of pencils from the office by the way how many people have office supplies at home and the people in the front row raising your hand if you put in the back of kind of hiding a little bit in the darkness em now this is the idea that really when things become more distance like a pencil you you you can think about it differently right if you went to the store if you went to the office and they had a petty cash box and you took 50 cents you would feel like a crook if you took a pencil not so much if you took 50 Cent's and you went to buy a pencil you would still feel like a crook but the moment it's a pencil you can tell yourself all kinds of stories the workplace has it for us it's actually beneficial for them I'll take the pencil I'll work harder at home right I'll print you know whatever you anyway so you can tell a lot of stories about this so we did two experiments on this one was with golf anybody who plays golf whew okay so we we asked at 12,000 golf players questions about how they cheat and don't cheat in golf and so one question was we said imagine that the ball fell on the rough not a good place and you really really wished it was four inches to the left would you pick it up and move it four inches and people said I can't imagine doing something like this they said by the fact that you're asking me this question it shows me that you understand nothing about the game you understand nothing about golf what it means the people who are playing it okay never never know nobody does it okay fine what about kicking the ball a little bit that's no problem we do it all the time what about hitting it with the club that's even easier the easiest by the way is the easiest one is if you look up and then you click a little bit that's the easiest the easiest first and I think you can all kind of feel the intuition right if you picked it up and move it it will be kind of hard to imagine the non-dual it's so deliberative kicking it a little because our God still plays a little part in this it could have been here as well my leg could have been here before I did all kinds of questions um in the other study I describes you with the simple math problems we did it in the following way in the regular condition people got the sheets shredded it came to the experiment that said I solved such-and-such number of problems pay me in another version of the experiment they came after shredding it and they said I solved X problems give me X tokens so when they looked into somebody in the eyes they did not live for money the delight lights for tokens now these people were paid in tokens took the tokens move twelve feet to the side and change them for money so the lying was for tokens but he became money very quickly what happened our participants doubled their cheating this by the way for me is one of the most worrisome experiment we've created why because if you think about these tokens there were one step removed from money for just a few seconds but as a society we're moving away from monetary presentation to more abstract representation cash credit stock stock options derivative dealing with people directly dealing with people over great distances could it be that as we have less tangible direct connection with the medium of exchange and with people we feel more ok being dishonest and still thinking of ourselves as honest people and I think the answer is probably yes which is why the internet is such an interesting but also dangerous Avenue from a moral perspective ok so all this was about getting people to rationalize more and get people to cheat more how could we get people to cheat less so of course we could do the opposite of what we've talked about so far right taking distances away and so on but what else could we do what else could we do to get people to cheat less observation yes actually it's really interesting because you don't need actual observation there was a study in England in which they had this kitchen in which people could take tea and coffee and they had an honor system in which they were asked to put a specific amount of money every time they took it and above this little tea coffee corner they had a big picture of flowers and sometimes they replaced it with pictures of eyes people left three times more money when there were eyes now these were professor at the University of Newcastle they are not idiots they don't think Oh these are somebodies really looking they know it's a picture they know it's a picture and it's not so much about the act of looking it's the act of self-reflection so office and you think about yourself so and I'll tell you I'll tell you a little joke on this I'll give you the Jewish version of the joke you can you can tell yourself a different one a guy goes to the rabbi and he said rabbi you wouldn't believe what happened but somebody stole my bicycle from synagogue and the rabbi is shocked sixteen your bicycle from synagogue this is terrible it I'll tell you what you do come to synagogue next time and sit in the front row and as we go over the Ten Commandments turn around and look at everybody in the eyes and when we get to doubt shall not steal see who can look you straight you'll know that's your thief the guys were excited the rabbi is excited it comes to synagogue sit in the front row turns around during the ten commandments the rabbi is very anxious he waits for him at the end of services he said so did it work the guy said like magic he said like a charm he says the moment the moment we got to - al not commit adultery I remember do I left my bike so you're probably wondering what's the experiment so this connects to your your point about religion we went to UCLA California and we asked people to try and recall the Ten Commandments by the way how many of them do you think recalled all Ten Commandments zero and quite a few of them invented new interesting anyway after they tried to recall the Ten Commandments we gave them the same task we tempted them to be dishonest nobody was dishonest it wasn't as if the more religious people then one who remembered more Commandments didn't cheat and their people who didn't know any of the commandments she didn't know nobody cheat across the board so yeah we took it to the next step and we asked a group of self declared atheist to swore on the Bible and then we gave them a chance to cheat even these guys no cheating whatsoever so it's not so much about God heaven hell it's about really thinking about your own moral structure which the eyes can do the the Bible can do all kinds of things like that so the next thing we did was we said okay let's think about it it's all about getting people to think in advance in the moral framework so we went to the University and in the University in the u.s. some universities have what's called an honor code the universities here have an honor code no so so another code basically says here is here is what a cheating entails and you'll get expelled for it um and we did this study in which people sign the honor code I understand that this short study falls under the honor code we did it at MIT and ADL people sign it did the test no cheating whatsoever and no cheating whatsoever despite the fact that neither MIT no Yale have an honor code so these are two University don't have an honor code nevertheless it worked then we went to Princeton Princeton is University is a very strong honor code they take the freshmen first year students and they teach them all about the honor code for a week discussion lectures how important is their cappella group has a song about the honor code it's an awful song but still so we waited two weeks after this crash course on morality and we tested them with signing in without signing do you think there were any different than MIT and Yale students no now the sad news is that one week-long crash course on morality doesn't seem to have any long-term effect the good news is that reminding people about their own moral obligations or standards just before being tempted to being dishonest has a big effect on them so with this in mind we didn't study with the big insurance company this is an insurance company it sends people a letter asking them how many miles they drove last year now if you got one of those letters do you want to increase the number or decrease it you want to decrease it because your premium would get lower so they gave us twenty thousand letters we took ten thousand kept them as it is how many miles you drive drove sign below the other ten thousand we ask people to sign first and then write the number what happened the people who signed first reported to be driving 2,400 miles more about four thousand kilometers more than the people who signed later so it means that signing evokes people's moral consideration and then they become more honest and by the way it's kind of curious because in some sense we all know it right if you think about the court system in the court system you you go to the court and you swear before you give the testimony right nobody would think it would make sense to finish somebody's testimony in court and in the end said do you swear it's over by that right but somehow when we do forms we forgot about this when we do forms you're right you're right you're right you're right at the end you sign it's over by that time we really need to think about it in a different in a different way okay so what I've told you up to now is really about conflicts of interest it's really about the fact that if life gives you pressure to see world in a certain way you'll be able to do it and you know this is something that every sports fan knows right if you go to a sports event of your team against the most arts rivalry opponent and the referee calls the call against your team you can't help but think the referees evil vicious stupid blind something like that you want to see live from one perspective and you see it from that perspective but let's think back for the financial crisis for a second imagine I took any of you and I put you in wall street in 2004 2005 and I gave you a five million dollar yearly bonus if you could only see mortgage-backed security as a good product don't you think you would be able to see them as better than they are and I'm not saying would you lie would you think yourself oh these are terrible let me just tell somebody else that they are great wouldn't you actually convince yourself that they are better than they are and what if there were multiple steps removed for money and what if everybody else was doing it and what if you had a theory to rationalize all of that right now you can see why you can create a financial system with terrible incentives and no matter who you put there you'll have bad intent you have bad outcome so you know we have a tendency to look at the financial crisis and to point fingers and some particular individual say these are just bad people and this is actually quite dangerous because if you believe that it means that as long as you replace those people with other people everything will be solved I don't think that's right I think that as long as we have this unbelievably biased incentive structure we will have bad outcomes even if we put Mother Teresa there you know for her it might take a few more months but but bad incentives are bad or bad for everyone I won't tell you one personal story on on conflicts of interest so so I was badly I was badly burned I spent a long time in hospital and about four years after I left Hospital I went back for a checkup and the head of the burned apartment catches me it says then I have a new fantastic treatment for you come with me to my office I go to his office and he says that when I shave on the left side of my face I have stubble little black dots the right side of my face is burned so there's no no hair there's no stubble and what is he proposing to do he's going to tattoo the right side of my face to equal the left side of my face and he says go home tomorrow morning wake up shave and come back and I'll fix you and make you symmetrical I know I Drive home and I think to myself what kind of shave should I aim for the symmetry like the morning shave the afternoon shadow how what what would maximize the hours of symmetry I go to his office and I say you know I'm not sure I want this can you show me some pictures of people you've done it before I said yes we've done into two people and he shows me their picture he couldn't show me the whole face he just shows me pictures of their cheeks and you know looks very nice cheeks with little black dots perfectly as promised and then I said what happens when I grow older and my hair becomes white it says don't worry we can laser it when the time comes I said you know I don't think it's for me I don't think it to me and then he says then what's wrong with you he says do you enjoy being non-symmetrical do you get some deprived pleasure from looking different he said do women feel sorry for you and you get some other anyway I was really kind of shocked by this pressure so I left his office and I went to his deputy I said what's going on so his deputy said well you know we had it on two people already and we need the third for an academic paper and I'm kind of ideal half the face burn half not like really good for the paper now here's the thing I lost half an eyebrow among many other things and this guy wanted to fix my half an eyebrow and the truth is I couldn't care less so he wanted to operate me for this half an eyebrow I said no so then he said what if you go to another operation and during that time I'll also do the eyebrows it's fine as long as it's not a special operation for that I had about 30 I didn't want more if you do it at the same time fine so I had a very complex operation in my hand so he came at the same time but the hands team took too much space so the guy had to wait 8 hours and then he started at about 8 p.m. to do my eyebrow and you can't just take pieces of hair and Transplant them it doesn't doesn't work so he took a Doppler machine he tracked blood vessels all over my head he found the blood vessel leading up to a piece of hair in the blood vessel leading down he isolated them redirected them and gave me half an eyebrow that grows like just not my hair the guy was an amazing physician he spent basic the whole night giving me half an eyebrow something I didn't care about but he did and and I can't think of him in anything but the most kind and wonderful terms he died about 10 years ago sadly but I can't think of him in anything but as it is a wonderful caring for he was my physician for three years but nevertheless at that moment he wanted that paper out and at that moment he couldn't see beyond his conflicts of interest right and that was a huge huge Parliament and that for me is a is a good indication that you don't have to be a bad person to have conflicts of interest you can be a fantastic kind wonderful human being conflicts of interest are a separate issue and we should try to think about how we eradicate them for politics and from our own personal lives by the way here's a statistic in the u.s. when you go to a dentist what and they find the cavity in an x-ray so that it's not a big poke but a it an x-ray they show a cavity what's the chances that the second dentist will find the same cavity in the same tooth it's about 50% in the u.s. I'm sure here it's much higher but but you know you pay dentists to find cavities and they find cavities not in the same place but they find them conflicts of interest are everyone willing to think about this okay there are two more things I want to I want to mention ah the first thing is somebody mentioned here practice like what happens to cheating over time so we also did experiments in which we gave people hundreds of chances to cheat over time and we basically found this following pattern people cheat a little bit like a little bit above random kind of trying to balance feeling good cheating a little bit feeling good and then at some point people switch and start cheating a hundred percent of the time now different people switch at different points but lots of people have this switch pattern moving from cheating over to cheating out all of a sudden okay so when we saw this pattern we decided to call it the what the hell effect right and the idea is that you think on your surface in a categorical way you're either good or bad now you could be 92 percent good and you're still finger resolve is good but if you 75 percent code is it really worthwhile to move to 82 not really you might as well go all the way and enjoy it so so we thought if there's something like the what the hell effect why would people ever start behaving well I mean in a religious sense if you think you're going to hell already wouldn't you just enjoy it until you go so we I mean no offense to the Catholics and most of your Catholics but we thought about the Catholic confession right how many people here are Catholic just as a few how many people grew up Catholic this is really different okay and so this is no offense to the Catholics to the audience but we went to talk to real Catholics we went to Italy we went to top we went to talk to Italian priests and we said please explain to us the Catholic confession from an economics perspective if you can sing and get absolved won't you sing more but if you're trying to minimize time in purgatory when you cheat all the way to confession it's kind of the optimal way but but the priest said no and we came up with some theories we said maybe you think to yourself and say oh you know I might have this crime and I might get caught and I might get punished but for sure I'll have to talk to the priest and this will be unpleasant I'll have to do Hail Marys the mother thing not worth it like ex-ante we find no evidence for this another model is like a Ten Commandment experiment you come out of confession you feel good and wonderful and pure and you don't want to spoil that yes we have some evidence for that for for a few hours after confession people behave better but they think that interest is the most what they want a hell effect so we brought people back to the lab and they cheat the lab and they start getting a lot and then we stop them and we say hey we have a sheet of paper here if you're interested you can write some things you've done bad recently and people wrote all kinds of things and shredded it and we really didn't want to see what they wrote they straight for real and then we said then here's another sheet of paper if you want to ask forgiveness from whatever deity you believe in please go ahead and people did that and after doing those of two things cheating drops down to the pre what the hell ever right which suggests that religion has some kind of interesting elements in terms of regulating behavior and confession and the notion of opening new pages seem to be really quite interesting now we're doing a study now and we comparing the Catholic confession to the Jewish Day of Atonement and if you think about it those two religions came up with different mechanisms once in Judaism it's once a year right maybe not frequent enough and and then in Catholicism because everybody can decide when they want to confess it's not coordinated not everybody is doing it to the same I'm so there's these two very different approaches we're going to try and figure out if we can say who has it who has the right mechanism and you can also think about the Truth and Reconciliation act is a kind of a confession I think of South Africa how does a country move from an apartheid period to a post apartheid period there's no smooth transition but they stood up and they say hear all the awful things we've done and we're going to start fresh and it doesn't erase apartheid but it does create a point of starting starting something new and then the last thing I want to tell you is about cultural differences and so and just as a anybody here grew up outside of Ireland here okay raise your hands keep your hands up any of you think that people in your country of origin cheat less than the Irish you in the map you think you're away from Britain anybody else okay I can't see I'm sorry anybody's so and so I grew up in Israel so the first country I went to test was Israel so how many of you think that Israel is treat modern Americans on our test raise your hand it's a very politically correct group I think okay I will show that Israel would cheat more they don't Franchesca genome Italian collaborators had come to Italy will show you the Italian seat just the same hey we tried China we tried Colombia South America we try Germany we just tried Portugal we tried Canada we try the UK that you just the same and we also tried Canada because the Canadians always think they're better than Americans they not and we tried South Africa Oh Turkey we don't find any differences now in some sense this is very puzzling because anybody who's been in other countries have seen cheating feels very different in different countries there's also the transparency international index that shows you that corruption index is very different in different places so how come our results show no cultural difference where we have so much evidence for cultural differences here is what happens our tasks are general and abstract they are detached from any cultural context and because of that they measure the basic human ability to cheat a little bit in rationalize and from that perspective we're all the same this doesn't mean that culture doesn't matter culture does matter it just matters on a domain by domain specific in the same way we talked about sin so culture can take a domain like not paying your taxes and say this is okay our culture can come and say you know not paying for the bus is perfectly fine no downloading illegal software culture doesn't change the backbone of human reasoning what it does it changes how we think about domain per domain in some countries it's perfectly reasonable to pay a policeman a bribe they catch you speeding right that's just how you do business nobody's nobody's embarrassed about this in those in those countries so culture does matter but it matters in domain by domain specific way this is by the way why for example in I talk to lots of people who doped in cycling why it was so prevalent in cycling to dope that nobody thought of it is being bad at the moment in that community they didn't think of it as bad was just the way you cycle you do all kinds of things including taking some people we did find one cultural difference when we do these experiments we do them in one of two ways we either go to universities and we do it because we think that students are basically the same everywhere or we go to bars because we think people in bars and pubs are the same everywhere and when we go to bars we also change the payment system we basically change the payment such that every four questions people answer correctly they get the amount of money equivalent to one glass of beer in that establishment so beer become our international currency right how do you equate different countries we use the beer index and anyway we ran one version of this in Washington DC in a pub where congressional staffers hang out in and we ran an equivalent study in New York City where bankers hang out in and this was the only place we found the cultural difference so who do you think cheats more the bankers or the politicians let's take a vote how many people think it's the politician raise your hand how many people think it's the bankers okay so the people think it's the two-two-one the politicians the bankers were cheating twice as much and but but I wanted sorry not I'm sure not the ayah and but to two points or worthwhile considering one is the cheating was in money which was the domain of bankers modern politicians and also these were congressional staffers which means that there were very junior politicians were lots of room for growth so in I told you a little bit about Catholicism and about a little bit about Judaism and when you seem to be responsive to to cathodic jokes suddenly try this one a guy goes to confession and he says forgive me Father for I have sinned and the father said what have you done my son and he said I'm 70 years old and I just had sex with two 25 year old twins and the priest is is appalled is shocked and he's saying I want you to do to say thousand times Hail Mary and walk around the church a thousand times and give a thousand euros to the church and how long has it been since your last confession the guys that have never been to confession said what you're 70 years old and you never been to confession how can that be so some Jewish so so the priest is saying if you're Jewish what are you doing here why are you telling me so I'm telling everybody

Channel: Kilkenomics

Views: 52,078

Rating: 4.8981614 out of 5

Keywords: Dan Ariely (Author), Behavioral Economics (Field Of Study), Kilkenomics, David McWilliams (Author), Kilkenny, Republic Of Ireland (Country), Comedy, www.kilkenomics.com, Set Theatre, Ado Brett, www.Clickzoom.ie, Finance, Entertainment, Financial Times (Newspaper), Cleere's theatre, Tourism (Interest)

Id: 1Gj4ZXSAVo8

Length: 61min 50sec (3710 seconds)

Published: Fri Nov 13 2015