### TL;DR The standard economics perspective considers only one ...
Dan Ariely - (Dis)Honesty [![](https://i.imgur.com/KbEgb4R.jpg)]...
Dan Ariely is a professor of Psychology and Behavioral Economics at...
From the Accenture Survey: > ***"one-fourth (24 percent) said th...
A theory that only takes into account external benefits states that...
#### Ultimatum Game: There are two players involved in an ultima...
When people lie they care about more than simply maximizing their o...
> *** "socialization is a key to the development of internalized re...
According to Freud the superego incorporates the values and morals ...
The internal reward mechanism that curbs dishonest behavior can be ...
**Self-deception** represents a biased, self-serving information fl...
**There are four general drivers of dishonesty: ** 1. lower extern...
Proposed solution to curbing dishonest behavior for different scena...
Vol. 25 (1) Spring 2006, 1–000
© 2006, American Marketing Association
ISSN: 0743-9156 (print), 1547-7207 (electronic)
1
Dishonesty in Everyday Life and Its Policy
Implications
Nina Mazar and Dan Ariely
D
ishonest acts are all too prevalent in day-to-day life. This article examines some possible
psychological causes for dishonesty that go beyond the standard economic considerations of
probability and value of external payoffs. The authors propose a general model of dishonest behavior
t
hat includes internal psychological reward mechanisms for honesty and dishonesty, and they discuss
the implications of this model in terms of curbing dishonesty.
Nina Mazar is a postdoctoral associate (e-mail: ninam@mit.edu), and
Dan Ariely is Luis Alvarez Renta Professor of Management Science
(e-mail: ariely@mit.edu), Sloan School of Management, Massachu-
setts Institute of Technology.
C
ompanies such as Enron, Tyco, WorldCom, and Adel-
phia are associated with some of the biggest financial
scandals in U.S. corporate history since the Great
D
epression. These corporations exemplify how the boom
years of the 1990s have been accompanied by a serious ero-
sion in business principles and, especially, ethics in the
accounting and auditing profession. The Brookings Institu-
tion estimated that the Enron and WorldCom scandals alone
would cost the U.S. economy approximately $37–$42 bil-
lion of gross domestic product in the first year alone (Gra-
ham, Litan, and Sukhtankar 2002). For comparison, this is
approximately the amount that the U.S. federal government
spends each year on homeland security (De Rugy 2005).
In addition to corporate scandals, almost all companies
present their employees with the conflict between selfishly
pursuing their own financial goals and being honest. Bro-
kerage companies represent perhaps the most clear exam-
ples of such companies. Brokers are rewarded on the basis
of the volume or profitability of the business they transact;
such a system provides ample opportunities for conflicts of
interest. Although brokers are supposed to act in their
clients’ best interests, the commissions system can tempt
them to choose personal gains over their clients’ interests;
for example, brokers may experience pressure to buy and
sell when they stand to gain larger commissions, they may
recommend stocks or funds that are suitable for their inter-
ests but not for the client’s interest, they may delay the
trades ordered by their clients to invest their own money
first, or they may misuse knowledge of a large impending
order (Davis 2004; McDonald 2002).
Companies and their employees are not alone in the play-
ground of dishonesty (Murphy and Laczniak 1981). In addi-
tion to corporate scandals and individuals within companies
who behave dishonestly, consumers also behave in ways
that are ethically questionable (Bagozzi 1995; Vitell 2003).
For example, in a recent survey conducted by Accenture
(2003) on insurance fraud, approximately 25% of U.S.
adults approved of overstating the value of claims to insur-
ance companies, and more than 10% indicated that submit-
ting insurance claims for items that were not lost or dam-
aged or for treatments that were not provided is acceptable.
According to Accenture’s press release, the Insurance Ser-
vices Office estimates that the cost of fraud in the U.S. prop-
erty and casualty industry is approximately 10% of total
claims payments, or $24 billion annually. Similar incidents
of consumer fraud can be found in the retail industry.
According to the National Retail Federation (Speights and
Hilinski 2005), “wardrobing,” or the return of used clothing,
was estimated to cost approximately $16 billion in the
United States in 2002.
Another domain that is central to consumers’ unethical
behavior involves intellectual property theft, such as music,
film, and software piracy. Although the standards and
morals linked to such behaviors are not yet well established,
it is clear that the economic implications of these endeavors
are large. As the Office of the United States Trade Repre-
sentative estimated, intellectual property theft worldwide
costs U.S. companies at least $250 billion a year, a stagger
-
ing statistic considering that the copyright industries make
up approximately 6% of the U.S. gross domestic product
($626 billion) and employ 4% of the U.S. workforce (U.S.
2 Dishonesty in Everyday Life and Its Policy Implications
Department of Justice 2004). Perhaps the largest contribu-
tion to consumer dishonesty comes from tax deception,
including issues such as omitting income and inflating
d
eductions. A recent Internal Revenue Service (IRS) study
based on special audits of randomly selected individual
income tax returns for the 2001 tax year estimates that the
“tax gap”—the difference between what the IRS estimates
taxpayers should pay and what they actually pay—is some-
where between $312 billion and $353 billion annually.
These numbers translate into an overall noncompliance rate
of 15% to 16.6% (Herman 2005).
These examples represent only a subset of everyday
deception by companies, individuals within companies, and
individual consumers. Together, they contribute to the U.S.
economy losing hundreds of millions of dollars in tax rev-
enues, wages, and investment dollars, as well as hundreds of
thousands of jobs each year.
1
As the damages to society’s
welfare become more apparent, substantial money is being
invested in special governmental task forces (e.g., the
Department of Justice’s task force for intellectual property
issues), programs, and laws to fight dishonest behavior.
However, little has proved successful so far. For example,
although the IRS is ramping up its audits on high-income
taxpayers and corporations, focusing more attention on abu-
sive shelters, and launching more criminal investigations,
the overall tax gap has not changed much as a reaction to
these measures. As IRS officials publicly state, too many
audits result in no change in the amount of taxes paid. That
means that these large and expensive efforts for increased
compliance seem to be a huge waste of time and money for
the taxpayer and the IRS (Herman 2005).
Similar disappointing results can be observed, for exam-
ple, in industry antipiracy measures, such as investing in
technologies for better copy protection of CDs and DVDs,
blocking unauthorized downloads, improving consumer
identifiability, and increasing the number of litigations. Evi-
dence for the number of litigations was reported in a recent
article at law.com, stating that music industry lawsuits
against individuals have been ineffective at cutting peer-to-
peer music swapping. Although the industry measures seem
to have contributed to an increased awareness of copyright
laws and lawsuit campaigns, people seem relatively unin-
timidated by them. An April 2004 survey revealed that 88%
of children between the ages of 8 and 18 years understood
that peer-to-peer music downloading is illegal, but despite
this, 56% of these children admitted to continued music
downloading (Von Lohmann 2004).
Given this limited success in curbing dishonest behavior,
there are two possible approaches for understanding and
limiting future dishonesty. The first approach assumes that
the current strategy for curbing dishonesty is the correct one
but that it is not practiced sufficiently or with sufficient
force. With this approach, the major two variables—the
probability of being caught and the magnitude of punish-
ment—should increase, thus reducing or eliminating dis-
honesty. At the extreme, this would mean “cutting off the
right arm” for minor crimes and cutting more important
organs for more severe crimes. The second approach, which
is the one we take in this article, questions whether the typ-
ical path taken to reduce dishonesty (i.e., increasing the
probability of being caught and the magnitude of punish-
Journal of Public Policy & Marketing 3
ment) is the correct path. In the next section, we elaborate
on these two approaches. The first approach falls under the
standard rational model, and the second one falls under the
p
sychological theory of honesty.
Economic and Psychological Theories of
(Dis)Honesty
Economic Theories of the Effect of External
Incentives
The standard economic perspective of the Homo economi-
cus is one in which the individual is a rational, selfish
human being who is interested only in maximizing his or her
own payoffs. This rational individual knows what he or she
wants and does not want and is able to perform correspond-
ing trade-offs to select the option that is expected to deliver
the greatest positive surplus (Hobbes and Macpherson 1968;
Smith and Skinner 1997, 1999). From this perspective, there
is nothing special about the decision to be honest, which
depends solely on the expected external benefits (e.g., more
money, a better position) and expected external costs (e.g.,
paying a fine, loosing a job) to the individual (Hechter 1990;
Lewicki 1984); the higher the external rewards from being
dishonest, the higher is the extent to which an individual
engages in dishonest behavior (see Figure 1). Such a cost–
benefit trade-off means that decisions about honesty are like
every other decision that individuals face.
Because this view of dishonesty has been adopted in gen-
eral, and has been adopted in legal theorizing in particular,
efforts to limit dishonesty have assumed that the only ways
to make progress are restricted to the external costs and
benefits of a dishonest act. The ensuing emphasis on the per-
vasiveness of police force and magnitude of punishment are
the two simplest ways to manipulate these external costs
(see Figure 1).
Psychological Theories of the Effect of Internal
Incentives
Internal Rewards for Virtuous Behavior
In contrast to the classic economic perspective, there is
ample evidence from different academic fields, such as psy-
chology, sociology, anthropology, behavioral and experi-
mental economics, and neuroeconomics and neuroscience,
that in addition to the external reward mechanisms, there are
also internal reward mechanisms and that these exert influ-
ence on people’s decisions. Economists such as Ernst Fehr
(see, e.g., Fehr and Fischbacher 2003, 2004; Fehr and
Gachter 2002) and James Andreoni (see, e.g., Andreoni,
Harbaugh, and Vesterlund 2003; Andreoni and Miller 2006)
have repeatedly demonstrated altruism and reciprocity in
social dilemma games. For example, in an ultimatum game,
two people have the opportunity to split a certain amount of
money through a one-time-only, anonymous interaction.
One of the two players, the proposer, offers a division of the
money. The second player, the receiver, must decide
whether he or she wants to accept or reject this proposition.
If the receiver rejects the proposed division, both players go
home without any money. If the receiver accepts the divi-
4 Dishonesty in Everyday Life and Its Policy Implications
sion, each player receives the amount that the proposer
offered. From a game theoretical, rational point of view, the
proposer should split the money unequally, in favor of him-
o
r herself. After all, it is a one-time game, so reciprocation
is not an issue. In addition, offering even $.01 to the second
player should make the receiver accept the offer because
that player will be better off with this amount than with
nothing. Instead, however, a majority of the offers are typi-
cally split equally, and many offers that are not split equally
are rejected. These types of results demonstrate that people
care about more than maximizing their own monetary pay-
offs and that these other considerations include social utility
and the care for others’ outcomes. Uri Gneezy (2005) con-
ducted a related study that emphasized this point in the con-
text of (dis)honesty. Gneezy used a simple deception game
with asymmetric information to demonstrate how people act
selfishly, insofar as they maximize their own payoffs, but
they are also sensitive to the costs that their lies impose on
others. These results are important when we consider daily
deception because there are many differences in wealth
(e.g., between employees and employers, between con
-
sumers and corporations) and in perceptions of the cost that
deception creates for the other party. Essentially, these
results suggest that people will be more dishonest when they
face wealthier counterparts and when the cost of the decep-
tion for these counterparts seems lower.
Thus, an important question for economists is, Why do
people consider more than “just” their material payoffs? To
address this question, Joseph Henrich and colleagues (2001)
undertook a large cross-cultural study of behavior in ultima-
tum, public good, and dictator games. They analyzed the
behavior of people from 15 small-scale societies in 12 coun-
tries exhibiting a wide variety of economic and cultural con-
ditions. The sample consisted of foraging societies; societies
that practice slash-and-burn horticulture; nomadic herding
groups; and sedentary, small-scale agriculturalist societies.
Two of their main findings in support of the hypothesis of
internalized reward mechanisms are that (1) the observed
behavior varied substantially across societies and (2)
people’s preferences were not exogenous as the classical
model would predict but rather were shaped by their soci-
ety’s characteristic economic and social interactions of
everyday life. In other words, socialization is a key to the
development of internalized reward mechanisms.
Adding to the behavioral evidence for internal rewards,
recent findings from neuroscience and neuroeconomics pro
-
vide further credence for the existence of internalized
reward mechanisms and point to the brain structure that
might be implicated in their activation. Thanks to the recent,
rapid diffusion of brain-imaging studies, such as positron
emission tomography or event-related functional magnetic
resonance imaging, groundbreaking developments have
added more pieces to the puzzle of reward processing. Sev-
eral studies in these fields have identified certain regions in
the dorsal and ventral striatum, especially the caudate
nucleus and the nucleus accumbens, to represent a brain’s
pleasure center that can be activated through different forms
of rewards (see also related studies in rats and primates; e.g.,
Olds and Milner 1954; Schultz et al. 1992). For example,
human beings show significantly increased striatal activity
during the anticipation of monetary gains (Knutson et al.
Journal of Public Policy & Marketing 5
2001), pleasant tastes (O’Doherty et al. 2002), or beautiful
faces (Aharon et al. 2001). More important for our point,
however, is that the same brain regions are also activated in
a
nticipation of satisfying social outcomes (i.e., social
rewards). Rilling and colleagues (2002) show how the stria-
tum “lit up” when people rewarded cooperators. Seemingly
contrary to these findings, De Quervain and colleagues
(2004) report similar findings when people punished defec-
tors; this result holds even if the punishment was possible
only at a personal material cost. Together, these two studies
suggest that people feel good about complying with inter-
nalized social norms and values; that is, someone who coop-
erates
should be rewarded, and someone who defects should
be punished to reestablish socially desirable behavior.
Psychology has long argued on behalf of internal reward
mechanisms. Most notably, Sigmund Freud and colleagues
(Freud 1933; Freud and Strachey 1962; Freud, Strachey, and
Gay 1989) lectured extensively about the superego, that is,
the part of the self that represents society’s moral norms and
values that the individual internalizes during the course of
his or her early life (see also Campbell [1964] on the inter
-
nalization of moral norms). The superego acts as an internal
judge, rewarding or punishing the individual depending on
compliance with these norms and values.
Activation of Internal Rewards Lessens Sensitivity to
External Incentives
On the basis of the evidence of internal reward mechanisms
described, Mazar, Amir, and Ariely (2005) studied how
external and internal reward mechanisms work in concourse
to influence people’s decisions to be (dis)honest. The gen-
eral procedure was to contrast financial reward incentives
that favor dishonest behavior with people’s inherent moti-
vation for honest behavior. Taking the motivation for finan-
cial rewards as self-evident, Mazar, Amir, and Ariely tested
the extent to which the decision to be (dis)honest is driven
by the possible consequences of being caught cheating
(external costs) relative to the internal rewards of honesty.
In one of the experiments, participants were presented with
a set of 50 multiple-choice, general-knowledge questions
and were promised $.10 per answer they solved correctly
within 15 minutes.
There were four different between-subjects conditions
that differed in procedure after participants finished answer
-
ing the questions on the original test sheets. The four condi-
tions were (1) experimenter graded (control), (2) self-graded
(self), (3) self-graded plus shredding (self+), and (4) self-
graded plus shredding plus self-payment (self++). In the
control condition, participants were told that when they fin-
ished answering the questions, they should ask the experi
-
menter for a bubble answer sheet (a sheet with circles to
indicate the answers, much like those used for exams that
are scanned and graded electronically) on which to transfer
their answers and then take both forms to the experimenter,
who would check their performance and pay them.
In the self condition, participants were told that when they
finished answering the questions on the original test sheet,
they should ask the experimenter for a premarked bubble
answer sheet, which included the same circles as in the con
-
trol condition but with one of the answers premarked as
being the correct answer. The respondents’ task was to
6 Dishonesty in Everyday Life and Its Policy Implications
transfer their own answers to the bubble answer sheet and
then to count and write down the number of correct answers.
When this was completed, they were asked to take both
f
orms to the experimenter, at which point they would be
paid accordingly. In this condition, participants had the pos-
sibility to cheat at the risk that the experimenter might dis-
cover it.
The self+ condition was similar to the self condition,
except that participants were instructed that after they trans-
ferred their answers to the premarked answer sheet, they
should walk to a shredder, shred their original test sheet, and
take only the answer sheet to the experimenter, at which
point they would be paid accordingly. This condition
offered a lower probability of being caught cheating than the
self condition. Indeed, there was no legal way of proving
that anyone cheated. The experimenter could be suspicious
only about an atypical high number of correct answers.
Because this social interaction could make cheating par-
ticipants feel uncomfortable, Mazar, Amir, and Ariely
(2005) decreased the chance of being caught even further in
the final condition (self++). In this condition, participants
were instructed to shred both their test sheet and the answer
sheet and then to walk over to a large jar with money that
was sitting at the end of the table and take the amount that
they earned.
This study had four important findings: First, participants
in the external condition solved significantly fewer ques-
tions than the participants in the three self conditions.
Because there was no reason to believe that the skill level of
the participants was different in any of these conditions, this
result implies that external reward mechanisms exist, and
people are dishonest when it is good for them. This result is
also along the lines of Schweitzer and Hsee’s (2002) find-
ings, according to which participants are more likely to be
dishonest as the private information they have becomes
more ambiguous.
Second, there was no significant difference between the
three self conditions, though the probability of being caught
further decreased dramatically from the self to the self+ to
the self++ condition (thus, the fear of being caught should
also have decreased). This result provides direct evidence
that the external disincentives for dishonesty are only a part
of a more complex picture.
Third, the magnitude of dishonesty in the three self con-
ditions was relatively small. Participants cheated only 20%
of the possible average magnitude and thus were far from
maximal dishonesty, as the standard rational model would
predict. This result suggests that people seem to possess
internal reward mechanisms for honesty because when
given the opportunity and incentive to be dishonest, they
exhibited dishonest behavior, but this dishonest behavior
was limited in its extent (probably by the strength of their
internal reward mechanisms).
Fourth, these results suggest that, at some level, the act of
cheating itself can activate the internal reward mechanism.
This means that though low levels of dishonesty might go
“unnoticed” from the point of view of the internal reward
mechanism, at some point, the magnitude of dishonesty
itself can activate this mechanism and limit dishonest
behavior.
Journal of Public Policy & Marketing 7
Together, these findings suggest that the relationship
between the external and the internal reward mechanisms is
complex. In particular, we hypothesize that the internal
r
eward mechanism is either active or inactive (in the same
way that people categorize actions and people as honest or
dishonest rather than in a more continuous way) and influ-
ences the tendency for acting (dis)honestly as a step func-
tion: First, below a certain level of dishonesty, the internal
reward mechanism may not be activated at all and thus does
not influence behavior; that is, the propensity for dishonesty
in such cases is a function of external cost–benefit consider-
ations (see Figure 1). Second, beyond the activation thresh-
old, when the dishonest act is noticeable, the internal reward
mechanism is activated and, at least within a certain range,
exerts its maximal force independently of the level of exter-
nal rewards. As a consequence, when a person’s internal
standards become activated, they override the sensitivity to
external rewards such that the propensity for dishonesty
becomes independent of increased external rewards for
being dishonest (within a certain range). Third, arguably, it
is likely that when the external rewards become very large,
they become tempting and may ultimately prevail. That is,
at some point, a person’s internal standards could be over-
ridden or deactivated such that the causes for dishonesty
preclude such internal considerations and are based solely
on planned dishonesty (a cost–benefit analysis as theorized
by the standard rational model). Figure 2 sketches the
hypothesized relationship of these components, as Mazar,
Amir, and Ariely’s (2005) findings illustrate. These findings
and the contrast between Figures 1 and 2 suggest that a
model for honesty that assumes that people behave like a
Homo economicus would lead to different predictions about
a person’s decision to be (dis)honest and, to the extent that
these assumptions are wrong, to incorrect prescriptions for
the prevention of deception.
Changing the Activation Threshold for Internal Rewards
Note that all the research we discussed supports the theory
that internal reward mechanisms indeed exist. However,
there is also research that suggests that it is possible to move
the activation threshold, that is, to cause internal reward
mechanisms for honesty to be more active, or to “kick in”
earlier. Representative of this kind of evidence is the exten-
sive body of research in psychology on objective self-
awareness by Duval and Wicklund (1972). According to
Duval and Wicklund, objective self-awareness represents
attention directed inward that induces self-evaluation in
relation to standards that are salient or accessible in the
immediate situation, which in turn increases motivation to
meet the standard (see also Carver and Scheier 1998). Par
-
ticular situations such as being in front of a real or implied
audience (Duval and Wicklund 1972), being individualized,
standing in front of a mirror (Carver and Scheier 1978), or
writing short stories about oneself (Fenigstein and Levine
1984) can increase an individual’s awareness of him- or her-
self as an object in the world. When awareness of the self is
increased, people are also more likely to be aware of dis-
crepancies between how they want to view themselves (the
ideal self) and how they actually behave. Given this tension
and the discomfort it can create, people who are aware of it
might work actively to reduce this discrepancy by either
8 Dishonesty in Everyday Life and Its Policy Implications
shifting attention away from the self or changing their
behavior to act more in accordance with their ideal self. In
the domain of deception, this means that higher self-
a
wareness might lead to more honest behavior.
Beaman and colleagues (1979) provide a well-known
example of the effect of self-focused attention on increasing
the alignment between behavior and internal standards. In
this famous experiment, which was conducted during Hal-
loween, trick-or-treating children entered a house and were
told by the experimenter to take only one candy; then, the
experimenter left the children alone in front of the candies.
They found that children who were individualized by being
asked their names and addresses were more likely to take
only one candy. In addition, these children were even more
likely to take only one candy when there was a mirror
directly behind the candy bowl. Mazar, Amir, and Ariely
(2005) use a different manipulation to influence self-
awareness; specifically, they use a manipulation that is more
directly related to honesty to test whether an increased
awareness leads to more honest behavior on a math test. In
their experiment, participants were told to write down either
as many of the Ten Commandments as they could remem-
ber (increased self-awareness of honesty) or the names of
ten books that they read in high school (control). They had
two minutes for this task before they moved on to an osten-
sibly separate task: the math test. The task in the math test
was to search for number combinations that added up to
exactly ten. There were 20 questions, and the duration of the
experiment was restricted to five minutes. After the time
was up, students were asked to recycle the test form they
worked on and indicate on a separate collection slip how
many questions they solved correctly. For each correctly
solved question, they were paid $.50. The results showed
that students who were made to think about the Ten Com-
mandments claimed to have solved fewer questions than
those in the control. Moreover, the reduction of dishonesty
in this condition was such that the declared performance
was indistinguishable from another group whose responses
were checked by an external examiner. This suggests that
the higher self-awareness in this case was powerful enough
to diminish dishonesty completely. Yet another method that
proved successful in increasing self-awareness with the con-
sequence that students cheated less on that math test was to
make students sign an honor code before beginning the test.
This finding is particularly interesting because it provides
some evidence for the effectiveness of a simple commitment
device that schools, companies, and the government can
easily adopt.
A different kind of research that can be interpreted in line
with the self-awareness theory is based on Daniel Schachter
and colleagues’ work on the role of emotional arousal for
moral behavior. For example, Schachter and Latane (1964)
tested the effects of a tranquilizer in a situation in which par-
ticipants could cheat. They found that participants cheated
significantly more after having taken the tranquilizer, a sym-
pathetic inhibitor, than did the placebo controls (see also
Schachter and Singer 1962). These results suggest that the
activation of the threshold is based on arousal and that when
arousal is decreased (even by artificial means, such as a
tranquilizer), the threshold is less likely to be activated, and
thus dishonesty is likely to be more prevalent. This idea is
Journal of Public Policy & Marketing 9
further developed by Dienstbier and Munter (1971), who
show that it is not emotional arousal per se that influences
the tendency to cheat but rather a person’s understanding or
i
nterpretation of the meaning and significance of that
arousal (see also Dienstbier 1972, 1975).
Self-Deception
T
hus far, the discussion has focused on deceptive acts and
t
he activation of a threshold that ignites the internal rewards.
In our conceptualization of the threshold, it is important that
the amount of deception in and of itself can activate the
threshold. An added complexity comes from the idea of self-
deception, in which people can reframe an act in a way that
makes them not perceive it as dishonest. Under such refram-
ing (self-deceptions), dishonest acts would not contribute to
the activation of the threshold and thus would not influence
the tendency for honesty. As a consequence, even if an indi-
vidual has internalized standards for honesty, acts of dis-
honesty that do not influence the activation of the threshold
(self-deceptions) would not influence behavior, and the rela-
tionship between external rewards and the tendency for dis
-
honesty would remain in Zone 1 of Figure 2 (never reaching
the threshold).
In general, self-deception represents a biased, self-serving
information flow within an individual—that is, an active but
unconscious misrepresentation of reality to the conscious
mind (Trivers 2000). Although it seems to be a paradox that
a person could deceive him- or herself, casual observation
suggests that people are effective in maintaining unrealisti-
cally positive views of themselves. People maintain beliefs
in their intelligence, competence, and moral worth in the
face of their sometimes foolish, incompetent, and immoral
behavior. Similarly, people frequently estimate that they
are, for example, better, more intelligent, or more beautiful
than average. Because typically far more than 50% of
people estimate this “better-than-average” effect, aggregat-
ing these data clearly violates logic (e.g., Alicke et al. 1995).
Other researchers have shown how people can be led to
believe false or biased “facts” about their own past (see
research on memory distortion and suppression of unwanted
memories; e.g., Anderson, Cohen, and Taylor 2000; Loftus
1994; Schachter and Dodson 2002), and they can convince
themselves of certain motivations for their behavior, thus
hiding their true intentions. Therefore, self-deception can be
successful even in the most extreme cases: For example,
doctors who participated in genocide in Nazi Germany man-
aged to convince themselves of the rectitude of their actions
(Lifton 1986).
Although self-deception can be beneficial in the short run
because it enables people to maintain self-regard, the
inflated self-perception can be problematic in the long run
when that bogus self-regard has costs. Norton and Ariely
(2005) show this in the context of an IQ test. In one of Nor-
ton and Ariely’s experiments, people participated in two
sequential IQ tests. Half of the participants in the first test
were provided with an answer key on the bottom of their test
sheet, whereas the other half did not have an answer key.
When the first test was over, each participant learned how
many questions he or she solved correctly. After that, they
were asked to predict how many questions they would solve
10 Dishonesty in Everyday Life and Its Policy Implications
on a second, similar test without an answer key. The predic-
tion task was designed such that people had a monetary
incentive to be accurate. Payment depended more on the
a
ccuracy of their predictions and less on their performance
such that the dominant strategy was to predict accurately.
The results of this experiment show that in the first round,
participants who had the answer key performed better on the
test than participants without the answer key and that there
was no performance difference on the second IQ test when
none of the participants were provided with an answer key.
This result suggests that the presence of the answers allowed
participants to solve more problems correctly. More impor-
tant, it seems that participants who had the answer key in the
first test believed that this better performance was actually
due to their greater intelligence, as reflected in their higher
estimates of their performance on the second test. As a con-
sequence, participants who deceived themselves by having
an inflated perception of themselves made less money.
Notably, when Norton and Ariely (2005) asked a different
group of people to predict how they would perform in such
an experiment, participants predicted that if they had the
answer key on the first test but not on the second, they
would perform better on the first test but not on the second
test. This result suggests an added danger of self-deception,
namely, that people believe that they are immune to it.
Researchers have explained this paradox of not knowing
about self-deception under the assumption that a person can
simultaneously store both true and false knowledge, with a
bias toward the true knowledge being stored in the uncon-
scious and the false (i.e., misrepresented) knowledge being
stored in the conscious (Greenwald 1997). Trivers (2000)
points out that from an evolutionary standpoint, this way of
organizing knowledge has the advantage that self-deception
not only must act primarily in the service of fooling oneself
but also can act in the service of deceiving others. The latter
is true because an outside observer initially interacts with
the conscious mind of the deceiver, and if the deceiver is
also deceiving him- or herself, the conscious mind com-
prises only the false information. The true information
would be hidden in the unconscious. If this is the case, cues,
such as a higher-pitched voice, increased pupil size, or lip
pressing, which in general accompany attempted, conscious
deception, should not be available to the observer, thus mak-
ing the deceit more difficult to detect (DePaulo and Morris
2004). As a consequence, even if people are fully self-aware
(i.e., internal reward mechanism is active) and the net utility
of deception is negative (i.e., costs loom larger than bene-
fits), deception that eludes the person who is committing the
dishonest act (i.e., self-deception) might not completely
vanish.
2
Policy Guidelines for Reducing
Dishonesty
The standard rational model of decisions about honesty and
dishonesty assumes that people trade off only external costs
and benefits of an outcome. In contrast, the psychological
model we have sketched assumes that decisions about hon-
esty also include considerations of internal reward mecha
-
nisms. In addition, we argue that decisions about honesty
can sometimes be not cognizant, for example, at levels of
Journal of Public Policy & Marketing 11
activation below the threshold or when self-deception is
involved. As a consequence, making the right policy recom-
mendation to decrease dishonesty depends particularly on
t
he analysis of what is driving the deceit in a particular situ-
ation. Our literature review suggests that there are four gen-
eral drivers of dishonesty: (1) lower external costs and rela-
tively higher benefits of deception; (2) lack of social norms,
which results in a weak internal reward mechanism; (3) lack
of self-awareness, which primes the activation of the inter-
nal reward mechanism; and (4) self-deception. In the fol-
lowing subsections, we elaborate on how these different per-
spectives on dishonesty can translate into different
approaches for reducing or curbing dishonesty.
When Dishonest Behavior Is Caused by External
Rewards
If the cause for deception lies solely in greater external
benefits than costs of the dishonest act, the solution is sim-
ple: The costs for dishonest actions must be greater than
their expected benefits. This can be achieved by increasing
either the probability of being caught or the severity of the
punishment. Thus, if the cause of dishonesty is based solely
on an imbalance of external costs and benefits, the standard
legal approach of controlling the external costs is appropri-
ate. This theory implies that it is appropriate to introduce
governmental task forces, such as the Department of Jus-
tice’s task force on intellectual property, which, among
other combat strategies, invests in increasing the number of
specially trained prosecutors. The same is true for the IRS’s
increase in audits and the music industry’s aggressive
increase in filing lawsuits against individual deceivers.
Even if the cause for deception is related to the cost–
benefit analysis, there might be ways to increase the effec-
tiveness and efficiency of measures to combat dishonest
behaviors. For example, if the probability of being caught
and the magnitude of punishment are evaluated differently,
and research suggests that the probability of punishment is
more important than increasing the severity of the punish-
ment (Nagin and Pogarsky 2003), it might be best to allocate
efforts accordingly. However, even if legislators decide to
invest more effort in the probability of detection and
decrease the magnitude of punishment (e.g., moving from a
$500 fine for not stopping at a stop sign with 10% probabil-
ity of being caught to a $100 fine with a 50% probability of
being caught), there is still the question of what is the opti-
mal probability for deterrence.
Informing the question of what is the optimal probability
for deterrence, research by Barkan, Zohar, and Erev (1998)
suggests that the best approach is eliminating altogether the
probability of being caught, that is, moving to nonproba-
bilistic punishments. Their main argument is that events that
have low probability are unlikely to occur (by definition)
and thus can have a perverse effect on learning, such that
people who violate the rule and are not caught receive a
positive reward for the violation, which causes them to
underestimate the probability of being caught and, over
time, increases their tendency to behave in this undesired
way (see also Erev et al. 2003). According to this perspec-
tive, a person who expects that driving through a red light
would involve a $500 fine in 5% of the cases is more likely
12 Dishonesty in Everyday Life and Its Policy Implications
to drive through it than a person who has the same expected
value but with certainty of being caught (i.e., a definite $25
fine). More important, over time, the person in the proba-
b
ilistic punishment setting is going to discount the probabil-
ity of the punishment further (as long as he or she is not
caught), which in turn will lead to an even greater tendency
for violation. Eliminating the probabilistic component from
all undesirable behaviors is impossible, but it is clear that
there are some cases (e.g., driving through an intersection at
a red light) in which this is possible and desirable.
When Dishonest Behavior Is Caused by the
Internal Reward Mechanism
If the reason for dishonest actions lies in a lack of internal-
ized social norms, our primary recommendation would be to
invest in educational efforts and socialization to increase the
strength of the internal reward mechanism. The key ques-
tions in this context are, How can this best be done, and is
there a critical age period for the internalization of such
mechanisms (as in language and visual development)? For
example, educational efforts can be integrated in schools,
social clubs, or religious institutions. Another possibility
that is increasingly exercised by the government and the
music, film, and software industries is to feature public mes-
sages in an attempt to build a social norm so that a particu-
lar type of behavior (e.g., illegally downloading music or
movies) becomes socially undesirable and frowned on.
Other efforts could illustrate how such acts can hurt the
rank-and-file workers, not just the big corporations, by
reducing their job security or pay (see, e.g., television adver-
tisements and movie trailers launched by the Motion Picture
Association of America in 2003 and 2004).
When the effects of such efforts on the development of
socially based internal reward mechanisms are understood,
it is important to go a step further and ask what the limits of
such efforts should be and whether society should allow all
ideologies to participate in the creation of such internal
rewards (e.g., what about racial prejudices or particular
cults?). The question about the types of internal reward
mechanisms that society could develop or not develop is
particularly important if we consider the likely possibility
that this process might have a critical period in which
younger people are much more sensitive to such influences
and that when the critical age is reached, these mechanisms
remain relatively stable for the rest of their lives. Given the
higher sensitivity of younger adults to social influence and
advertising, society might want to place careful boundaries
for the development of such socially based internal repre-
sentations by different interested parties, such as religious,
financial, and social institutions.
If dishonest behavior occurs not because of a lack of
social norms but simply because of a lack of self-awareness
and, thus, the degree to which these internalized social
norms are activated, it is important to make use of contex-
tual cues that increase awareness when deception is about to
happen, namely, at the point of temptation. For example, the
IRS could slightly change its forms by making them more
personal or by asking people to sign an honor code of sorts
before they begin filling out the forms. Another possibility
worth trying might be to include a survey that asks tax pay
-
Journal of Public Policy & Marketing 13
ors questions such as how much they care about their coun-
try, how important honesty was to their parents, how many
people they think lie on their taxes, or what the typical pro-
f
ile is of tax deceivers.
The consideration of internal rewards also suggests that
the theory of optimal punishment (optimal punishment
trades off the benefits of deterrence and the cost of punish-
ing innocent people) should be reconsidered with these
inputs in mind. If the punishment magnitude is determined
in a way that makes the costs slightly higher than the bene-
fits and if these costs also include internal costs, the optimal
punishment will be lower by that amount. For example, if
the expected benefit for a particular crime is Y and the inter-
nal reward for honesty is X, the standard rational model
would prescribe a punishment with an expected magnitude
of –(Y +
ε), whereas the model that includes internal
rewards would prescribe –(Y +
ε) + X. The complexity is
that not everyone has the same level of internal reward
mechanisms, and to the degree that these are unobservable,
it is difficult to assess the true level of optimal punishment
(though it is possible that someday there will be a test for
this). Conversely, signs of repeated criminal behavior, for
example, can be taken as an indication for a lower level of
internal reward mechanisms, causing the magnitude of X to
be updated as lower. This type of framework, in which X is
an individual variable, has the potential to help build a
theory of repeated punishment with the same desired princi-
ples of optimal punishment but with more effectiveness.
(Currently, repeated crime is punished more severely, such
as in California’s “three-strikes-and-you’re-out” approach,
but there is no theory or logical guideline for the magnitude
of these policies.)
When Dishonest Behavior Is Caused by Self-
Deception
Finally, deception of the self-deception variety is difficult to
fight. Self-deception due to a self-serving bias is very
robust. Several academics have shown that paying people to
be more realistic in their view, making people write essays
that argue the other side’s point of view, or educating people
about the self-serving bias are not successful in debiasing
people (see, e.g., Babcock and Loewenstein 1997; Babcock,
Loewenstein, and Issacharoff 1997). Therefore, the most
successful way to fight self-deception might be to eliminate
the incentives that spawn the bias and simply eliminate the
situations that can give rise to this type of behavior. For
example, Bazerman, Loewenstein, and Moore (2002; see
also Bazerman and Loewenstein 2001) argue that if decep-
tive audits by accounting professionals are mainly due to
self-deception, it might be more effective to pass laws or
enforce standards among the accounting profession that bar
auditors from offering both consulting and tax services to
clients, prohibit hiring accountants through clients, and
allow only limited-time contracts. As these examples show,
fighting deception caused by self-deception requires serious
interventions that limit substantially the freedom and self-
determination of people in certain situations.
14 Dishonesty in Everyday Life and Its Policy Implications
Conclusion
In summary, there is no question that dishonesty is prevalent
in daily life. The standard economics perspective considers
one cause for dishonesty—external reward mechanisms—
and thus emphasizes the probability of being caught and the
m
agnitude of punishment as the only ways to overcome dis-
h
onesty. In contrast, the psychological perspective we pre-
sent herein suggests that dishonesty is also influenced by
internal reward mechanisms and that such mechanisms
should be taken into account when considering effective
measures for limiting dishonesty in daily life. Moreover, the
psychological perspective suggests that internal and external
rewards are not simply additive but also take a particular
functional form (see Figure 2). With this functional form in
mind, the psychological approach for reducing dishonesty
could be based on increasing the long-term effectiveness of
internal rewards (education), increasing the short-term
effectiveness of internal rewards (contextual cues), or elimi-
nating the possibility of dishonest acts when the cause could
be attributed to self-deception. When the role of internal
rewards is better understood, both preventions and punish-
ments of dishonesty can be made more effective and
efficient.
Refer
ences
Accenture Inc. (2003), “One-Fourth of Americans Say It’s Accept-
able to Defraud Insurance Companies, Accenture Survey
Finds,” press release, (February 12), (accessed January 31,
2006), [available at http://www.accenture.com/xd/xd.
asp?it=enweb&xd=_dyn%5Cdynamicpressrelease_577.xml].
Aharon, Itzhak, Nancy Etcoff, Dan Ariely, Christopher F. Chabris,
Ethan O’Connor, and Hans C. Breiter (2001), “Beautiful Faces
Have Variable Reward Value: fMRI and Behavioral Evidence,”
Neuron, 32 (3), 537–51.
Alicke, Mark D., M.L. Klotz, David L. Breitenbecher, Tricia J.
Yurak, and Debbie S. Vredenburg (1995), “Personal Contact,
Individuation, and the Better-Than-Average Effect,”
Journal of
Personality and Social Psychology
, 68 (5), 804–825.
Anderson, Stephen J., Gillian Cohen, and Stephanie Taylor (2000),
“Rewriting the Past: Some Factors Affecting the Variability of
Personal Memories,”
Applied Cognitive Psychology, 14 (5),
435–54.
Andreoni, James, William T. Harbaugh, and Lise Vesterlund
(2003), “The Carrot or the Stick: Rewards, Punishments, and
Cooperation,”
The American Economic Review, 93 (3),
893–902.
——— and John H. Miller (2006), “Analyzing Choice with
Revealed Preference: Is Altruism Rational?” in
Handbook of
Experimental Economics Results
, Vol. 1, Charles Plott and Ver-
non L. Smith, eds. Amsterdam: Elsevier Science, forthcoming.
Babcock, Linda and George Loewenstein (1997), “Explaining Bar-
gaining Impasse: The Role of Self-Serving Biases,”
Journal of
Economic Perspectives
, 11 (1), 109–126.
———, ———, and Samuel Issacharoff (1997), “Creating Con-
vergence: Debiasing Biased Litigants,”
Law & Social Inquiry,
22 (4), 913–25.
Bagozzi, Richard P. (1995), “Reflections on Relationship Market
-
ing in Consumer Markets,”
Journal of the Academy of Market
-
ing Science
, 23 (4), 272–77.
Journal of Public Policy & Marketing 15
Barkan Rachel, Dov Zohar, and Ido Erev, (1998), “Accidents and
Decision Making Under Risk: A Comparison of Four Models,”
Organizational Behavior and Human Decision Processes, 74
(2), 118–44.
B
azerman, Max H. and George Loewenstein (2001), “Taking the
Bias Out of Bean Counting,”
Harvard Business Review, 79 (1),
28.
———, ———, and Don A. Moore (2002), “Why Good Accoun-
tants Do Bad Audits,”
Harvard Business Review, 80 (11),
9
6–102.
Beaman, Arthur L., Bonnel Klentz, Edward Diener, and Soren
Svanum (1979), “Self-Awareness and Transgression in Chil-
dren: Two Field Studies,”
Journal of Personality and Social
Psychology
, 37 (10), 1835–46.
Campbell, Ernest Q. (1964), “The Internalization of Moral
Norms,”
Sociometry, 27 (4), 391–412.
Carver, Charles S. and Michael F. Scheier (1978), “Self-Focusing
Effects of Dispositional Self-Consciousness, Mirror Presence,
and Audience Presence,”
Journal of Personality and Social Psy-
chology
, 36 (3), 324–32.
——— and ——— (1998),
On the Self-Regulation of Behavior.
New York: Cambridge University Press.
Davis, Ann (2004), “Open Secrets; Head of the Line: Client Comes
First? On Wall Street, It Isn’t Always So; Investing Own
Money, Firms Can Misuse Knowledge of a Big Impending
Order; Mischief in the ‘Back Books,’” The Wall Street Journal,
(December 16), A1.
DePaulo, Bella M. and Wendy L. Morris (2004), “Discerning Lies
from Truth: Behavioral Cues to Deception and the Indirect Path-
way of Intuition,” in
The Detection of Deception in Forensic
Contexts
, Pär Anders Granhag and Leif A. Strömwall, eds. New
York: Cambridge University Press, 15–40.
De Quervain, Dominique J.-F., Urs Fischbacher, Valerie Treyer,
Melanie Schelthammer, Ulrich Schnyder, Alfred Buck, and
Ernst Fehr (2004), “The Neural Basis of Altruistic Punishment,”
Science, 305 (5688), 1254–58.
De Rugy, Veronique (2005), “What Does Homeland Security
Spending Buy?” working paper, American Enterprise Institute
for Public Policy Research, (April 1), (accessed January 31,
2006), [available at http://www.aei.org/publications/pubID.
21483/pub_detail.asp].
Dienstbier, Richard A. (1972), “The Role of Anxiety and Arousal
Attribution in Cheating,”
Journal of Experimental Social Psy
-
chology
, 8 (2), 168–79.
——— (1975), “An Emotion-Attribution Approach to Moral
Behavior: Interfacing Cognitive and Avoidance Theories of
Moral Development,”
Psychological Review, 82 (4), 299–315.
——— and Pamela O. Munter (1971), “Cheating as a Function of
the Labeling of Natural Arousal,”
Journal of Personality and
Social Psychology
, 17 (2), 208–213.
Duval, Shelley and Robert A. Wicklund (1972),
A Theory of
Objective Self Awareness
. New York: Academic Press.
Erev, Ido, Paul Ingram, Ornit Raz, and Dror Shany (2003), “On the
Possibility of Gentle Rule Enforcement,” working paper,
Department of Industrial Engineering and Management,
Technion.
Fehr, Ernst and Urs Fischbacher (2003), “The Nature of Human
Altruism,”
Nature, (October 23), 785–91.
——— and ——— (2004), “Social Norms and Human Coopera-
tion,”
Trends in Cognitive Sciences, 8 (4), 185–90.
16 Dishonesty in Everyday Life and Its Policy Implications
——— and Simon Gachter (2002), “Altruistic Punishment in
Humans,”
Nature, (January 10), 137–40.
Fenigstein, Allan and Michael P. Levine (1984), “Self-Attention,
Concept Activation, and the Causal Self,”
Journal of Experi-
m
ental Social Psychology
,
20 (3), 231–45.
Freud, Sigmund (1933),
New Introductory Lectures on Psycho-
Analysis
. New York: W.W. Norton.
——— and James Strachey (1962),
The Ego and the Id. New
York: W.W. Norton.
———, ———, and Peter Gay (1989),
An Outline of Psycho-
A
nalysis
,
stand. ed. New York: W.W. Norton.
Gneezy, Uri (2005), “Deception: The Role of Consequences,”
American Economic Review, 95 (1), 384–94.
Graham, Carol, Robert E. Litan, and Sandip Sukhtankar (2002),
“The Bigger They Are, the Harder They Fall: An Estimate of the
Costs of the Crisis in Corporate Governance,” working paper,
The Brookings Institution, (accessed February 1, 2006), [avail-
able at http://www.brookings.edu/views/papers/graham/
20020722Graham.pdf].
Greenwald, Anthony G. (1997), “Self-Knowledge and Self-
Deception: Further Consideration,” in
The Mythomanias: The
Nature of Deception and Self Deception
, Michael S. Myslobod-
sky, ed. Mahwah, NJ: Lawrence Erlbaum Associates, 51–71.
Hechter, Michael (1990), “The Attainment of Solidarity in Inten-
tional Communities,”
Rationality and Society, 2 (2), 142–55.
Henrich, Joseph, Robert Boyd, Sam Bowles, Colin Camerer, Ernst
Fehr, Herbert Gintis, and Richard McElreath (2001), “In Search
of Homo Economicus: Behavioral Experiments in 15 Small-
Scale Societies,”
American Economic Review, 91 (2), 73–78.
Herman, Tom (2005), “Study Suggests Tax Cheating Is on the
Rise; Most Detailed Survey in 15 Years Finds $250 Billion-Plus
Gap; Ramping Up Audits on Wealthy,”
The Wall Street Journal,
(March 30), D1.
Hobbes, Thomas and C.B. Macpherson (1968),
Leviathan. Balti-
more: Penguin Books.
Knutson, Brian, Charles M. Adams, Grace W. Fong, and Daniel
Hommer (2001), “Anticipation of Increasing Monetary Reward
Selectively Recruits Nucleus Accumbens,”
Journal of Neuro-
science
, 21 (16), RC159 (1–5).
Lewicki, R.J. (1984), “Lying and Deception: A Behavioral
Model,” in
Negotiation in Organizations, Max H. Bazerman and
Roy J. Lewicki, eds. Beverly Hills, CA: Sage Publications,
68–90.
Lifton, Robert J. (1986), “Reflections on Genocide,”
Psychohis-
tory Review
, 14 (3), 39–54.
Loftus, Elizabeth F. (1994), “The Repressed Memory Contro-
versy,”
American Psychologist, 49 (5), 443–45.
Mazar, Nina, On Amir, and Dan Ariely (2005), “(Dis)Honesty: A
Combination of Internal and External Rewards,” working paper,
Sloan School of Management, Massachusetts Institute of
Technology.
McDonald, Ian (2002), “Brokers Get Extra Incentive to Push
Funds,”
The Wall Street Journal, (April 8), C17.
Murphy, Patrick E. and Gene R. Laczniak (1981), “Marketing
Ethics: A Review with Implications for Managers, Educators,
and Researchers,” in
Review of Marketing, Ben M. Enis and
Kenneth J. Roering, eds. Chicago: American Marketing Associ
-
ation, 251–66.
Journal of Public Policy & Marketing 17
Nagin, Daniel S. and Greg Pogarsky (2003), “An Experimental
Investigation of Deterrence: Cheating, Self-Serving Bias, and
Impulsivity,”
Criminology, 41 (1), 501–527.
Norton, Mike and Dan Ariely (2005), “Self-Deception: How We
C
ome to Believe We Are Better Than We Truly Are,” working
paper, Sloan School of Management, Massachusetts Institute of
Technology.
O’Doherty, John P., Ralf Deichmann, Hugo D. Critchley, and Ray-
mond J. Dolan (2002), “Neural Responses During Anticipation
o
f a Primary Taste Reward,”
N
euron
,
33 (5), 815–26.
Olds, James and Peter Milner (1954), “Positive Reinforcement
Produced by Electrical Stimulation of Septal Area and Other
Regions of Rat Brain,”
Journal of Comparative and Physiolog-
ical Psychology
, 47 (6), 419–27.
Rilling, James K., David A. Gutman, Thorsten R. Zeh, Giuseppe
Pagnoni, Gregory S. Berns, and Clinton D. Kilts (2002), “A
Neural Basis for Social Cooperation,”
Neuron, 35 (2), 395–405.
Schachter, Stanley and Chad S. Dodson (2002), “Misattribution,
False Recognition and the Sins of Memory,” in
Episodic Mem-
ory: New Directions in Research
, Alan Baddeley, Martin Con-
way, and John Aggleton, eds. London: Oxford University Press,
71–85.
——— and Bibb Latane (1964), “Crime, Cognition, and the Auto-
nomic Nervous System,”
Nebraska Symposium on Motivation,
Vol. 12, David Levine, ed. Lincoln: University of Nebraska,
221–75.
——— and Jerome Singer (1962), “Cognitive, Social, and Physi-
ological Determinants of Emotional State,”
Psychological
Review
, 69 (5), 379–99.
Schultz, Wolfram, Paul Apicella, Eugenio Scarnati, and Tomas
Ljungberg (1992), “Neuronal Activity in Monkey Ventral Stria-
tum Related to the Expectation of Reward,”
Journal of Neuro-
science
, 12 (12), 4595–4610.
Schweitzer, Maurice E. and Christopher K. Hsee (2002), “Stretch-
ing the Truth: Elastic Justification and Motivated Communica-
tion of Uncertain Information,”
Journal of Risk and Uncertainty,
25 (2), 185–201.
Smith, Adam and Andrew S. Skinner (1997),
The Wealth of
Nations: Books I–III
. New York: Penguin Books.
——— and ——— (1999),
The Wealth of Nations: Books IV and
V.
London: Penguin Books.
Speights, David and Mark Hilinski (2005), “Return Fraud and
Abuse: How to Protect Profits,”
Retailing Issues Letter, 17 (1),
1–6.
Trivers, Robert (2000), “The Elements of a Scientific Theory of
Self-Deception,” in
Evolutionary Perspectives on Human
Reproductive Behavior
, Peter Moller and Dori LeCroy, eds.
New York: New York Academy of Sciences, 114–31.
U.S. Department of Justice, Office of the Attorney General (2004),
“Report of the Department of Justice’s Task Force on Intellec-
tual Property,” (October 24), (accessed February 1, 2006),
[available at http://www.usdoj.gov/criminal/cybercrime/
IPTaskForceReport.pdf].
Vitell, Scott J. (2003), “Consumer Ethics Research: Review, Syn-
thesis and Suggestions for the Future,”
Journal of Business
Ethics
, 43 (1–2), 33–47.
Von Lohmann, Fred (2004), “Is Suing Your Customers a Good
Idea?” (September 29), (accessed February 1, 2006), [available
at http://www.law.com/jsp/article.jsp?id=1095434496352].
18 Dishonesty in Everyday Life and Its Policy Implications
1
Not everybody loses in every dishonest act; those who committed the
act can gain.
2
We assume that the external reward mechanism as postulated by classic
economics is always active in at least normally healthy people.
Journal of Public Policy & Marketing 19
20 Dishonesty in Everyday Life and Its Policy Implications
Figure 1. The Relationship Between Expected Net Benefits
of Dishonesty and the Propensity for Dishonesty
A
ccording to a Theory That Includes Only
E
xternal Rewards
Journal of Public Policy & Marketing 21
Notes: Mazar, Amir, and Ariely’s (2005) results show that dishonesty itself
can activate the internal reward mechanisms, which in turn interrupt
the standard relationship between external rewards and the propen-
sity for being dishonest (as postulated by classic economics).
Figure 2. The Relationship Between Expected Net Benefits
of Dishonesty and the Propensity for Dishonesty
B
ased on the Results of Mazar, Amir, and
A
riely’s (2005) Study

Discussion

> *** "socialization is a key to the development of internalized reward mechanisms." *** This study found that in all societies studied: 1. Ultimatum game offers were strictly positive and often substantially in excess of the expected income-maximizing offer. Rejections of positive offers in some societies also occurred at a considerable rate. 2. Preferences over economic choices are not merely influenced by external factors but rather seem to be shaped by the economic and social interactions of everyday life. Learn more about this study here: [In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies](https://www.umass.edu/preferen/gintis/Anthro%20AER%202001.pdf) According to Freud the superego incorporates the values and morals which are learned from one's parents and society. The superego's function is to control our impulses and it also has the function of persuading the ego to turn to moralistic goals and to strive for perfection. > ***The superego acts as an internal judge, rewarding or punishing the individual depending on compliance with these norms and values.*** You can learn more here: [Id, Ego and Superego](https://www.simplypsychology.org/psyche.html) **Self-deception** represents a biased, self-serving information flow within an individual. I is an active and unconscious misrepresentation of reality to the conscious mind . **There are four general drivers of dishonesty: ** 1. lower external costs and relatively higher benefits of deception 2. lack of social norms, which results in a weak internal reward mechanism 3. lack of self-awareness, which primes the activation of the internal reward mechanism 4. self-deception The internal reward mechanism that curbs dishonest behavior can be either active or inactive. Below a certain threshold of dishonesty it will be inactive and it will not influence human behavior, and thus the propensity for dishonest behavior is only a function of external rewards. Above the dishonesty threshold the internal reward mechanism becomes active and seems to influence behavior drastically so much so that it seems to become independent of external rewards. But, when external rewards become very large the internal reward mechanism seems to be completely overridden and we planned dishonesty (a cost–benefit analysis as theorized by the standard rational model). ![dishonest](https://i.imgur.com/kdORQPD.png) Proposed solution to curbing dishonest behavior for different scenarios: **Dishonest Behavior Is Caused by the External Reward Mechanism** - If the cause for deception lies solely in greater external benefits than costs of the dishonest act, the solution is simple: The costs for dishonest actions must be greater than their expected benefits. This can be achieved by increasing either the probability of being caught or the severity of the punishment. - function of probability of being caught and magnitude of punishment (500 dollar fine with 5% probability or 25 dollar fine with 100% probability) **Dishonest Behavior Is Caused by the Internal Reward Mechanism** - invest in educational efforts and socialization to increase the strength of the internal reward mechanism. - build a social norm so that a particular type of behavior (e.g. not paying for public transportation) becomes socially undesirable and frowned on. - younger people might be much more sensitive to such influences and that when the critical age is reached, these mechanisms remain relatively stable for the rest of their lives **Dishonest Behavior Is Caused by Self-Deception** - Self-deception is very robust and difficult to fight. - the most successful way to fight self-deception might be to eliminate the incentives that spawn the bias and simply eliminate the situations that can give rise to this type of behavior - fighting deception caused by self-deception requires serious interventions that might limit substantially the freedom and self-- determination of people in certain situations When people lie they care about more than simply maximizing their own monetary pay offs. People are sensitive to their gains when deciding to lie but they also care about how much the other side loses with their lie. This "unselfish" motive decreases as the size of the gains increases. You can learn more here: [Deception: The Role of Consequences](https://rady.ucsd.edu/faculty/directory/gneezy/pub/docs/deception.pdf) !["deception gains"](https://i.imgur.com/UgzXSaT.png) *Deceptions seems to decrease if the losses to the third party are big. We care about gains but also take into account the losses that are decisions inflict on other. If the gains are big the unselfish motive is not taken into account. * A theory that only takes into account external benefits states that the propensity for dishonesty will increase as the net gains for the dishonest person increase. The more you have to gain the more likely you are to lie independent of any other factors like the losses you are causing to a third party. !["external benefits"](https://i.imgur.com/XDqEY0j.png) *Degree of deception according to a theory that includes only gains for the dishonest person. Deception increases linearly as the gains increase.* From the Accenture Survey: > ***"one-fourth (24 percent) said they believe that the people who commit insurance fraud do so because they believe they pay too much for insurance. Twenty percent said they believe that the offenders commit fraud to compensate for the claims deductibles they have to pay."*** You can learn more here: [Accenture Survey: One-Fourth of Americans Say It’s Acceptable to Defraud Insurance Companies](https://newsroom.accenture.com/industries/insurance/one-fourth-americans-say-its-acceptable-to-defraud-insurance-companies-accenture-survey-finds.htm) Dan Ariely - (Dis)Honesty [![](https://i.imgur.com/KbEgb4R.jpg)](https://www.youtube.com/watch?v=nXH9rJZtkYo) #### Ultimatum Game: There are two players involved in an ultimatum game: - The proposer who is endowed with a sum of money. The proposer is tasked with splitting it with another player, the responder. - The responder will receive a certain amount of money from the proposer and will decide whether to accept it or refuse. Once the proposer communicates their decision, the responder may accept it or reject it. If the responder accepts, the money is split per the proposal; if the responder rejects, both players receive nothing. Both players know in advance the consequences of the responder accepting or rejecting the offer. Dan Ariely is a professor of Psychology and Behavioral Economics at Duke University and is the founder of The Center for Advanced Hindsight. He is the author of Dollars and Sense, Predictably Irrational, The Upside of Irrationality, and The Honest Truth about Dishonesty. Nina Mazar is a a Professor of Marketing and Behavioral Science and the co-director of the Susilo Institute for Ethics in the Global Economy at the Boston University Questrom School of Business. Her main research topics focus on how expectations, emotions, peers, and random cues in the environment affect how we think about products, money, investments, and morality, and their implications for welfare, development, and policy Learn more about: - Dan Ariely: [All About Dan](http://danariely.com/all-about-dan/) - Nina Mazar: [About Nina](http://ninamazar.com/about-nina/) ### TL;DR The standard economics perspective considers only one cause for dishonesty: external reward mechanisms. That implies that humans would be solely motivated by increasing their net gains and thus in order to overcome dishonesty the only variables that need to be taken into account are: 1. the probability of being caught 2. and the magnitude of punishment In contrast, **the authors suggest that dishonesty is also influenced by internal reward mechanisms and that such mechanisms should be taken into account when considering effective measures for limiting dishonesty in daily life.** The solution they propose for different scenario are: **Dishonest Behavior Is Caused by the External Reward Mechanism** - If the cause for deception lies solely in greater external benefits than costs of the dishonest act, the solution is simple: The costs for dishonest actions must be greater than their expected benefits. This can be achieved by increasing either the probability of being caught or the severity of the punishment. - function of probability of being caught and magnitude of punishment (500 dollar fine with 5% probability or 25 dollar fine with 100% probability) **Dishonest Behavior Is Caused by the Internal Reward Mechanism** - invest in educational efforts and socialization to increase the strength of the internal reward mechanism. - build a social norm so that a particular type of behavior (e.g. not paying for public transportation) becomes socially undesirable and frowned on. - younger people might be much more sensitive to such influences and that when the critical age is reached, these mechanisms remain relatively stable for the rest of their lives **Dishonest Behavior Is Caused by Self-Deception** - Self-deception is very robust and difficult to fight. - the most successful way to fight self-deception might be to eliminate the incentives that spawn the bias and simply eliminate the situations that can give rise to this type of behavior - fighting deception caused by self-deception requires serious interventions that might limit substantially the freedom and self-- determination of people in certain situations