The (Honest) Truth About Dishonesty

When we estimated the amount of driving that took place over the last year, those who signed the form first appeared to have driven on average 26,100 miles, while those who signed at the end of the form appeared to have driven on average 23,700 miles—a difference of about 2,400 miles. Now, we don’t know how much those who signed at the top really drove, so we don’t know if they were perfectly honest—but we do know that they cheated to a much lesser degree. It is also interesting to note that this magnitude of decreased cheating (which was about 15 percent of the total amount of driving reported) was similar to the percentage of dishonesty we found in our lab experiments.

TOGETHER, THESE EXPERIMENTAL results suggest that although we commonly think about signatures as ways to verify information (and of course signatures can be very useful in fulfilling this purpose), signatures at the top of forms could also act as a moral prophylactic.

COMPANIES ARE ALWAYS RATIONAL!

Many people believe that although individuals might behave irrationally from time to time, large commercial companies that are run by professionals with boards of directors and investors will always operate rationally. I never bought into this sentiment, and the more I interact with companies, the more I find that they are actually far less rational than individuals (and the more I am convinced that anyone who thinks that companies are rational has never attended a corporate board meeting).

What do you think happened after we demonstrated to the insurance company that we could improve honesty in mileage reporting using their forms? Do you think the company was eager to emend their regular practices? They were not! Or do you think anyone asked (maybe begged) us to experiment

Some Lessons

When I ask people how we might reduce crime in society, they usually suggest putting more police on the streets and applying harsher punishments for offenders. When I ask CEOs of companies what they would do to solve the problem of internal theft, fraud, overclaiming on expense reports, and sabotage (when employees do things to hurt their employer with no concrete benefit to themselves), they usually suggest stricter oversight and tough no-tolerance policies. And when governments try to decrease corruption or create regulations for more honest behavior, they often push for transparency (also known as “sunshine policies”) as a cure for society’s ills. Of course, there is little evidence that any of these solutions work.

By contrast, the experiments described here show that doing something as simple as recalling moral standards at the time of temptation can work wonders to decrease dishonest behavior and potentially prevent it altogether. This approach works even if those specific moral codes aren’t a part of our personal belief system. In fact, it’s clear that moral reminders make it relatively easy to get people to be more honest—at least for a short while. If your accountant were to ask you to sign an honor code a moment before filing your taxes or if your insurance agent made you swear that you were telling the whole truth about that water-damaged furniture, chances are that tax evasion and insurance fraud would be less common.^*

What are we to make of all this? First, we need to recognize that dishonesty is largely driven by a person’s fudge factor and not by the SMORC. The fudge factor suggests that if we want to take a bite out of crime, we need to find a way to change the way in which we are able to rationalize our actions. When our ability to rationalize our selfish desires increases, so does our fudge factor, making us more comfortable with our own misbehavior and cheating. The other side is true as well; when our ability to rationalize our actions is reduced, our fudge factor shrinks, making us less comfortable with misbehaving and cheating. When you consider the range of undesirable behaviors in the world from this stand-point—from banking practices to backdating stock options, from defaulting on loans and mortgages to cheating on taxes—there’s a lot more to honesty and dishonesty than rational calculations.