Cheating and Stealing; Dan Ariely, MIT and Duke University
0:17I want to talk to you today little bit about thepredictable irrationalityand
0:25my interest in irrational behavior is started many years ago in hospital. I was burned very badly
0:33anif you spend a lot of time in hospitalyou'll see a lot of types of irrationalities
0:41and the one that particularly bothered me in theburn department was the process by which the nurses took
0:49the bandage off me now you must have all taken a band-aid off at some point in
0:53you must have wondered what's the right approach? You rip it off quickly short duration but high intensity
1:00or you take you band aid off slowly… you take a long time but each secondis not as painful. Which one of those is the rightapproach? The nurses in my department
1:12thought that the right approach was the ripping...so they would grab hold and rip,
1:16and grab hold rip and would grab hold they would ripbecause I had seventy percent of my body burn it would take about an hour
1:21and as you can imagine, ehhh, I hated that moment of ripping with incredible intensityand would try to reason with them and say why don't we try something else? …why
1:32don't we take ita little longer maybe two hours instead of a hour and have less of this
1:37intensity…. and the nurses told me two things, and they told me that they had the right model ofthe patient that they knew what was the right thing to do to minimize my pain
1:48and they also told me that they would patient doesn't mean to make suggestions
1:51and to fear uhhh.,,this is not just inhebrew by the way but in every language which have had experience with
1:57so far …and you know there's not much there wasn't much I could doand they kept on doing what they were doing in about three years laterwhen I left the hospital
2:07uhhh, I started studying at the University and one of the most interesting
2:11lesson I learned lessons it was thatthere is an experimental method that if you have a question you cancreate a replica of this question in some abstract way
2:22and you can try to examine this question maybe learn something about the worldso that's what idea that was still interested this question of how do you
2:29take bandages off a burn patientso originally I didn't has the much money so I went to a hardware storeand
2:36both the Carpenters vice and I would bring people to the lab and I would putthe finger in it and I would crunch it a little bit
2:43and I would crunch it for long periods in short periods and pain went up andwhen it went downand with breaks in without breaks….all kind of versions of pain
2:54and when I finished hurting people but I will ask them to how into was this?tohow painful was this? …so if you had to choose between the last two which one
3:02would you choose? …I kept on doing this for a whileand then like all good academic projects I got more funding
3:14I moved to sounds, electrical shocks, I even had the pain suits that they couldget people tofeel much more pain. But at the end of this process
3:26what they learned was that the nurses were wrong. They werewonderful people with good intentions and plenty of experience and
3:34nevertheless they were getting things wrongpredictably all the time. It turns out that because we don't encode
3:40duration in the way we encodeintensity I would have had less painif the duration would have been longer and intensity
3:48was lower. It turns out it would have been better to start with my face whichwas much more painful
3:53and toward my legs giving a trend of improvement over time. That would havebeen also this painful
3:58it also turns out I would have been good to give me a break in the middleto kind ofrecuperate from the pain
4:02All of these would have been great thing to do, and my nurses had no idea.And from that point onI started thinking are the nurses the only people in
4:09the world who get things wrong in this particular decision? Or was it a moregeneralcase? As it turns out it's a more general case. It’s a lot ofmistakes we do and
4:20I want to give you one example of one of these irrationalities and uh…I want to talk to you about cheating and the reason i picked cheating is because
4:28it interesting but also tells us something I think aboutthe stock market situation we're in. So
4:34my interest in cheating started when Enron came on the scene... exploded all of
4:39a sudden. And I starting thinking about what is happening here? Is the case that there are afew apples who are
4:44and capable of doing these things?Or are we talking more endemic situation that manypeople are actually capableof behaving this way? so like we usually do
4:53I decided to do a simple experiment, and here's how it went. If you were in the experiment I would pass to sheet of paper with
5:0020 simple math problems that everybody could solve, but they wouldn't give you enough time. When the five minute were over,
5:07I would say passed with a sheet of paper and I'll pay you a dollar per questionPeople did this. I would pay people four dollars for the task. On average people
5:15would solve 4 problems. Other people I will attempt to cheat. I would pass the sheet of paper
5:21when a five minutes were over I would say please shred the piece of paperput a little pieces in your pocket or in your backpack, and tell me how many
5:28questions you got correctly. People now told seven questions on average.Now it wasn't as ifthere was few bad apples… a few people would you did a lot...
5:40instead what we saw was a lot of people who cheat a little bit. Now in economic theory cheating is a very simple cost-benefit analysis
5:50You say what's the probability of being caught? How much do is stand to gain from
5:54cheating? And how much punishment will I get if I get caught? And you weigh these options out and
5:58do the simple cost-benefit analysis and you decide whether it's worthwhile to commit the crimeor not? So we tried to test this.
6:06For some people with varied how much money they could get away with….how much
6:10money they could steal. We paidthem 10 cents per correctquestion, 50 cents, a dollar, five dollars, ten dollars
6:16per correct question. You would expect that as the amount of money on their on the table increases,
6:21people who cheat more. But in fact it wasn't the case. We got a lot of people cheating, but still by little bit.
6:27What about the probability of being caught? Some people shredded half the sheet of paper. So there was some evidence left.
6:33some people shredded whole sheet of paper. Some people shredded everything,went out of the room and paid and paid themselves from the bowl of money that had over a
6:40hundred dollars. You would expect that is the probability of being caught goes down, people would
6:44cheat more…but again this was not the case….again a lot of people cheered by just by alittle bit,
6:49and they were insensitive to these economic incentives.
6:53Soit said if people are not sensitive to the economic rational theory, explanations to the these forces, what could be going on
7:01And we thought maybe what is happening is that the two forces.On the one hand we all want to look at yourself in the mirror and feel goodabout ourselves
7:08so we don't want to cheat. And other hand we could cheat a little bit and still feel good about ourselves. So maybe what is happening
7:15is that there's a level of cheating we can't go over, but we can still benefit from cheatinguh, at the low degree as long as it doesn't change your impressions about ourselves.
7:24We call these like a personal “fudge factor”. Now how would you test personal fudge factor?Initially we said, what can we do to shrink the “fudge factor”?
7:36so we got people to the lab and said we have two tasks for you today. First we ask half the people to recall either ten books to read in high school
7:44or to recall the Ten Commandments. And then we tend to do with cheating.It turns out the people who tried to recall the Ten Commandments, in our sample
7:52nobody could recall the Ten Commandments. But those people who tried to recall the ten commandments, given the opportunity
7:58to cheat, did not cheat at all. It wasn't that the more religious people, the people who remembered more for the
8:04commandmentscheated less and less religious people the people who couldn’tremember almost any comments cheated more
8:09The moment people thought about trying to recalled the ten commandments theystop cheating.
8:14In fact even when we give self-declared atheists the task of slowing in theBible, and give them a chance
8:19to cheat they don't cheat all.Now ten amendments is something that is hard to bring into the education system,so we said why don’t you get people to sign the Honor Code…
8:30so we got people to sign, I understand that this short survery falls under the MIT ona codethen they shredded it, no cheating whatsoever.
8:39And is particularly interesting because MIT doesn't have an honor code.So all this was about to decreasing the fudge factor
8:51What about increasing the fudge factor? The first experiment I walked around MIT
8:55in a distributed six-packs of cokesin the refrigerators. These were common refrigerators for the undergrads,
9:01and I came back to measure what we technically called half lifetime of coke.How long does it last and the refrigerators? And you can expect itdoesn't last very long.
9:10People take it.In contrast I took a plate with six one dollar bills
9:14and I left those plates in the same refrigerators. No bill was everto disappear. Now this is not a good social science experiment.
9:22So do it better, I did the same experiment as I described to you before,a third of the people we passed the sheet, they gave it back to us
9:30a third of the people, we passed it they shredded it. They gave it back to us, and saidmister experimenter
9:35I solved X problems, give me X dollars. A third of the people when they finished shredding the piece of paper,,
9:41they came to us and said mister experimenter I sold X problems,give me X tokens. We did not paid them in dollars, we paid them in something else.
9:50And then they took the something else they walked 12 feet to the side
9:54and exchange it for dollars. Think about the following intuition. How bad would you feel about taking a pencil from work home
10:02compared to how bad would you feel about taking 10 cents for petty cash box?These things feel very differently. With being a step removed from cash
10:10for a few seconds by being paid by token make a difference? Our subject doubled their cheating
10:17I'll tell you what I think about this in stock market in a minute. But this did not solve the the big problem I had with anyone yet. Because in
10:25anyone there is also social element.People see each other behaving in fact every day when you open the news
10:31we see examples of people cheating. What does this causes us. So we need another experiment. We got the big group of students to
10:38be in the experiment… and we pre paid him so everybody got an envelope with allthe money for the experiment
10:44And we told them at the end, we asked them to pay us back the money theydidn't
10:48make. Okay the same thing happens when we give people the opportunity to cheat, thecheated just by a little bit
10:54all the same. But in this experiment we also hiredacting student.This acting student stood up
11:01after 30 seconds and said, I solved everything what do we do now? And the experimenter said, if you finished everything
11:09go home. That's it the task is finished. So now we had a student, an actingstudent
11:14that was a part of the group. Nobody knew there was an actor…and a clearly cheated in a very very serious way.
11:23What would happen to the other people in the group? Will the cheat more?
11:27Or will they cheat less?Here is what happens.It turns out that depends on what kind of sweatshirtsthey're wearing.
11:36Here's the thing we ran this at Carnegie Mellon in Pittsburg.And in Pittsburgh there are 2 big universities, Carnegie Mellon and Universityof Pittsburgh
11:45All of the subjects sitting in experiment were Carnegie Mellon students
11:49When the actor was getting up was a Carnegie Mellonstudent (he was actually a Carnegie Mellon student), but he was
11:56part of their group, cheating went up. But when he actually had the University of Pittsburgh sweatshirt,cheating went down
12:09Now this is important because remember when the moment the student stood up,
12:13it made it clear to everybody that they could get away with cheating…because experimenter said you finished everything, go home and went with themoney.
12:19So it wasn't so much about the probability of being caught again.It was about did norms for cheating. Somebody from an
12:27“in group” cheats, and we see them cheating, we feel it's more appropriate as a groupto behave this way. But if it somebody from another group, these terrible people
12:35(not terribly in the end), but somebody we don't want to associate yourself with from another
12:40university, another group, all for some people awareness of honesty goes up, like the Ten Commandmentsexperimentand people cheat even, even less
12:49So what have we learned from this about cheating? We've learned it a lot of people can cheat.They cheat just by a little bit. When you remind people about the morality,
13:02they cheat less. When we get abigger distance from cheating,from the object… of money for example,
13:10people cheat more. And when we see things, the cheating around, particularly if it a part of our “ingroup”
13:15cheating goes up. Now if we think about this in terms of the stock market, thinkwhat happens.What happens in a situation when you create something…
13:24when you pay people a lot of money to see reality in a slightly distorted way.Would they not be able to see it this way? Of course they would.
13:32What happens when you do other things like you remove things from money?You call them stock,or stock options, derivatives, mortgage-backed securities.
13:40Could it be that with those more distant things, it's not a token for one second it's something that is
13:45many steps removed for moneyfor much longer time. Would be the people who cheat even more,
13:51and what happened to the social environment when people see other peoplebehave
13:55around. I think all of those forces worked in a very bad way…eh, in the stock market. More generally
14:03I want to tell you something about behavior economics.We have many intuitions in our life.
14:11And the point is that many of these intuitions are wrong. The question is are we going to test those intuitions
14:18We can think about how we going to test this intuition in a private life, in ourbusiness life…
14:22And most particularly when it goes to policy… when we think about things likeNo Child Left Behind…When you create new stock markets…when you create other
14:30policies…taxation, healthcare, and so on. And the difficulty of testing onintuitionwas was the big lesson I I learned when I went back to the nurses
14:39to talk to them. So went back totalk to them and tell them what they found out aboutremoving bandages…
14:44and I learned two interesting things…one was that my favorite nurse, Etsy,told me that I did not take her pain into consideration. She said, of course, it
14:53was very painful for you, but think about me as a nursetaking, removing the bandages have somebody I liked it had to do it
15:00repeatedly over a long period of time…creating so much torture was not something that was good for me too. And
15:05she said maybepart is the reason was that was he was difficult for her.…which was actually more interesting than that because she said, “I did not think that
15:16your intuition was right. I thought my intuition was correct”If you think about all of your intuitions. Think about it's very hard to
15:22believe that your intuitionis wrong. And she said given the fact that I thoughtmy intuition was right. She thought her intuition was right.
15:30It was very difficult for her to accept doinga difficult experiment to try and check whether she was wrong.
15:37But the fact this is the situation we're all, we’re all, in all the time.We have a very strong intuitions about all kinds of things…
15:44our own ability, how the economy works, how we should pay school teachers…But unless we start testing does intuitions we're not going to do better.
15:53Nowjust think about how better my life would have been if these nurses wouldhave been willing to check your intuition
15:58and how everything would have been better if we just start doing moresystematic experimentation of ourintuitions
16:03thank you very much
Class Questions:
1. Please explain the “fudge factor” experiment?
2. What did the “fudge factor” experiment show?
3. What happened to cheating when people read the Ten Commandments first?
4. What happened to cheating when people were paid in tokens?
5. What was the effect of the student’s sweatshirt on cheating?